N.K. Builders, Delhi V. ACIT, New Delhi

ITA 5828/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97194 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 20-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 31-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Keywords: Opportunity of being heard
• Section: 142(1); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI A.T. VARKEY : JUDICIAL MEMBER ITA NO. 5828/DEL/2013 ASSTT. YR: 2008-09 N.K. BUILDERS, VS. ASSTT. COMMISSIONER OF INCOME -TAX C-8, SURAJMAL VIHAR, CIRCLE 39(1), NEW DELHI. DELHI. PAN: AAGFN 3606 F ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI C.S. ANAND ADV. RESPONDENT BY : SHRI P.DAM KANUNJNA SR. DR DATE OF HEARING : 21/07/2015. DATE OF ORDER : 07/09/2015. O R D E R PER S.V. MEHROTRA, A.M. : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER DATED 09-09-2013 PASSED BY THE LD. CIT(APPEALS)-XXVIII, N EW DELHI IN APPEAL NO. 43/2012-13, RELATING TO ASSTT. YEAR 2008-09, R AISING FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS OF THE CASE AND UNDER THE LAW , THE ID CIT(A) HAS ERRED IN UPHOLDING THE ID. A.D.'S INCORR ECT ACTION OF REJECTING THE BOOKS OF ACCOUNTS U/S 145(3 ) OF THE LT. ACT 1961. 2. THAT THE ID. CIT(A) HAS FAILED TO APPRECIATE THA T IT WAS NOT A CASE OF PETTY CIVIL CONTRACTOR, WHO DO NO T MAINTAIN THE ACCOUNT BOOKS, BUT WAS A CASE OF CIVIL 2 ITA 5828/DEL/2013 N.K. BUILDERS VS. ACIT CONTRACTOR, WHO HAD MAINTAINED CASH BOOK, LEDGER, P URCHASE REGISTER ETC. AND GOT THE SAME AUDITED BY A FIRM OF CHARTERED ACCOUNTANTS. 3. THAT ON THE FACTS OF THE CASE AND UNDER THE LAW, THE ID CIT(A) HAS ERRED IN UPHOLDING THE ID. A.D.'S UNJUST IFIED ACTION OF APPLYING NET PROFIT RATE OF 8% ON THE GRO SS RECEIPTS, WITHOUT BRINGING ON RECORD ANY COMPARABLE CASE (AS AGAINST THE NET PROFIT DECLARED BY THE ASSESSEE , ON THE BASIS OF AUDITOR'S REPORT, WHICH WORKED OUT AT 3.58 %). 4. THAT ON THE FACTS OF THE CASE AND UNDER THE LAW, THE AUTHORITIES BELOW HAD ERRED IN IGNORING THE PAST HI STORY. 5. THAT THE ID. CIT(A) HAS FAILED TO APPRECIATE THA T THE ASSESSEE HAD NOT TAKEN ANY NEW CONTRACT, BUT HAD CO MPLETED THE PENDING CONTRACT AWARDED TO SH. KAWAI SURI (WHO WAS THE PROPRIETOR OF M/S N.K. BUILDERS, TILL THE DATE OF HIS DEATH ON 25.02.2007) AND ALSO THAT THE NET PROFIT R ATE OF 3.35 % DECLARED BY THE SAID SH. KAWAI SURI WAS ACCE PTED BY THE DEPARTMENT. 6. THAT ON THE FACTS OF THE CASE AND UNDER THE LAW, CHARGING OF INTEREST U/S 234B WAS NOT JUSTIFIED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM WAS CONSTITUTED IN FEBRUARY 2007. THE FIRM TOOK OVER THE BUSINESS OF K AWAL SURI WHO WAS RUNNING THE SAME AS SOLE PROPRIETOR. THE FIRM DID N OT TAKE ANY NEW CONTRACT BUT PROCEEDED TO FINISH OLD CONTRACTS OBTAINED BY P REVIOUS OWNER. THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING A TOT AL INCOME OF RS. 5,17,674/-. TOTAL CONTRACT RECEIPTS WERE RS. 1,37,7 2,169/- ON WHICH NET PROFIT RATE OF 3.75% WAS DECLARED. 2.1. THE AO HAD REQUIRED THE ASSESSEE TO PRODUCE AL L BOOKS OF A/C, WITH ALL BILLS AND VOUCHERS. HOWEVER, AS ASSESSEE FAILED TO PRODUCE THE SAME, THE BOOKS WERE REJECTED U/S 145(3). THE AO COMPUTED THE INCOME FROM BUSINESS BY APPLYING NET PROFIT RATE OF 8% ON THE GROSS RECE IPTS WHICH WORKED OUT TO 3 ITA 5828/DEL/2013 N.K. BUILDERS VS. ACIT RS. 11,54,025/-AND, THEREFORE, HE MADE ADDITION OF RS. 6,37,025/- (11,54,025-5,17,674). 2.2. LD. CIT(A) DISMISSED THE ASSESSEES APPEAL AS BOOK RESULTS OF THE ASSESSEE COULD NOT BE VERIFIED IN THE ABSENCE OF BI LLS AND VOUCHERS. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN T HE ASSESSMENT ORDER THE AO HAS OBSERVED THAT IN COMPLIANCE TO NOTICE U/S 14 2(1) DATED 28-5-2010, MR. SURAJ SURI PARTNER OF FIRM ATTENDED TO PROCEEDI NGS FROM TIME TO TIME AND FILED NECESSARY DETAILS/ INFORMATION/ DOCUMENTS ETC . AS REQUIRED. FURTHER, BOOKS OF ACCOUNTS WERE ALSO PRODUCED AND THE SAME W ERE EXAMINED ON TEST CHECK BASIS. THEREFORE, REJECTION OF BOOKS OF ACCOU NT WAS NOT CORRECT, WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS OF A/C . HE SUBMITTED THAT ASSESSEES BOOKS WERE DULY AUDITED AND, THEREFORE T HE AO WRONGLY APPLIED THE NET PROFIT RATE OF 8% ON THE GROSS RECEIPTS. HE FURTHER POINTED OUT THAT ASSESSEE HAD TAKEN OLD CONTRACT AND, THEREFORE, THE PROFIT MARGIN COULD NOT BE SO HIGH IN ANY VIEW OF THE MATTER. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. FROM A BARE READING OF THE ASSESSMENT ORDER, IT IS EVIDENT THAT THOUGH IN RESPONSE TO NOTICE U/S 142(1) DATED 28-5-2010 BOOKS OF A/C WERE PRODUCED AND TEST CHECKED BY THE AO, HOWEVER, NO BOOKS OF ACCOUNT WERE PRODUCED IN RESPONSE TO ORDER-SHEET ENTRY DATED 10-12-2010, 15-10-2010, 20-12-2010 AND 22-12-2010. HOWEVER, THA T DOES NOT IMPLY THAT THE BOOKS OF A/C WERE NOT THERE, PARTICULARLY WHEN AO HAD DULY EXAMINED THE BOOKS IN RESPONSE TO NOTICE DATED 28-5-2010. 4.1. AGAINST THE ASSESSMENT ORDER THE ASSESSEE PREF ERRED APPEAL BEFORE LD. CIT(A), WHICH WAS DISMISSED VIDE ORDER DATED 31-1-2 012 AGAINST WHICH 4 ITA 5828/DEL/2013 N.K. BUILDERS VS. ACIT ASSESSEE FILED APPEAL BEFORE ITAT. ITAT VIDE ITS OR DER DATED 25-5-2012 REMANDED THE MATTER TO THE FILE OF CIT(A) TO CONSID ER THE ISSUE AFRESH AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. 4.2. LD. CIT(A) CONSEQUENTLY HAS PASSED THE PRESENT IMPUGNED ORDER DATED 9-9-2013 DISMISSING THE ASSESSEES APPEAL AFTER OBS ERVING THAT BOOK RESULTS OF THE ASSESSEE COULD NOT BE VERIFIED IN THE ABSENC E OF BILLS AND VOUCHERS. 4.3. THE ASSESSEE HAD GIVEN DETAILED SUBMISSIONS DA TED 27-8-2013 BEFORE LD. CIT(A) WHICH HAVE BEEN REPRODUCED FROM PAGES 2 TO 6 OF HIS ORDER IN WHICH THE ASSESSEE EXPLAINED THE CIRCUMSTANCES UN DER WHICH THE CONTRACT WAS TAKEN OVER FROM THE WIDOW OF KAWAL SURI. IT WAS POINTED OUT THAT AS PER THE PAST HISTORY NET PROFIT RATE WAS 3.35% ONLY, WH EREAS IN THE CURRENT YEAR THE ASSESSEE HAD RETURNED NET PROFIT RATE OF 3.58%. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE HAD TO INCUR FURTHER EXPENSES TO COMPLETE THE OLD CONTRACTS. 4.4. WE FIND THAT LD. CIT(A) HAS NOT GIVEN ANY CRED ENCE TO THE SUBMISSIONS MADE BEFORE HIM INASMUCH AS HAS NOT TAKEN INTO CONS IDERATION THE ASSESSEES PLEA THAT THE ASSESSEE FIRM HAD NOT TAKEN ANY NEW M AJOR CONTRACT AND WITH THE PASSAGE OF TIME THE BUSINESS ACTIVITY HAD BEEN DISCONTINUED. IT WAS FURTHER POINTED OUT THAT SINCE THERE WAS NO BUSINES S ACTIVITIES THE PARTNERS HAD NOT CAREFULLY PRESERVED THE BILLS AND VOUCHERS ETC. OF M/S N.K. BUILDERS AND THAT IS WHY THE ASSESSEE FIRM COULD NOT PRODUCE THE BILLS AND VOUCHERS ALONG WITH BOOKS OF A/C BEFORE THE LD. AO IN THE MO NTH OF DECEMBER 2010. IN OUR OPINION, CONSIDERING THE FACT THAT ASSESSEE HAD PRODUCED THE BOOKS OF A/C BEFORE AO IN THE MONTH OF MAY 2010, IN RESPONSE TO NOTICE U/S 142(1) AND NO DISCREPANCY AT THAT TIME WAS POINTED OUT BY AO, THEREFORE, ON ACCOUNT OF DISTURBED CIRCUMSTANCES, PREVAILING IN T HE BUSINESS, IF ASSESSEE COULD NOT PRODUCE THE BOOKS OF A/C LATER ON, THEN T HE BOOK RESULTS CANNOT BE 5 ITA 5828/DEL/2013 N.K. BUILDERS VS. ACIT VARIED TO SUCH EXTENT SO AS TO DOUBLE THE PROFIT FR OM BUSINESS, IGNORING THE PAST HISTORY OF ASSESSEE. CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES, WE DIRECT THAT A NET PROFIT RATE OF 4% BE APPLIED T O THE GROSS RECEIPTS AND ASSESSMENT BE COMPLETED ACCORDINGLY. WE ORDER ACCOR DINGLY. 5. THE CHARGING OF INTEREST U/S 234B IS CONSEQUENTI AL. THE AO SHALL RECALCULATE THE CHARGING OF INTEREST UNDER THE AFOR ESAID SECTION, IF ANY, WHILE GIVING EFFECT TO THE APPELLATE ORDER. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 07/09/2015. SD/- SD/- (A.T. VARKEY) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 07/09/2015. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. 6 ITA 5828/DEL/2013 N.K. BUILDERS VS. ACIT - + DATE INITIAL 1. DRAFT DICTATED ON - 09.2015 PS 2. DRAFT PLACED BEFORE AUTHOR .09.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.