ACIT, Kota V. GOODWILL ADANCE CONSTRUCTION COMPANY PVT. LTD., Kota

ITA 618/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2024 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 03-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEENA JEPH DH LS
• Assessee Lawyers: AKASH
• 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.618/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 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 NEENA JEPH FU/KZKFJRHDH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA, SHRI DIVANG GARGIEYA & SHRI AKASH JAIN LQUOKBZ DH RKJH[K@ DATE OF HEARING : 22.06.2017 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT: 07/07/2017. 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 08.03.2016 FOR A.Y. 2012-13. THE GROUND OF APPEAL TAKEN BY THE REVENUE IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS. 2,28,24,615/- MADE TOWARDS THE BUSINESS INCOME OF THE ASSESSEE BY APPLYING NET PROFIT RATE OF 8% AFTER ALLOWING DEPRECIATION AND INTEREST TO RS. 10,00,000/- BY NOT ADOPTING HARMONIOUS INTERPRETATION ON AOS ABOVE SAID DECISION. ITA NO. 618/JP/16 ACIT VS. M/S GOODWILL ADVANCE CONSTRUCTION CO. PVT. LTD.,KOTA 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION WORK. DURING THE YEAR UNDER C ONSIDERATION, THE ASSESSEE HAD SHOWN GROSS CONTRACT RECEIPTS AT RS. 62,88,21,6 58/- AND N.P. AT RS. 3,26,31,301/-, GIVING NP RATE OF 5.19%. THE AO REJ ECTED THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT AND ENHANCE D THE NP RATE @ 8% AND THUS, MADE TRADING ADDITION OF RS. 1,76,74,431/-. I N APPEAL BEFORE THE LD. CIT(A), HE UPHELD THE APPLICATION OF SECTION 145(3 ) BUT THE TRADING ADDITION WAS SUSTAINED AT RS 10,00,000/- AGAINST WHICH THE R EVENUE IS IN APPEAL BEFORE US. 3. THE RELEVANT FINDING OF THE LD. CIT(A) WHICH ARE UNDER CHALLENGE BEFORE US IS REPRODUCED AS UNDER:- SINCE THE FACTS AND THE NATURE OF BUSINESS REMAIN THE SAME IN THIS YEAR AS WELL EXCEPT THAT THE PROPRIETORSHIP HAS BEEN REP LACED BY THE PRESENT PRIVATE LIMITED COMPANY, I AM INCLINED TO FOLLOW TH E SAME LINE OF DECISION IN THIS CASE FOR THE YEAR UNDER CONSIDERAT ION. CONSIDERING THE PAST HISTORY AND FINDINGS GIVEN BY THE AO WHILE DISCUSSING THE ISSUE RELATED TO DEFECTS POINTED OUT IN BOOKS OF ACCOUNTS, AND THE INABILITY OF THE ASSESSEE TO COUNTER EXPLAI N THE DEFECTS POINTED OUT IN HIS BOOKS OF ACCOUNTS SHOWS THAT ASSESSEES BOOKS WERE NOT PROPERLY MAINTAINED AND AS SUCH THESE INCOMPLETE & IMPROPERLY MAINTAINED BOOKS OF ACCOUNTS COULD NOT REFLECT TRUE AND FAIR PICTURE OF PROFIT OF THE ASSESSEE COMPANY. HENCE, THE REJECTIO N OF BOOKS OF ACCOUNTS RESORTED TO BY THE A.O. IS UPHELD. THE AO IN THE ASSESSMENT HAS ASSESSED THE INTEREST INCOME, SALES TAX REFUND, DISCOUNTS ETC. RS. 1,65,18,473/- AS INCOME FROM OTHER SOURCES. THEREFORE, THE INCOME FROM BUSINESS AFTER RE-COMPUT ATION (EXCLUDING INTEREST INCOME0 COMES TO RS. 2,74,81117/- (RS. 4,3 9,99,590-RS. 1,65,18,473). IN THE ASSESSMENT ORDER THE AO HAS GIVEN THE FOLLOW ING FINDING:- ITA NO. 618/JP/16 ACIT VS. M/S GOODWILL ADVANCE CONSTRUCTION CO. PVT. LTD.,KOTA 3 CONSIDERING THE TOTALITY OF THE FACTS AVAILABLE ON RECORD AND PREVIOUS HISTORY OF THE CASE, NET PROFIT RATE @ 8% IS APPLIE D ON THE GROSS CONTRACT RECEIPTS OF RS. 62,88,21,656/-. SINCE NET PROFIT RATE HAS BEEN APPLIED, ALL EXPENSES INCLUDING DEPRECIATION AND IN TEREST DEEMED TO HAVE BEEN ALLOWED. HOWEVER, IN THE COMPUTATION, THE AO DID NOT REDUCE DEPRECIATION AND INTEREST FROM THE NET PROFIT COMPUTED @ 8%. AS PER THE CORRECT CALCULATION (GIVING EFFECT TO THE AOS FINDING), TH E INCOME FROM BUSINESS SHOULD BE AS UNDER:- TURNOVER RS. 62,88,21,658/- NET PROFIT @ 8% RS. 5,03,05,732/- LESS: I) INTEREST RS. 1,82,33,376/- II) DEPRECIATION RS. 2,25,51,633/- RS. 4,07,85,009/- INCOME FROM BUSINESS RS. 95,20,723/- THEREFORE, AS PER AOS FINDING ITSELF, THE CORRECT INCOME OF ASSESSEE FROM BUSINESS COMES TO RS. 95,20,723/- AS AGAINST THIS, THE CORRECT BUSINESS INCOME DECLARED BY ASSESSEE (AFTER EXCLUDI NG INTEREST INCOME0 COMES TO RS. 2,74,81,117/-. THIS SHOWS THAT IF WE A PPLY AOS FINDING, THE INCOME OF ASSESSEE WOULD ACTUALLY GO DOWN. THE DECLARED INCOME BEFORE INTEREST AND DEPRECIATIO N COMES TO RS. 8,47,84,599/- WHICH GIVES A NET PROFIT RATE OF 13.4 8%. CONSIDERING THE ABOVE, I AM OF THE OPINION THAT AN ADDITION OF RS. 10,00,000/- WOULD MEET THE END OF JUSTICE. THE INCO ME OF ASSESSEE WOULD BE RS. 6,92,66,126/- BEFORE DEPRECIATION & IN TEREST, THIS GIVES NET PROFIT RATE OF 11.01% BEFORE INTEREST AND DEPRE CIATION. ASSESSEES NET INCOME AFTER INTEREST & DEPRECIATION WOULD BE R S. 2,84,81,117/-. THE AO IS DIRECTED TO TAKE ASSESSEES NET BUSINESS INCOME AT RS. 2,84,81,117/-. 4. THE LD AR SUBMITTED THAT THE RESULTS DECLARED ARE B ETTER THAN LAST YEAR AND WHERE THE BOOKS OF ACCOUNTS ARE REJECTED, A FAI R ESTIMATE IS REQUIRED TO BE MADE. IT WAS SUBMITTED THAT THE HONBLE RAJASTHA N HIGH COURT THESE DAYS ITA NO. 618/JP/16 ACIT VS. M/S GOODWILL ADVANCE CONSTRUCTION CO. PVT. LTD.,KOTA 4 HAS BEEN ADOPTINGTHE PRINCIPLE OF FIVE YEARS AVERAG E IN THE CASES OF FAIR ESTIMATION. APPLYING THE SAME, IN THE INSTANT CASE, IT WILL BE OBSERVED THAT THE AVERAGE NP RATE (AFTER ALL DEDUCTIONS) DECLARED FRO M ASSESSMENT YEAR 2008-09 TO 2012-13STOOD AT 5.36%, AS AGAINST WHICHTHE NP RA TE(AFTER ALL DEDUCTIONS) DECLARED THIS YEAR BY THE ASSESSEE STOOD AT 5.19%. HOWEVER, THE LD. CIT(A) PARTLY SUSTAINED THE ADDITION OF RS. 10,00,000/- AN D THEREFORE SUCH NP RATE STOOD INCREASED TO 5.35% WHICH IS NOTHING BUT THE A VERAGE OF FIVE YEARS. 5. HAVING HEARD BOTH THE PARTIES, THE PRINCIPLE OF AVE RAGES TAKING INTO CONSIDERATION LAST FIVE YEARS (PAST HISTORY) IS CLE ARLY A ROBUST AND FAIR ESTIMATION OF DETERMINING THE NET PROFITS FOR THE Y EAR UNDER CONSIDERATION. THE PRINCIPLE OF AVERAGE HAS BEEN DETERMINED BY THE HON BLE RAJASTHAN HIGH COURT AND IS THUS CLEARLY BINDING AND APPLICABLE IN THE INSTANT CASE. THE AO IS DIRECTED TO VERIFY THE AVERAGE NP RATE FOR LAST FIV E YEARS AS CONTENDED BY THE LD AR AND WHERE THE SAME IS CONSISTENT WITH WHAT HA S BEEN DETERMINED BY THE LD CIT(A), ALLOW THE NECESSARY RELIEF TO THE AS SESSEE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/07/2017. 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:- 07/07/2017 VKNS'K DH IZFRFYFI VXZSF'KR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE-1, KOTA. ITA NO. 618/JP/16 ACIT VS. M/S GOODWILL ADVANCE CONSTRUCTION CO. PVT. LTD.,KOTA 5 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.618/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.