Sh. Ravinder Singh Negi, Mohali V. DCIT, Mohali

ITA 558/CHANDI/2014

• Counselvise Citation: 55821514 RSA 2014
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 02-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S C MITTAL
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. RANO JAIN, ACCOUNTANT MEMBER ITA NOS. 558 & 559/CHD/2014 ASSESSMENT YEARS: 2007-08 & 2008-09 SH. RAVINDER SINGH NEGI, VS. THE DCIT, CIRCLE 6(1) , MOHALI MOHALI PAN NO. AAGPN3602B (APPELLANT) (RESPONDENT) APPELLANT BY : SH. T.N. SINGLA RESPONDENT BY : SH. S.C. MITTAL DATE OF HEARING : 10.09.2015 DATE OF PRONOUNCEMENT : 17.09.2015 ORDER PER H.L.KARWA, VP THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AG AINST THE SEPARATE ORDERS OF CIT(A), CHANDIGARH DATED 21.3.2014 RELATING TO A SSESSMENT YEARS 2007-08 & 2008-09. SINCE ISSUES INVOLVED IN THESE APPEALS A RE COMMON AND, THEREFORE, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE COMMON GROUND OF THE APPEALS READS AS UNDER: - THAT THE LD. CIT HAS WRONGLY UPHELD THE ADDITION MA DE BY THE ASSESSING OFFICER BY APPLYING THE NET PROFIT RATE @ 12% 2 INSTEAD OF 7% ON THE GROSS RECEIPTS AS DECLARED BY THE APPELLANT. 3. FOR THE SAKE OF CONVENIENCE, WE WILL TAKE UP THE FACTS FROM ITA NO. 558/CHD/2014 FOR ASSESSMENT YEAR 2007-08. THE ASSES SEE (INDIVIDUAL) FILED HIS RETURN OF INCOME ON 12.5.2011 DECLARING A TAXABLE I NCOME OF RS. 71,97,950/-. THE RETURN WAS NOT PROCESSED AS THE SAME WAS INVALID. SUBSEQUENTLY, NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE ON 31.3.2013. IN THIS CASE AN INFORMATION WAS RECEIVED FROM THE OFFICE OF THE DY. DIRECTOR OF I NCOME-TAX (INV.)-I, CHANDIGARH WHICH REVEALED THAT THE ASSESSEE HAD MADE CASH DEP OSITS TO THE TUNE OF RS. 6,60,29,200/- IN VARIOUS BANK ACCOUNTS DURING FINAN CIAL YEARS 2006-07, 2007-08 AND 2008-09. THE ASSESSING OFFICER OBSERVED THAT O N EXAMINATION OF THE ITR FILED BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR UNDER CONSIDERATION ALONG WITH FORM 26AS, THE FOLLOWING FACTS CAME TO LIGHT:- I. IT WAS SEEN THAT THE ITR WAS FILED BY THE ASSESSEE ON 12.05.2011. AS PER THE PROVISIONS OF THE INCOME TAX ACT, A BELATED RETURN CAN BE FILED WITHIN ONE YEAR FROM TH E END OF THE RELEVANT A.Y. OR BEFORE THE COMPLETION OF ASSESSMEN T, WHICHEVER EARLIER. IN THIS CASE, THE DUE DATE OF FI LING OF ITR AS PER SECTION 139(1) WAS 31.07.2007. HOWEVER THE ASSE SSEE COULD HAVE FILED A BELATED RETURN UP TO 31.03.2009 OR BEFORE THE COMPLETION OF ASSESSMENT, WHICHEVER WAS EARLIER . SINCE THE ASSESSEE FAILED TO FILE HIS RETURN WITHIN THE TIME LIMITS AS SPECIFIED IN THE INCOME TAX ACT, 1961, THEREFORE TH E ITR OF THE ASSESSEE WAS NOT VALID. II. AS PER THE FORM 26AS OF THE ASSESSEE FOR THE RELEVA NT F.Y. (I.E. F.Y. '2006-07), THE ASSESSEE HAD TOTAL GROSS RECEIP TS OF RS.10,53,06,947/-. III. FURTHER, IT WAS SEEN THAT IN HIS ITR, THE ASSESSEE HAD ENTERED ALL THE COLUMNS OF HIS 'BALANCE SHEET' AND 'P&L ACC OUNT' AS NIL AND NO EXPENDITURE WHATSOEVER WAS CLAIMED BY THE 3 ASSESSEE IN HIS P&L ACCOUNT. FURTHER, THE ASSESSEE HAD DECLARED A GROSS PROFIT OF RS,72,53,528/- AND A NET PROFIT ALSO OF THE SAME AMOUNT (I.E. RS.72,53,528/-), ACCORDING LY, THE ASSESSEE HAD COMPUTED HIS GROSS TOTAL INCOME AT RS. 72,53,528/- (ALL UNDER THE HEAD 'PROFIT & GAINS FRO M BUSINESS OR PROFESSION') AND COMPUTED HIS TAX LIABILITY. 4. THE ASSESSEE WAS REQUIRED TO SUBMIT THE RETURN I N RESPONSE TO NOTICE U/S 148 OF THE ACT BUT THE ASSESSEE FAILED TO MAKE THE COMPLIANCE. SUBSEQUENTLY, STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. IN R ESPONSE TO THE STATUTORY NOTICE AND QUESTIONNAIRE, THE ASSESSEE STATED THAT DURING THE RELEVANT PERIOD HE WAS A PROPRIETOR OF M/S R.D. CONSTRUCTION COMPANY AND DUR ING THE PERIOD THE SAID FIRM WAS ENGAGED IN THE BUSINESS OF FABRICATION AND EREC TION OF STEEL STRUCTURES FOR VARIOUS PRIVATE CONCERNS. THE ASSESSEE FAILED TO P RODUCE AUDIT REPORT, BALANCE SHEET AND PROFIT AND LOSS ACCOUNT PERTAINING TO THE YEAR UNDER CONSIDERATION. THE ASSESSEE THROUGH HIS COUNSEL FURTHER INFORMED THE A SSESSING OFFICER THAT HE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT AND, THEREFORE, NO AUDIT REPORT, BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, BILLS AND VOUCHE RS ETC. COULD BE PRODUCED FOR VERIFICATION. DURING ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER RECORDED THE STATEMENT OF THE ASSESSEE APPEARING IN PARA 10 OF T HE ASSESSMENT ORDER. ON ANALYZING THE STATEMENT OF THE ASSESSEE, THE ASSESS ING OFFICER CAME TO THE CONCLUSION THAT ASSESSEE HAD DECLARED HIS TOTAL INC OME MERELY ON ESTIMATED BASIS AND THE ASSESSEE HAD NOT PROOF / EVIDENCE WHATSOEV ER TO JUSTIFY THE EXPENSES CLAIMED. THE ASSESSING OFFICER FURTHER OBSERVED THA T ASSESSEE HAD NOT EXPRESSLY OR DIRECTLY CLAIMED ANY EXPENDITURE IN HIS PROFIT A ND LOSS ACCOUNT, BUT HE HAD MERELY CALCULATED HIS INCOME @ APPROXIMATELY 7% OF HIS GROSS RECEIPTS DURING THE RELEVANT PERIOD. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE BASIS OF CALCULATION OF INCOME BY APPLYING AN AVERA GE RATE OF 7% OF THE GROSS RECEIPTS. THE REPLY DATED 25.1.2013 SUBMITTED BY T HE ASSESSEE WAS FOUND DEVOID OF ANY MERIT. ACCORDING TO ASSESSING OFFICER, THE C ONTENTION OF THE ASSESSEE THAT 4 IF A CONTRACTOR DECLARED HIS INCOME @ 6% OF THE GRO SS RECEIPTS, THEN HIS TAX LIABILITY @ 30% TAX RATE COMES OUT TO BE 1.8% OF TH E GROSS RECEIPTS AND RATE OF DEDUCTION OF TAX AT SOURCE BY THE LEGISLATURE IN TH E CASE OF CONTRACTORS HAS ALSO BEEN FIXED @ 2% OF GROSS RECEIPTS IS BASELESS, IRRA TIONAL AND DEFIES LOGIC. . THE ASSESSING OFFICER FURTHER STATED THAT WHERE THE BOO KS OF ACCOUNT ARE NOT MAINTAINED PROPERLY / ACCURATELY OR NOT MAINTAINED AT ALL, THE ASSESSING OFFICER CAN ESTIMATE THE NET PROFIT OF THE ASSESSEE ACCORDI NG TO THE INFORMATION GATHERED AND MATERIALS AVAILABLE ON RECORD, VIS A VIS THE NA TURE OF BUSINESS ACTIVITY CARRIED OUT BY THE ASSESSEE. THE ASSESSING OFFICER HAS FURT HER MENTIONED THAT THE ASSESSEE COULD NOT PRODUCE ANY BILLS/VOUCHERS OR ANY OTHER E VIDENCE / PROOF IN THE FORM OF BANK ENTRY ETC. PERTAINING TO THE EXPENSES INCURRED BY HIM DURING THE COURSE OF BUSINESS. FROM THE INFORMATION WHICH WAS GATHERED BY THE ASSESSING OFFICER, IT CAME TO HIS NOTICE THAT THE ASSESSEE WAS INDEED INV OLVED IN CONTRACTUAL WORK. ACCORDING TO ASSESSING OFFICER, THE RATE OF NET PRO FIT AS DECLARED BY THE ASSESSEE WAS NOT ACCEPTABLE IN THE ABSENCE OF BOOKS OF ACCOU NT AND THE FACTS AVAILABLE ON RECORD. ACCORDINGLY, THE ASSESSING OFFICER REQUIRE D THE ASSESSEE TO SHOW CAUSE AS TO WHY THE NET PROFIT RATE DECLARED BY HIM SHOUL D NOT BE ENHANCED TO 12% IN THE ABSENCE OF BOOKS OF ACCOUNT AND OTHER CORROBOR ATORY EVIDENCE AND ALSO IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V M/S PRABHAT KUMAR [2010] 323 ITR 675(P&H). IN THE SAID JUDGEMENT THE HON'BLE HIGH COURT HELD THAT ASSESSMENT AT 12% OF NET PROFI T RATE OF CONTRACT RECEIPTS EXCLUDING MATERIAL SUPPLIED, IS NOT ARBITRARY OR PE RVERSE AND IN THIS CASE THE NET PROFIT RATE OF 12% WAS HELD TO BE A REASONABLE RAT E OF PROFIT BY THE TRIBUNAL. CONSEQUENTLY, THE ASSESSING OFFICER MADE THE ADDITI ON OF RS. 52,65,347/-. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) CONFIRMED THE ADDITION FOR THE REASONS STATED IN PARAS 5 TO 5.5 OF THE IMPUGNE D ORDER. 5 6. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AT LENGTH. IT IS AN ADMITTED FACT THAT ASSESSEE HAS NOT PRODUCED BALANC E SHEET AND PROFIT & LOSS ACCOUNT. THE ASSESSEE HAD NOT MAINTAINED STOCK REGI STER, WAGES REGISTER, BILLS AND VOUCHERS. NO LEDGER IS AVAILABLE WITH THE ASSESSEE . THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF ERECTION, FABRICATION AND INSTALLAT ION OF PLANT, MACHINERY, STRUCTURES AND CIVIL WORKS. NO DETAILS OF THE PAR TIES ARE AVAILABLE WITH THE ASSESSEE FROM WHOM HE HAD MADE PURCHASES DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE H AD SHOWN NET PROFIT OF RS. 72,61,135/- BY APPLYING AN AVERAGE RATE OF APPROXIM ATELY 7% OF THE GROSS RECEIPTS FROM BUSINESS. THE NET INCOME DISCLOSED BY THE ASSESSEE IS ON ESTIMATED BASIS SINCE HE HAD NOT MAINTAINED ANY BOOKS OF ACCO UNT. THE LD. CIT(A) HAS MADE SIGNIFICANT OBSERVATION THAT ASSESSEE IS NOT A CIVIL CONTRACTOR. HE WAS DOING FABRICATION WORK, WHICH REQUIRES HIGHER EXPERTISE A ND THEREFORE, YIELDS HIGHER PROFIT. ACCORDING TO CIT(A), THE ASSESSEES MAIN IT EM OF EXPENDITURE WAS ON LABOUR BUT WHEN THE CIT(A) ASKED THE ASSESSEE ABOUT THE NUMBER OF THE PERSONS THE ASSESSEE HAD EMPLOYED, THE REPRESENTATIVE OF TH E ASSESSEE STATED THAT NO INFORMATION WAS AVAILABLE AS NO ACCOUNTS WERE MAINT AINED. THE LD. CIT(A) HAS STATED THAT IN THE NATURE OF ASSESSEES BUSINESS, T HE NUMBER OF PERSONS EMPLOYED COULD NOT BE LARGE BECAUSE OTHERWISE THE ASSESSEE W OULD HAVE BEEN REQUIRED TO FILE STATEMENTS TO VARIOUS STATE AGENCIES ADMINISTE RING VARIOUS LABOUR WELFARE LAWS. NO MUSTER ROLL WAS MAINTAINED. THE ASSESSEE DID NOT FURNISH INFORMATION REGARDING NUMBER OF PERSONS EMPLOYED AND THE NAME O F THE PARTIES FROM WHOM CONSUMABLES WERE PURCHASED. IN OUR CONSIDERED VIEW, THE AUTHORITIES BELOW WERE FULLY JUSTIFIED IN APPLYING THE NET PROFIT RATE OF 12% ON GROSS RECEIPTS WHICH IS IN CONSONANCE WITH THE JUDGEMENT OF THE HON'BLE JURISD ICTIONAL HIGH COURT IN THE CASE OF CIT V M/S PRABHAT KUMAR (SUPRA) RELIED ON BY THE ASSESSING OFFICER. IN OUR OPINION, IN CASE OF ESTIMATION, IF THE CIT(A) H AS PASSED AN ORDER BY GIVING COGENT REASONS, THE TRIBUNAL IN AN APPEAL EITHER BY REVENUE OR ASSESSEE IS 6 REQUIRED TO APPLY ITS MIND AND CONSIDER THE REASON S GIVEN BY CIT(A). IN OUR CONSIDERED VIEW, THE LD. CIT(A) HAS PASSED A WELL R EASONED ORDER AND, THEREFORE, WE DO NOT SEE ANY GROUND TO INTERFERE WITH THE ORDE R OF CIT(A). CONSIDERING THE NATURE OF ASSESSEES BUSINESS, NET PROFIT RATE OF 1 2% ON GROSS RECEIPTS IS REASONABLE. ACCORDINGLY, WE UPHOLD THE ORDER OF CI T(A) AND DISMISS THE APPEAL OF THE ASSESSEE. ITA NO. 559/CHD/2014 :- 7. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE THAT OF ITA NO. 558/CHD/2014 FOR ASSESSMENT YEAR 2007-08. THE RIVA L CONTENTIONS ARE ALSO SIMILAR. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 558/CHD/2015 SHALL APPLY WITH EQUAL FORCE TO THIS APPEAL ALSO. FOR THE DETAILED REASONS GIVEN THEREIN, WE DISMISS THIS APPEAL. 8. IN THE RESULT, BOTH THE APPEAL ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.09.2015 SD/- SD/- (RANO JAIN) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 17 TH SEPTEMBER, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR