Asstt.Commissioner of Income Tax,Circle-6, Nagpur V. Shri. Rajendra Goenka, Nagpur

ITA 62/NAG/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3091 (ITAT-NAGPUR)
• Duration Of Justice: 8 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 28-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M B BHUSARI
• Keywords: Rejection of books of accounts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR E-BENCH, NAGPUR (THROUGH VIDEO CONFERENCE AT MUMBAI) . . , . / BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 62/NAG/2011 / ASSESSMENT YEAR 2007-08 ASST. COMMISSIONER OF INCOME TAX CIRCLE -6, ROOM NO. 402, AAYAKAR BHAVAN, CIVIL LINES, NAGPUR. VS. RAJENDRA GOENKA PROP. M/S. R.K. ENGINEERING SERVICES, NANDANWAN, CEMENT ROAD, NAGPUR. PAN: AAOPG 4703 A ( / APPELLANT ) ( / RESPONDENT ) REVENUE BY : SHRI M.B. BHUSARI ASSESSEE BY : SHRI K.P. DEWANI ! '#$ / DATE OF HEARING : 18-12-2012 %& ! '#$ / DATE OF PRONOUNCEMENT : 18-12-2012 '( / O R D E R PER RAJENDRA, AM CHALLENGING THE ORDER DT. 20-01-2011 OF THE CIT(A)- II, NAGPUR, ASSESSING OFFICER (AO) HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THE LEARNED CIT(A)-II NAGPUR HAS ERRED IN DIRECT ING THE ASSESSING OFFICER TO ADOPT THE NET PROFIT @ 4% OF TRADING TURNOVER. 2. THE LEARNED CIT(A)-II NAGPUR HAS ERRED IN DIRECT ING THE ASSESSING OFFICER TO ADOPT THE NET PROFIT @ 7% ON THE COMBINE TURNOVER OF THE ELECTRICAL CONTRACT WORK AND LABOUR CHARGES. ITA NO. 62/NAG/2011 RAJENDRA GOENKA 2 3. ANY OTHER GROUND THAT MAY BE RAISED AT THE TIME OF HEARING. 2. ASSESSEE, AN INDIVIDUAL, UNDERTAKING ELECTRICAL CON TRACTS FILED HIS RETURN OF INCOME ON 11-11-2007 DECLARING TOTAL INCOME OF RS. 37.48 LAKHS. ASSESSMENT WAS FINALISED ON 31-12-2009 BY THE AO U/S. 143(3) OF TH E INCOME TAX ACT, 1961 DETERMINING HIS TOTAL INCOME AT RS. 88.07 LAKHS. 3. DURING THE ASSESSMENT PROCEEDINGS, AO ASKED THE ASS ESSEE TO PROVIDE THE DETAILS OF THE LABOUR CHARGES CLAIMED IN THE P&L A/ C. IN THIS REGARD, HE RECORDED THE STATEMENTS OF 3 SUB-CONTRACTORS TO M/S. RAHUL ENTER PRISES, MILIND ELECTRICALS AND SUSHIL ASSOCIATES. AFTER CONSIDERING THE MATERIAL AVAILABLE ON THE RECORD, HE REJECTED THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. HE HELD THAT IN ASSESSE ES CASE, NO SEPARATE DETAILS OF EXPENSES RELATED TO INCOMPLETE PROJECT HAD BEEN MAI NTAINED, THAT THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE WAS SUCH THAT C ORRECT PROFIT COULD NOT BE DEDUCTED FROM THE BOOKS OF ACCOUNTS MAINTAINED BY T HE ASSESSEE, THAT THE ASSESSEE HAS SUPPRESSED HIS PROFIT BY INFLATING EXPENDITURE ON ACCOUNT OF BOGUS LEABOUR CHARGES. HE ESTIMATED THE NET PROFIT @ 15% ON TOTA L SALES AND RECEIPTS OF RS. 5.78 CRORES. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE HELD THAT IN THE CASE OF THE ASSESSEE IN THE IMMEDIATELY PRECEDING AY (AY 2006-0 7) ASSESSMENT WAS FRAMED AND BOOK RESULTS WERE ALSO REJECTED WITH REGARD TO THE SAME 3 SUB-CONTRACTORS, THAT HIS PREDECESSOR HAD, AFTER RECORDING DETAILED REASONS A ND CONSIDERING THE EVIDENCES ON RECORD, HAD DIRECTED TO ESTIMATE NET INCOME OF ASSE SSEE AT 4% OF TRADING TRANSACTION AND AT 7% IN RESPECT OF THE CONTRACT WORK AS WELL A S THE LABOUR CHARGES, THAT THERE WAS INCREASE IN THE TOTAL TURNOVER OF THE ASSESSEE IN T HE YEAR UNDER CONSIDERATION, THAT INCREASE IN TURN OVER RESULTED IN FALL IN MARGIN OF THE PROFIT, THAT AO HAD NOT DISPUTED OR DOUBTED THE CLAIM OF EXPENSES INCURRED ON ACCOUN T OF INTEREST, THAT INTEREST EXPENSES HAS INCREASED FROM RS. 1.24 CR. TO 1.7 CR. IN THE CURRENT YEAR. FOLLOWING THE ORDER OF HIS PREDECESSOR, HE PARTLY ALLOWED THE APP EAL FILED BY THE ASSESSEE. 5. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) SUBMITT ED THAT BOOKS OF ACCOUNTS WERE REJECTED BY THE AO, THAT THERE WAS NO PROPER V ERIFICATION OF THE EXPENDITURE CLAIMED BY THE ASSESSEE WITH REGARD TO 3 LABOUR CON TRACTORS. AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT LABOUR CONTRACTO RS WERE ASSESSED TO TAX, THAT IN THE PRECEDING YEAR, FAA HAD PASSED A DETAILED ORDER JUS TIFYING THE ESTIMATE OF NET INCOME OF THE ASSESSEE @ 4% FOR TREATING TRANSACTION @ 7% FOR CONTRACT WORK AND LABOUR CHARGES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PUT BEFORE US. WE FIND THAT IT IS THE CASE OF ESTIMATION OF INCOME BY THE AO AS WELL AS THE FAA. ORDER PASSED BY THE FAA IS SELF-SPEAKING AND WELL R EASONABLE ORDER. DR HAS NOT ITA NO. 62/NAG/2011 RAJENDRA GOENKA 3 BROUGHT ANYTHING ON RECORD TO PROVE THAT ESTIMATE C ONFIRMED BY THE FAA LACKS ANY CREDIBILITY. WE FIND THAT THE AO HAS DISCUSSED THR EE METHODS FOR ESTIMATING THE PROFIT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AN D FINALLY ADOPTED METHOD NO.3. IN OUR OPINION, WHENEVER INCOME HAS TO BE ESTIMATED, I T SHOULD BE ESTIMATED ON SOME LOGICAL BASIS. A FAIR METHOD SHOULD BE ADOPTED IN SUCH MATTERS RATHER THAN THE METHOD WHICH MIGHT RESULT IN HIGHER/LOWERS TAXES. WE ARE OF THE OPINION THAT METHOD ADOPTED BY THE FAA IS FAIR AND JUST. SO, CONFIRMING THE OR DER OF THE FAA, WE REJECT THE GROUNDS OF APPEAL FILED BY THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISS ED. ORDER PRONOUNCED BY E-BENCH AT MUMBAI ON THIS 18 TH DAY OF DECEMBER, 2012. SD/- SD/- ( . . / R.K. GUPTA ) ( / RAJENDRA ) ') / JUDICIAL MEMBER $ ') / ACCOUNTANT MEMBER *+ MUMBAI, ,' DATE: 18 TH DECEMBER, 2012 TNMM COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR, ITAT, NAGPUR 6. GUARD FILE -' ' //TRUE COPY// BY ORDER, ASST. REGISTRAR, ITAT