M/s Rajinder Parshad Jain, Jind V. ITO, Jind

ITA 582/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63911 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-07-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 26-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: BRIJ MOHAN MONGA
• Keywords: Rejection of books of accounts
• Section: 40A(3); 143(3); 194C; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND ITA NO. 582/CHD/2011 (ASSESSMENT YEAR 2008-09) M/S RAJINDER PARSHAD JAIN VS THE INCOME OFFICER, GOVT. CONTRACTOR, BASANT VIHAR, WARD-2, SAFIDON ROAD, JIND. JIND. PAN NO. AAFJR3351E ITA NO. 606/CHD/2011 (ASSESSMENT YEAR 2008-09) THE INCOME OFFICER, VS M/S RAJINDER PARSHAD JAIN WARD-2, GOVT. CONTRACTOR, BASANT VIHAR, JIND. SAFIDON ROAD, JIND. PAN NO. AAFJR3351E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BRIJMOHAN MONGA DEPARTMENT BY: SHRI N.K. SAINI DATE OF HEARING : 30.07.2012 DATE OF PRONOUNCEMENT : 28.08.2012 ORDER PER SUSHMA CHOWLA, JM THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE ARE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS ), ROHTAK DATED 18.03.2011 RELATING TO ASSESSMENT YEAR 2008-0 9 AGAINST THE ORDER PASSED U/S 143(3) OF INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE ASSESSEE IN ITA NO. 582/CHANDI/2011 HAS RAIS ED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON FACTS, IN LAW & CIRCUMSTANCES OF THE CASE, THE L D. C.I.T. (APPEAL) HAS ERRED IN LAW AND FACTS BY NOT CONSIDER ING ASSESSEE NOT IN DEFAULT AND PROVISIONS OF SECTION 40(A)(IA) HAS BEEN ATTRACTED BY CONFIRMING ADDITION OF RS. 2 17,08,933/- ON ACCOUNT OF PAYMENT MADE TO LABOUR WI THOUT DEDUCTING TAX AT SOURCE. 2. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 3. THE REVENUE IN ITA NO. 582/CHANDI/2011 HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE REJECTION OF B OOKS OF ACCOUNT BY THE ASSESSING OFFICER WAS NOT IN ORDER, WITHOUT APPRECIATING THE FACT THAT THERE WERE A NUMBER OF D EFECTS IN THE BOOKS OF ACCOUNTS AS DISCUSSED AT PAGE-2 OF THE ASSESSMENT ORDER BY THE ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE REJECTION OF B OOKS OF ACCOUNT BY THE A.O. WAS NOT IN ORDER, WITHOUT APPRE CIATING THE FACT CHEQUES IN TRANSIT, TRADE CREDITORS AND BA NK BALANCE AS PER BOOKS DID NOT TALLY WITH THE BALANCE -SHEET FILED BY THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 11 ,73,861/- MADE BY APPLYING NET PROFIT @ 12% OF TOTAL RECEIPTS OF RS. 97,82,181/- FOLLOWING THE JUDGEMENT OF HONBLE PUNJ AB & HARYANA HIGH COURT IN THE CASE OF M/S PRABHAT KUMAR CONTRACTOR, SIRS IN ITA NO. 293OF 2008 DATED 14.11. 200. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 8, 04,948/- MADE ON ACCOUNT OF RAW MATERIAL AND WORK IN PROGRES S WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS MAINTAINING THE BOOKS OF ACCOUNT ON MERCANTILE BASI S AND WORK IN PROGRESS SHOULD HAVE BEEN SHOWN IN THE TRAD ING ACCOUNT. 5. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OF. 4. BOTH THE APPEALS OF THE ASSESSEE AND REVENUE WER E HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.582/CHD/2012 : 5. THE ONLY ISSUE RAISED BY THE ASSESSEE IN ITS APP EAL IS AGAINST DISALLOWANCE OF RS.17,08,933/- ON ACCOUNT OF LABOUR CHARGES PAID WITHOUT DEDUCTION OF TAX AT SOURCE. THE ASSESSING OFFICER APPLIED 3 PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND MADE THE SAID DISALLOWANCE. 7. THE CIT (APPEALS) CONFIRMED THE ORDER OF THE ASS ESSING OFFICER. 8. ON PERUSAL OF THE RECORD WE FIND THAT THE ISSUE IN THIS APPEAL IS IN RELATION TO THE DISALLOWANCE MADE OUT OF PAYMENTS O F LABOUR CHARGES PAID FOR NON DEDUCTION OF TAX AT SOURCE UNDER THE PROVIS IONS OF SECTION 194C OF THE ACT. THE SAID DISALLOWANCE WAS MADE BY INVOKIN G THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE SPECIAL BENCH OF VISHAKHAPATNAM REPORTED IN ACIT VS. MERILYN SHIPPING & TRANSPORTS[ 136 ITD 23(SB)(VISHAKHAPATNAM)] HAD LAID DOWN THE PRINCIPLE THAT WHERE THE AMOUNTS HAVE BEEN PAID DURING THE YEAR UNDER CONSID ERATION ITSELF AND NOTHING IS PAYABLE AT THE CLOSE OF THE YEAR, NO DIS ALLOWANCE WAS WARRANTED UNDER SECTION 40(A)(IA) OF THE ACT FOR NON DEDUCTIO N OF TAX AT SOURCE OUT OF SUCH AMOUNT PAID DURING THE YEAR. FOLLOWING THE ABOVE SAID PARITY OF REASONING, WE DIRECT THE ASSESSING OFFICER TO VERIF Y THE STAND OF THE ASSESSEE AND IN CASE THE SAID AMOUNTS HAVE BEEN PAI D BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, NO DISALLOWANC E IS WARRANTED OUT OF SAID PAYMENTS IN LINE WITH THE PROVISIONS OF SECTIO N 40A(IA) OF THE ACT. REASONABLE OPPORTUNITY OF HEARING SHALL BE AFFORDED TO THE ASSESSEE BY THE ASSESSING OFFICER FOR ADJUDICATING THE ISSUE. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ITA NO.606/CHD/2011 : 9. THE REVENUE VIDE GROUND NOS. 1 AND 2 ARE AGGRIEV ED BY THE ORDER OF THE CIT (APPEALS) IN HOLDING THAT THE REJECTION OF BOOKS OF ACCOUNT BY THE ASSESSING OFFICER WAS NOT IN ORDER AND VIDE GROUND NO.3 IN ACCEPTING THE BOOK RESULTS DECLARED BY THE ASSESSEE. THE GROUND NO.4 RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.8 ,04,948/- ON ACCOUNT OF RAW MATERIAL AND WORK IN PROGRESS. 4 10. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE WAS A CIVIL CONTRACTOR AND DURING THE YEAR UNDER CONSIDERATION HAD DECLARED NET PROFIT RATE OF 0.21% ON GROSS RECEIPTS OF RS.97,82,181/-. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD DECLARED GP RATE O F 3.71% AS AGAINST GP RATE OF 8.02% DECLARED IN THE PRECEDING YEAR. THE REASONS FOR FALL IN GP RATE WERE EXPLAINED BY THE ASSESSEE TO BE ON ACCOUN T OF RAPID INCREASE IN COST OF RAW MATERIAL, LABOUR AND INCREASE IN TURN O VER. THE ASSESSING OFFICER REQUISITIONED THE ASSESSEE TO PRODUCE THE B OOKS OF ACCOUNT AND THE SAME WERE THOUGH PRODUCED BUT AFTER MANY OPPORTUNIT IES ALLOWED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER ASKED THE ASSESSEE TO ESTABLISH THAT THE SAID BOOKS OF ACCOUNT WERE MAINTAINED IN T HE REGULAR COURSE OF CONTRACT BUSINESS. 11. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACC OUNT IN VIEW OF THE PROVISIONS OF SECTION 145 OF THE ACT AND ESTIMATED THE INCOME FROM CONTRACT WORK RECEIPT OF RS.97,82,181/-, IN VIEW OF THE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN M/S PRABHAT KUMAR CONTRACTOR SIRSA IN ITA NO.293 OF 2008 DATED 14.11.2008. THE INCOME OF THE ASSESSEE FROM CONTRACT WORK BUSINESS WAS THUS DETE RMINED AT RS.11,73,861/-. 12. THE CIT (APPEALS) DELETED THE ADDITION VIDE PAR A 4.1 OBSERVING AS UNDER: 4.1 I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR. FROM THE ASSESSMENT ORDER, IT IS SEEN THAT THE AO REJECTED THE BOOKS OF ACCOUNTS WITHOUT ANY COGENT AND VALID REASONS. REJECTION OF BOOKS OF ACCOUNTS IN THE CASE OF A TAX AUDIT CASE, WITHOUT ANY MATERIAL AND VALID REASONS IS NOT IN ORDER. THEREFORE, THE ACTION OF THE AO I N THIS REGARD IS NOT JUSTIFIED AND THUS THE ESTIMATIO N OF INCOME AT RS.11,73,861/- IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 13. THE REVENUE IS IN APPEAL AGAINST BOTH THE REJEC TION OF BOOKS OF ACCOUNT AND ALSO DELETION OF ESTIMATION OF INCOME I N THE HANDS OF THE ASSESSEE. 5 14. SHRI BRIJMOHAN MONGA APPEARED ON BEHALF OF THE ASSESSEE AND SHRI N.K.SAINI PUT IN APPEARANCE ON BEHALF OF THE REVENU E AND PUT FORWARD THEIR CONTENTIONS. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS A CIVIL CONTRACTOR AND WAS CARRYING ON CONTRACT WORK DURING THE YEAR UNDER CONSIDERATION. THE GROSS RECEIPTS O F THE ASSESSEE DURING THE YEAR WERE RS.97,82,181/-, ON WHICH THE ASSESSEE HAD DECLARED NP RATE OF 0.21% ONLY. THE GROSS PROFIT RATE DECLARED DURI NG THE YEAR WAS 3.71% AS AGAINST GP RATE OF 8.02% DECLARED IN THE PRECEDI NG YEAR. THE REASONS FOR FALL IN GP RATE WAS EXPLAINED TO BE THE INCREAS E IN COST OF RAW MATERIAL AND LABOUR AND ALSO BECAUSE OF INCREASE IN TURN OVE R. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO PRODUCE BOOKS OF ACCOUNT ON VARIOUS OCCASIONS. THE SAID BOOKS OF ACCOUNT WERE PRODUCED BY THE ASSESSEE AFTER TAKING VARIOUS OPPORTUNITIES. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSE SSEE HAD NOT MAINTAINED THE SAID BOOKS OF ACCOUNT IN REGULAR COU RSE. FURTHER ON PERUSAL OF THE BOOKS OF ACCOUNT THE ASSESSING OFFIC ER NOTED AS UNDER II) VOUCHERS PRODUCED IN RESPECT OF WAGES AND OTHER RAW MATERIAL LIKE RATTI, CRUSHER SAND ETC. WERE UNVERIFIABLE AS COMPL ETE ADDRESS OF THE RECIPIENT OF THE PAYMENT WAS NOT RECORDED ON THE VO UCHERS. FURTHER LEDGER FOLIO WERE ALSO NOT MENTIONED ON THE VOUCHER S. III) THE ASSESSEE FIRM MADE THE PAYMENT OF RAW MATERIAL ETC. IN CASH BELOW RS.20,0007- TO AVOID THE PROVISIONS O F SECTION 40A(3) OF THE INCOME TAX ACT. IV) MUSTER ROLL /QUITTANCE ROLL WERE NOT MAINTAINED. V) THE ASSESSEE DECLARED THE CONTRACT RECEIPTS ON R ECEIPT BASIS WHEREAS PER COLUMN 11 (A) OF THE AUDIT REPORT , THE ASSESSEE FIRM WAS FOLLOWING MERCANTILE SYSTEM OF AC COUNTING. VI) THE GROSS PROFIT DECLARED WAS 3.71% OF THE GROSS PA YMENT WHICH IS 'WHICH IS EXTREMELY ON LOWER SIDE. THE ASSESSEE FI RM MERELY STATED THAT IT WAS ALL DUE TO RAPID INCREASE IN THE COST O F RAW MATERIAL AND LABOUR AND INCREASE IN TURNOVER. IT IS WORTHWHILE TO MENTION THAT IN THE PRECEDING YEAR THE ASSESSEE FIRM DECLARED G.P. @8.02%. VII) THE- ASSESSEE FIRM CLAIMED A-CONSOLIDATED AMOUNT OF EXPENDITURE OF RS.90,30,3397/- UNDER THE SUB HEAD FOR RAW- MATERIA L, LABOUR AND MISC EXPENSES ETC. NO SEPARATE RECORDS WERE MAINTAINED RAISING A SERIOUS DOUBT OVER THE 6 GENUINENESS OF THE BOOKS OF ACCOUNT MAINTAINED BY T HE ASSESSEE FIRM. VIII) NO DIRECT EXPENSES ON ACCOUNT OF SALARY PAID TO STA FF, TELEPHONE, ELECTRICITY, PRINTING AND STATIONERY WER E DECLARED BY THE ASSESSEE FIRM. IX) THE CHEQUES IN TRANSIT DECLARED BY THE ASSESSEE FIR M, THE BALANCE SHEET AT RS.658561/- WERE ALREADY RECEIVED AND AS PER BOOKS OF ACCOUNT THERE WAS NO CHEQUE IN TRAN SIT. X) AS PER BOOKS OF ACCOUNT THERE WERE TRADE CREDITORS OF RS.331950/- WHICH WERE FOUND MISSING IN THE AUDIT REPORT EXPLANATION OF THE ASSESSEE THAT NET CURRENT ASSETS WERE DECLARED AFTER DEDUCTION OF CURRENT LIABILITIE S IS AFTER THOUGHT AND CAN NOT BE ACCEPTED AS IT IS A CA SE OF FIRM AND NOT COMPANY. XI) ON PHYSICAL VERIFICATION OF BANK PASS BOOK, BALANCE OF RS.1080571/- WAS FOUND WHICH WAS NOT REPORTED IN TH E BALANCE SHEET. XII) THE PARTNERS OF THE FIRM DECLARED HOUSE HOLD EXPENS ES AT RS.4000/- TO 4400/- PER MONTH TO SUPPORT THE FAMILY WHICH IS EXTREMELY ON LOWER SIDE. IN VIEW OF THE ABOVE SAID ISSUES, THE BOOKS OF ACCO UNT WERE FOUND TO BE INCORRECT AND NOT COMPLETE BY THE ASSESSING OFFI CER. 16. IN VIEW OF THE ABOVE SAID DEFECTS NOTED BY THE ASSESSING OFFICER, THE BOOKS OF ACCOUNT WERE REJECTED BY INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT. 17. THE DEFECTS NOTED BY THE ASSESSING OFFICER WERE ON ACCOUNT OF NON- MAINTENANCE OF VOUCHERS IN RESPECT OF WAGES AND OTH ER RAW MATERIAL AS BEING UNVERIFIABLE. FURTHER THE ASSESSEE HAD FAILE D TO MAINTAIN THE MUSTER ROLL/QUITTANCE ROLLS. THE OTHER DISCREPANCY NOTED BY THE ASSESSING OFFICER WAS THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYST EM OF ACCOUNTING BUT HAD DECLARED CONTRACT RECEIPTS ON RECEIPT BASIS. F URTHER THE ASSESSEE HAD CLAIMED CONSOLIDATED EXPENDITURE UNDER THE SUB-HEAD FOR RAW MATERIAL, LABOUR AND MISCELLANEOUS EXPENDITURE TOTALING RS.90 ,30,339/-. FURTHER THE ASSESSEE HAD NOT REPORTED THE BANK BALANCE IN ITS B ALANCE SHEET NOR HAD REPORTED THE TRADE CREDITORS. THE ASSESSEE HAD DEC LARED CHEQUES IN TRANSIT IN ITS BALANCE SHEET WHICH WERE ALREADY RECEIVED BY THE ASSESSEE. IN VIEW OF THE VARIOUS DISCREPANCIES FOUND/NOTED BY THE ASS ESSING OFFICER AND IN 7 THE ABSENCE OF ANY EXPLANATION FURNISHED BY THE ASS ESSEE WITH REGARD TO THE SAME, WE REVERSE THE ORDER OF THE CIT (APPEALS) AND UPHOLD THE REJECTION OF BOOKS OF ACCOUNT IN VIEW OF THE PROVIS IONS OF SECTION 145 OF THE ACT. WE FIND NO MERIT IN THE OBSERVATION OF TH E CIT (APPEALS) THAT THE REJECTION OF BOOKS OF ACCOUNT IN THE CASE OF TA X AUDIT CASES, WITHOUT ANY MATERIAL AND VALID REASONS WAS NOT IN ORDER. THE ASSESSING OFFICER HAVING POINTED OUT VARIOUS DISCREPANCIES IN THE ACC OUNTS MAINTAINED BY THE ASSESSEE AND THE VOUCHERS NOT BEING MAINTAINED PROPERLY AND NON- PRODUCTION OF THE SAME AND ALSO DISCREPANCIES IN TH E BALANCE SHEET, THERE WAS NO MERIT IN THE ORDER OF THE CIT (APPEALS) AND THE REJECTION OF BOOKS OF ACCOUNT IS UPHELD. IN VIEW THEREOF, WHERE THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE BEEN REJECTED, THERE IS NO OPTION BUT TO ESTIMATE THE NET PROFIT RATE IN THE HANDS OF THE ASSESSEE IN ORDER T O COMPUTE THE INCOME FOR THE YEAR UNDER CONSIDERATION. 18. WE FIND NO MERIT IN THE ORDER OF THE ASSESSING OFFICER IN ADOPTING NET PROFIT RATE OF 12% TO DETERMINE THE INCOME OF T HE ASSESSEE. WE FIND THAT SIMILAR ISSUE OF ADOPTION OF NET PROFIT RATE T O DETERMINE THE INCOME IN THE HANDS OF THE ASSESSEE, WHERE THE BOOK S OF ACCOUNT HAD BEEN REJECTED, AROSE BEFORE THE TRIBUNAL IN SHRI SU KHWINDER SINGH VS. ITO. THE TRIBUNAL IN SUKHWINDER SINGH VS. JCIT , KURUKSHETRA IN ITA NO.1461/CHD/2010 VIDE DATED 24.11.2011 HELD AS UNDER : 10. THE SECOND ISSUE TO BE ADDRESSED IN THE CASE IS THE APPLICATION OF NP RATIO. THE TRIBUNAL (SUPRA) IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2005-06 HAD DIRECTED THE APPLICATION OF NET PROFIT RATE OF 1.08% TO THE GROSS RECEIPTS OF RS.3.22 CRORES IN COMPARISON TO NET PROFIT RATE OF 6.5% TO THE TOTAL RECEIPTS APPLIED BY THE ASSESSING OFFICER. THE CIT (A) DURING THE YEAR UNDER CONSIDERATION HAD REJECTED THE CLAIM OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT VS. M/S PRABHAT KUMAR CONTRACTOR (SUPRA) WHEREIN THE RATE OF PROFIT @ 12% WAS APPLIED BY THE HONBLE COURT. 11. THE ASSESSEE IS A ROAD CONTRACTOR AND NOT CIVIL CONTRACTOR AS IN THE CASE BEFORE THE HONBLE PUNJAB & HARYANA HIGH COURT. THE ASSESSEE HAD DISCLOSED THE INCOME FOR THE YEAR UNDER CONSIDERATION AT NET 8 PROFIT RATE OF 1.20% AND THE ASSESSING OFFICER FOR COMPUTING THE INCOME OF THE YEAR HAD APPLIED NET PROFIT RATE OF 6.5%. THE BASIS FOR THE APPLICATION OF THE SAID NET PROFIT RATE BY THE ASSESSING OFFICER W AS SIMILAR RATE APPLIED IN ASSESSMENT YEAR 2005-06 AN D THE CIT (A) HAD PLACED RELIANCE TO THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ANOTHER CONTRACTOR IN CIT VS. PARBHAT KUMAR CONTRACTOR (SUPRA). THE CIT (A) HAD APPLIED NET PROFIT RATE OF 6.5% IN VIEW OF THE RATE APPLIED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT. IN THE FACTS OF THE CASE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT, THE REASONS FOR THE APPLICATION OF THE SAID RATE WAS THE UN-VERIFIABILITY OF THE WAGES CLAIMED AS EXPENDITURE. THERE IS NO MERIT IN THE STAND OF TH E CIT (A) THAT IN CASE OF CONTRACTORS, HIGHER RATE TO GROSS RECEIPTS IS TO BE APPLIED IN ALL CASES IN VIE W OF RATIO LAID DOWN IN CIT VS. PRABHAT KUMAR, CONTRACTOR (SUPRA). WE FIND THAT THE HON'BLE PUNJAB & HARYANA HIGH COURT IN RAJA RAM CONTRACTORS VS. CIT IN ITA NO. 689 OF 2009, DATE OF DECISION 7.4.2010, HAS UPHELD APPLICATION OF NET PROFIT RATE OF 10% AS NET PROFIT RATE. IT HAS BEEN FURTHER LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT THAT WHERE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED, THE ESTIMATION OF INCOME BY APPLYING OF FLAT RATE INHERENTLY INVOLVES AN ELEMENT OF SUBJECTIVITY. 19. THE APPLICATION OF NET PROFIT RATE OF 12% IN AL L THE CASES OF CIVIL CONTRACTORS IS THUS UNWARRANTED AS THE HON'BL E PUNJAB & HARYANA HIGH COURT ITSELF IN DIFFERENT SET OF FACTS HAD APPLIED NET PROFIT RATE OF 10%. ACCORDINGLY, WE DIRECT THE ASS ESSING OFFICER TO APPLY NET PROFIT RATE OF 6%, AS AGREED BY THE LEARN ED A.R. FOR THE ASSESSEE, TO THE GROSS RECEIPT OF RS.97,82,181 IN ORDER TO DE TERMINE INCOME IN THE HANDS OF THE ASSESSEE. IN VIEW THEREOF, WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE INCOME IN THE HANDS OF THE ASSESSEE IN LINE WITH OUR DIRECTIONS IN PARAS HEREINABOVE. GROUND N OS.1 AND 2 RAISED BY THE REVENUE ARE PARTLY ALLOWED. 20. THE LAST ISSUE RAISED BY THE ASSESSEE IS AGAINS T THE DELETION OF RS.8,04,948/-. THE SAID ADDITION WAS MADE IN THE H ANDS OF THE ASSESSEE AS THE ASSESSING OFFICER NOTED THAT THOUGH THE ASSESSE E HAD DECLARED RS.8,04,948/- UNDER SUB-HEAD WORK IN PROGRESS IN TH E BALANCE SHEET BUT THE SAME WAS MISSING IN THE TRADING ACCOUNT. THE A SSESSING OFFICER THUS MADE THE ADDITION OF RS.8,04,948/-. 9 21. THE CIT (APPEALS) DELETED THE ADDITION OBSERVIN G AS UNDER: 6. WITH REGARD TO THE ADDITION OF RS. 804948/- ON A CCOUNT OF WORK IN PROGRESS, CONTESTED IN GROUND NO. 3 OF APPE AL, THE AR SUBMITTED THAT THIS HAS ALREADY BEEN TAKEN INTO ACC OUNT IN THE TOTAL WORKS COST AS UNDER:- (A) OPENING STOCK OF MATERIAL AT SITE & W.I.P. : 15 ,43,693/- (B) ADD; PURCHASE OF MATERIAL DURING THE YEAR : 56, 94,626/- (C ) ADD; LABOUR CHARGES : 25,45,759/- (D) ADD; OTHER EXPENSES : 51,309/- (E) LESS; CLOSING STOCK OF MATERIAL & W.I.P. : 8,04 ,948/- TOTAL WORKS COST 90,30,339/- THEREFORE, THE ADDITION MADE BY THE AO IS INFRUCTU OUS AND REQUIRES TO BE DELETED. 6.1 I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR. SINCE THE CLOSING WORK IN PROGRESS HAS ALREADY BEEN TAKEN INTO ACCOUNT IN THE TOTAL WORKS COST AS ABOVE, THE ADDIT ION MADE BY THE AO AMOUNTS TO DOUBLE ADDITION AND THEREFORE DELETED AND THE GROUND OF APPEAL IS ALLOWED. 22. THE LEARNED D.R. FOR THE REVENUE HAS FAILED TO CONTROVERT THE ABOVE SAID FINDING OF THE CIT (APPEALS) AND IN VIEW THERE OF, WE FIND NO MERIT IN GROUND NO.4 RAISED BY THE REVENUE. THUS THE SAME I S DISMISSED. 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.582/CHD/20011 IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IN ITA NO.606/CHD/2011 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF AUGUST, 2012. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 28 TH AUGUST, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH