Narpat Singh Rathore, NAGAUR V. ITO, NAGAUR

ITA 579/JODH/2013

• Counselvise Citation: 57923314 RSA 2013
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 24-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Depreciation
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 579/JU/2013 ASSESSMENT YEAR: 2009-10 SHRI NARPAT SINGH RATHORE VS. THE INCOME-T AX OFFICER S/O SHRI DUNGAR SINGH RATHORE WARD - 1 BEHIND KISHAN CHATRAWAS NAGAUR PLOT NO. 34, SHIV COLONY MERTA CITY, NAGAUR PAN NO. AEZPR 0741 L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT KOTHARI DEPARTMENT BY : SHRI N.A JOSHI, DR DATE OF HEARING : 28.02.2014 DATE OF PRONOUNCEMENT : 07.03.2014 ORDER PER HARI OM MARATHA, J.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A), BIKANER, DATED 11.10.2013 FOR A.Y 2009-2010. 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED HIS RETURN OF INCOME [ROI] FOR A.Y. 2009-10 DECLARING TOTAL INCOME OF RS. 14,37,820/- AS AGAINS T WHICH THE ASSESSMENT WAS COMPLETED AT TOTAL INCOME OF RS. 47,84,000 [ROUNDED OFF]. IN COMING TO THE ABOVE CONCLUSION, THE A.O. HAS MADE TRADING ADDITION OF R S. 34,88,290/- TO THE DECLARED INCOME OF THE ASSESSEE. THE ASSESSEE IS CONTRACTOR AND HAS DISCLOSED TOTAL CONT RACT RECEIPTS AT RS. 6,34,65,886/- AND HAS SHOWN NET PRO FIT OF RS. 15,88,980/- GIVING NET PROFIT RATE OF 2.50%. I N THE EARLIER YEAR, AGAINST TOTAL RECEIPTS AT RS. 1,85,63 ,662/- NET PROFIT RATE OF 5.05% HAD BEEN SHOWN. THE REASO N FOR DECLINE IN THE NET PROFIT WAS STATED AS THAT THE RE CEIPTS OF THE YEAR ARE MANY FOLD AND ARE AROUND 6.34 CRORES A S COMPARED TO RS. 1.8 CRORES IN THE LAST YEAR. ON EXAMINATION OF THE BOOKS OF ACCOUNT THE A.O. HAS NO TICED THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER REGARDING MATERIAL AND MOST OF THE EXPENSES HAVE BE EN PAID AGAINST HAND-MADE VOUCHERS. WITH REFERENCE TO THESE DEFECTS IN THE MAINTENANCE OF BOOKS OF ACCOUNT, HE HAS 3 INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND BY ADOPTING NET PROFIT RATE OF 8%, HAS MADE THE IMPUGN ED ADDITION. AGGRIEVED, THE ASSESSEE WENT IN APPEAL A ND THE LD. CIT(A) HAS ALSO CONFIRMED THIS ADDITION. 3. THE ASSESSEE IS FURTHER AGGRIEVED AND HAS COME I N SECOND APPEAL BEFORE THE APPELLATE TRIBUNAL BY RAIS ING THE FOLLOWING GROUNDS: 1A. THE LD. CIT(A) HAS ERRED IN SUSTAINING TRADING ADDITION OF RS. 34,88,290/- BY APPLICATION OF NET PROFIT RATE OF 8% SUBJECT TO INTEREST AND DEPRECIATION APPLIED BY THE A.O. AS AGAINST 2.5% SHOWN BY THE ASSESSEE. B. THE ADDITION SO SUSTAINED IS BAD IN LAW AND BAD ON FACTS C. THE LD. CIT(A) HAS ERRED IN REJECTING THE BOOKS OF ACCOUNT. 4 D. THE LD. CIT(A) HAS ERRED IN NOT ACCEPTING THE PAST HISTORY IN THE CASE OF THE APPELLANT. 2. THE INTEREST CHARGED U/S 234B AND 234C IS BAD IN LAW AND BAD ON FACTS. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. WE HAVE FOUND THAT THE A.O. HAS REJECTED THE BOOKS OF ACCOU NT IN THE ABSENCE OF STOCK REGISTER, MATERIALS REGISTER, VOUCHERS OF CERTAIN EXPENSES, ABSENCE OF LOG BOOK OF VEHICLE S AND ATTENDANCE REGISTER. THE MAIN REASON FOR REJECTION FOR BOOKS OF ACCOUNT SEEMS TO BE DECLINE IN THE NET PRO FIT RATE SHOWN BY THE ASSESSEE IN THIS YEAR AS COMPARED TO T HE EARLIER YEAR. THE A.O. HAS SHOW-CAUSED THE ASSESSE E REGARDING INVOCATION OF PROVISIONS OF SECTION 145(3 ) AND THE ASSESSEE HAD REPLIED TO THAT SHOW CAUSE NOTICE. THE ASSESSEE HAS STATED THAT THERE BEING A THROAT-CUT COMPETITION IN GETTING TENDER FOR CONTRACT WHERE TH E ASSESSEE IS REQUIRED TO HAVE VERY MINIMUM MARGINS. THE 5 ASSESSEE ALSO SUBMITTED THAT THE CONTRACT RECEIPTS HAVE INCREASED DURING THE YEAR AS COMPARED TO LAST YEAR. BUT THE A.O., WITHOUT CONSIDERING THEM HAS SIMPLY REJEC TED THE BOOKS AND APPLIED NET PROFIT RATE OF 8% SUBJECT TO DEDUCTION OF INTEREST TO THIRD PARTIES AND DEPRECIA TION WHICH RESULTED INTO ADDITION OF RS. 33,46,176/-. T HE ASSESSEE HAS ALSO OBJECTED TO THE REJECTION OF BOOK S OF ACCOUNT BY THE A.O. WE HAVE FOUND THAT THE REASONS FOR REJECTION OF BOOKS ARE NOT MATERIAL WHICH CAN BE TE RMED AS A DEFECT IN THE BOOKS OF ACCOUNT, MUCH LESS MATE RIAL AND SUBSTANTIAL DEFECTS IN THEM. IT SEEMS THAT THE A.O. HAS REJECTED THE BOOKS MAINLY BECAUSE THERE IS FALL IN THE PROFIT RATE IN THIS YEAR. HOWEVER, THE A.O. HAS NO T CONSIDERED THE METEORIC RISE IN CONTRACT RECEIPTS W HICH ARE MANY FOLD AS IS EVIDENT FROM THE ABOVE NARRATED FACTS. THE TOTAL RECEIPTS OF THIS YEAR ARE RS. 6.34 CRORES AND ODD AS AGAINST RS. 1.85 ODD CRORES IN THE LAST YEAR. O N ACCOUNT OF FALL IN GROSS PROFIT RATE OR NET PROFIT RATE BOO KS OF ACCOUNT CANNOT BE REJECTED. THE JODHPUR BENCH OF T HE TRIBUNAL HAS TAKEN SIMILAR VIEW IN THE CASE OF SHRE E 6 GAUTAM TEXTILES VS. ITO [2002] 72 TTJ 169. THE HYDE RABAD BENCH OF THE TRIBUNAL IN THE CASE OF VISHAL INFRAST RUCTURE LTD. REPORTED IN [2007] 104 ITD 537 [HYD] HAS ALSO TAKEN SIMILAR VIEW WHEREIN IT HAS BEEN HELD THAT WHEN ACC OUNTS ARE REGULARLY MAINTAINED DURING THE COURSE OF BUSIN ESS AND NO DEFECTS HAVE BEEN POINTED OUT, THE BOOKS CANNOT BE REJECTED. THE HON'BLE MADRAS HIGH COURT IN THE CAS E OF R.M.P. PERIANNA PILLAI & CO. VS. CIT REPORTED IN 42 ITR 370 [MAD] HAS ALSO TAKEN SIMILAR VIEW HOLDING THAT THE ACCOUNTS OF THE ASSESSEE CANNOT BE REJECTED ON THE GROUND TH AT THE GROSS PROFIT DISCLOSED IN HIS BOOKS ARE VERY LOW AN D COMPARED UNFAVORABLY WITH THOSE OF OTHERS IN THE SA ME LINE OF BUSINESS. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF JAIN CONSTRUCTION COMPANY REPORTED IN 245 I TR 527 [RAJ] HAS HELD THAT 1.10% IN A CONTRACTORS CASE EV EN OTHERWISE AFTER REJECTION OF BOOKS OF ACCOUNT, THE A.O. CANNOT IGNORE THE FACTOR THAT THE TOTAL RECEIPTS OF THIS YEAR ARE VERY HIGH AS COMPARED TO THE EARLIER YEARS . THE INCREASE IN CONTRACT RECEIPTS HAS A DEFINITE BEARIN G ON THE NET PROFIT OF THE ASSESSEE. WE FIND THAT THERE IS NO VALID 7 REASON FOR REJECTING THE BOOKS OF ACCOUNT. EVEN AF TER REJECTION OF BOOKS NO ARBITRARY ADDITION CAN BE MAD E IN THE TRADING RESULTS. THE SETTLED POSITION OF LAW I S THAT AFTER REJECTION OF BOOKS IN CASE THE ASSESSEE HAS P AST HISTORY THAT IS THE BEST GUIDE FOR ADOPTION OF RATE OF THAT A.Y. IN THIS CASE, THE NET PROFIT DECLARED IN THE LAST YEAR IS 5.05% ON TOTAL CONTRACT RECEIPTS OF RS. 1.85 CRO RES AND ODD. IN THIS YEAR, THE CONTRACT RECEIPTS HAVE RISE N TO RS. 6.34 CRORES AND ODD. THEREFORE, EVEN AFTER REJECTI ON OF BOOKS OF ACCOUNT, THIS FACTOR HAS TO BE TAKEN INTO CONSIDERATION AND IN THAT VIEW OF THE MATTER, NO FR ESH ADDITION IS DESIRABLE. WE DO NOT APPROVE THE REJEC TION OF BOOKS OF ACCOUNT AND IN ANY OTHER CASE THE RESULT D ECLARED BY THE ASSESSEE CANNOT BE DISTURBED. THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THIS CASE, EVEN TH E PAST HISTORY COULD BE EXPLAINED. ACCORDINGLY, WE ACCEPT THIS APPEAL AND ORDER TO DELETE THE IMPUGNED DELETION FR OM THE HANDS OF THE ASSESSEE. 8 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 07.03.2014. SD/- SD/- (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 07 TH MARCH, 2014 VL/- COPY TO: THE APPELLANT THE RESPONDENT THE CIT BY ORDER THE CIT(A) THE DR ASSISTANT REGISTRAR ITAT, JODHPUR