ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, Kota V. GOODWILL ADVANCE CONSTRUCTION COMPANY PVT. LTD., Kota

ITA 588/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2046 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 13-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DH LS
• Assessee Lawyers: MAHENDRA GARGIEYA ADV DHK
• Keywords: Business income; Depreciation

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO.588/JP/17 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2013-14 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTA. CUKE VS. M/S GOODWILL ADVANCE CONSTRUCTION COMPANY PVT. LTD., 41-42, 1 ST FLOOR, CAD CIRCLE, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AADCG4121G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT) FU/KZKFJRHDH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (ADV.) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 29.09.2017 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT: 03/10/2017. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), KOTA DATED 03.05.2017 FOR A.Y. 2013-14. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN:- (I) RESTRICTING THE ADDITION OF RS. 2,62,35,760/- M ADE TOWARDS THE BUSINESS INCOME OF THE ASSESSEE BY APPLYING NET PROFIT RATE OF 8% AFTER ALLOWING DEPRECIATION AND INTEREST TO RS. 25,00,000/- BY NOT ADOPTING HARMONIOUS INTERPRETATION ON AOS ABOVE SAID DECISION; ITA NO. 588/JP/17 ACIT VS. M/S GOODWILL ADVANCE CONSTRUCTION CO. PVT. LTD., KOTA 2 (II) DELETING THE AMOUNT OF RS. 25,889/- ADDED BY T HE AO ON ACCOUNT OF LATE DEPOSIT OF PF CONTRIBUTION RELYING ON THE DECISION OF HONBLE HIGH COURT OF RAJASTHAN IN COMMISSIONER OF INCOME TAX, UDAIPUR V/ S UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LTD. WHEN THE MATTER HAS BE EN TAKEN TO HONBLE SUPREME COURT OF INDIA BY THE DEPARTMENT AND DECISI ON THEREIN IS PENDING.; 2. REGARDING GROUND NO. 1, THE BRIEF THE FACTS OF T HE CASE ARE THAT THE ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF CIVIL C ONSTRUCTION WORK FILED ITS RETURN OF INCOME ON 26.09.2013 DECLARING TOTAL INCO ME OF RS. 7,36,22,480/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD SHOWN GROSS CONTRACT RECEIPTS OF RS. 106,90,96,706/- AND NET PROFIT OF R S. 5,87,07,925/-, GIVING NP RATE OF 5.49% (AFTER INTEREST & DEPRECATION) AS AGA INST GROSS CONTRACT RECEIPTS AT RS. 62,88,21,658/- AND N.P. SHOWN AT RS. 3,26,31 ,301/- GIVING NP RATE OF 5.19% (AFTER INTEREST & DEPRECIATION) LAST YEAR. 2.1 THE AO REJECTED THE BOOKS OF ACCOUNT UNDER SEC. 145(3) AND ENHANCED THE NP RATE TO 8% (AFTER INTEREST AND DEPRECIATION) AND THUS, MADE TRADING ADDITION OF RS. 2,62,35,760/-. IN THE FIRST APPEAL, THE LD. CIT(A) UPHELD THE APPLICATION OF SECTION 145(3) BUT RESTRICTED THE AD DITION UPTO RS. 25,00,000/-. AGAINST THE FINDINGS OF THE LD CIT(A), THE REVENUE IS IN APPEAL BEFORE US BUT THE ASSESSEE HAS NOT CHALLENGED AND HAS ACCEPTED TH E FINDINGS OF THE LD CIT(A). 3. WE NOW REFER TO THE RELEVANT FINDING OF THE LD. CIT(A) WHICH ARE UNDER CHALLENGE BEFORE WHICH ARE REPRODUCED AS UNDER:- AS REGARDS THE ESTIMATION OF PROFITS, IT IS SEEN T HAT THE AO IN THE ASSESSMENT HAS ASSESSED THE FDR INTEREST INCOME, DI SCOUNT RECEIVED, ETC. RS. 1,43,30,504/- AS INCOME FROM OTHER SOURCES . THEREFORE, THE INCOME FROM BUSINESS AFTER RE-COMPUTATION (EXCLUDIN G INTEREST INCOME) HAS BEEN WORKED TO RS. 8,55,27,736/- AFTER TAKING A N.P. OF 8% (AS ITA NO. 588/JP/17 ACIT VS. M/S GOODWILL ADVANCE CONSTRUCTION CO. PVT. LTD., KOTA 3 AGAINST 5,87,07,925/- SHOWN @ 5.49% BY THE APPELLAN T) ON THE CONTRACT RECEIPT OF RS. 106,90,96,706/-. THE BUSINESS INCOME DECLARED BY ASSESSEE (INCLUDING OTHER SOURCES INCOME) COMES TO RS. 7,36,22,480/- WHICH GIVES A NE T PROFIT RATE OF 6.88%. THE BUSINESS INCOME OF THE ASSESSEE AFTER EX CLUDING OTHER COURSES INCOME COME TO RS. 5,92,91,976/- WHICH GIVE S A NET PROFIT RATE OF 5.54%. CONSIDERING THE ABOVE, THE BUSINESS RESUL TS ARE FOUND TO BE REASONABLY ACCEPTABLE BEING IN THE 6% VICINITY. THE INCOME OF ASSESSEE WOULD BE RS. 10,67,27,405/- BEFORE ALLOWING FOR DEP RECIATION & INTEREST GIVING A NET PROFIT RATE OF 9.98%. THUS ON A TOTALITY OF FACTS AND CONSIDERING THE PAS T HISTORY, A.OS CONCERNS AS WELL AS THE PRESENT BUSINESS RESULTS, I AM OF THE OPINION THAT AN ADDITION OF RS. 25,00,000/- WOULD MEET THE END OF JUSTICE. THUS AFTER THE ABOVE ADDITION, THE ASSESSEES NET I NCOME AFTER INTEREST & DEPRECIATION WOULD BECOME RS. 6,17,91,976/- WITH A N.P. OF 5.78%. THE AO IS DIRECTED TO TAKE ASSESSEES NET BUSINESS INCOME AT RS. 6,17,91,976/-. THE INTEREST ETC INCOME WOULD BE SEP ARATELY ASSESSED AS OTHER SOURCES INCOME. THESE GROUNDS OF APPEAL ARE T HEREFORE PARTLY ALLOWED. 4. DURING THE COURSE OF HEARING, THE ASSESSEE DRAWN OUR REFERENCE TO THE COMPARATIVE CHART OF GROSS RECEIPTS AND N.P. RATE D ECLARED BY THE ASSESSEE AS UNDER: A.Y. GROSS RECEIPT NET PROFIT NP RATE 2009-10 RS. 36,39,25,564/- RS. 1,98,81,280/- 5.46% 2010-11 RS. 57,57,96,344/- RS. 4,03,19,320/- 7.00% 2011-12 RS. 43,74,68,783/- RS. 1,31,81,619/- 3.10% 2012-13 RS. 62,88,21,656/- RS.3,26,31,301/- 5.19% 2013-14 RS.106,90,96,706/- RS. 5,87,07,925/- 5.49% ITA NO. 588/JP/17 ACIT VS. M/S GOODWILL ADVANCE CONSTRUCTION CO. PVT. LTD., KOTA 4 IT WAS SUBMITTED THAT THE GROSS RECEIPTS HAVE SHARP LY INCREASED FROM RS. 62.88 CRORES LAST YEAR TO RS. 106.91 CRORES THIS YE AR, REGISTERING SHARP INCREASE OF 67.13% AND DESPITE SUCH INCREASE, THE A SSESSEE HAS BEEN ABLE TO SHOW MUCH BETTER RESULT I.E. NP RATE (AFTER ALL DED UCTIONS) FROM 5.19% TO 5.49%. 4.1 IT WAS FURTHER SUBMITTED THAT THE HONBLE RAJAS THAN HIGH COURT THESE DAYS HAS BEEN ADOPTING FIVE YEARS AVERAGE IN THE CA SES OF FAIR ESTIMATION. APPLYING THE SAME, IN THE INSTANT CASE, IT WILL BE OBSERVED THAT THE AVERAGE NP RATE (AFTER ALL DEDUCTIONS) DECLARED FROM ASSESSMEN T YEAR 2009-10 TO 2013- 2014 (FOR FIVE YEARS) STOOD AT 5.23%, AS AGAINST WH ICH THE NP RATE (AFTER ALL DEDUCTIONS) DECLARED THIS YEAR STOOD AT 5.49%. 4.2 IT WAS FURTHER SUBMITTED THAT THE HONBLE ITAT HAS EVEN UPHELD THE NP RATE AT 5.74% IN A.Y. 2009-10 VIDE ITS ORDER DATED 30.05.2017 IN ITA NO. 2/JP/2014 AND EVEN ALSO UPHELD THE NP RATE AS LOW A S 5.35% IN A.Y. 2012-13 VIDE ITS ORDER DATED 07.07.2017 IN ITA NO. 618/JP/2 016 AS AGAINST DECLARED 5.49%. 5. THE LD. DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE NP RATE ESTIMATED BY THE ASSESSING OFFICER @ 8% IS JUSTIFIABLE GIVEN THE FACTS AND CIRCUMSTANCES OF THE CASE AS AGAINST ADHOC ADDITION OF RS. 25,00,000/- SUSTAINED BY THE LD. CIT(A). 6. HAVING HEARD BOTH THE PARTIES, WE ARE OF THE VIE W THAT THE PRINCIPLE OF AVERAGES TAKING INTO CONSIDERATION LAST FIVE YEARS (PAST HISTORY) IS CLEARLY A ROBUST AND FAIR ESTIMATION OF DETERMINING THE NET P ROFITS FOR THE YEAR UNDER CONSIDERATION. THE PRINCIPLE OF AVERAGE HAS BEEN DE TERMINED BY THE HONBLE RAJASTHAN HIGH COURT AND IS THUS CLEARLY BINDING AN D APPLICABLE IN THE INSTANT CASE. THE AVERAGE NP RATE DECLARED FROM ASSESSMENT YEAR 2009-10 TO 2013- 2014 STOOD AT 5.23%, AS AGAINST WHICH THE NP RATE O F 5.49% DECLARED THIS ITA NO. 588/JP/17 ACIT VS. M/S GOODWILL ADVANCE CONSTRUCTION CO. PVT. LTD., KOTA 5 YEAR. IN ANY CASE, THERE IS ADDITION OF RS 25,00,0 00 SUSTAINED BY THE LD CIT(A) WHICH HAS NOT BEEN CHALLENGED BY THE ASSESSE E WHICH FURTHER BUILDS UP THE NET PROFIT RATE. IN LIGHT OF THE SAME, WE DONO T FEEL THERE IS ANY NEED TO INTERFERE WITH THE FINDINGS OF THE LD CIT(A) AND WH ICH ARE HEREBY CONFIRMED. IN THE RESULT, GROUND NO.1 OF THE REVENUES APPEAL IS DISMISSED. 7. REGARDING SECOND GROUND OF APPEAL WHEREIN THE DI SALLOWANCE OF RS. 25,889/- ON ACCOUNT OF LATE DEPOSIT OF PF CONTRIBUT ION HAS BEEN MADE BY THE AO, THE MATTER IS COVERED BY THE DECISION OF HONBL E RAJASTHAN HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX, UDAIPUR V/S UDA IPUR DUGDH UTPADAK SAHAKARI SANGH LTD. HENCE, THE ADDITION DELETED BY THE LD. CIT(A) IS CONFIRMED. IN THE RESULT, GROUND NO.2 OF THE REVENU ES APPEAL IS DISMISSED. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/10/2017. SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER SANTOSH* JAIPUR DATED:- 03/10/2017 VKNS'K DH IZFRFYFI VXZSF'KR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE-1, KOTA. 2. IZR;FKHZ@ THE RESPONDENT- M/S GOODWILL ADVANCE CONSTRUCTION COMPANY PVT. LTD., 41-42, 1 ST FLOOR, CAD CIRCLE, KOTA. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT , 6. XKMZ QKBZY@ GUARD FILE (ITA NO.588/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.