ITO, CHURU V. M/s. Jai Construction Co., SUJANGARH

ITA 64/JODH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78205 (ITAT-JODHPUR)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 04-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Business income; Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 64/JU/2014 ASSESSMENT YEAR: 2009-10 THE INCOME-TAX OFFICER VS. M/S JAI CONSTRU CTION CO WARD 2 B/O BAGARA SAMAJ BHAWAN CHURU NEAR RAILWAY GATE NO. 1 SUJANGARH PAN NO. AAEFJ 4105 D (APPELLANT) (RESPONDENT) CO NO. 15/JU/2014 A/O ITA NO. 64/JU/2014 ASSESSMENT YEAR: 2009-10 M/S JAI CONSTRUCTION CO VS. THE INCOME-TAX OFFICER B/O BAGARA SAMAJ BHAWAN WARD 2 NEAR RAILWAY GATE NO. 1 CHURU SUJANGARH PAN NO. AAEFJ 4105 D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJEEV SOGANI DEPARTMENT BY : SHRI N.A. JOSHI, DR DATE OF HEARING : 10.06.2014 DATE OF PRONOUNCEMENT : 12.06.2014 2 ORDER PER HARI OM MARATHA, J.M. THIS APPEAL BY THE REVENUE AND CROSS OBJECTION [CO] BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF T HE CIT(A)-III, JAIPUR, RAJASTHAN DATED 0.11.2013 PERTA INING TO A.Y 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE TRADING ADDITION OF RS. 21,26,406/- BY APPLYING NET PROFIT RATE @ 6.5% SUBJECT TO ALLOWABILITY OF DEPRECIATION, INTEREST AND REMUNERATION TO PARTNERS. 2. THE LD. CIT(A) HAS FURTHER ERRED IN TREATING THE INTEREST ON FDRS AS BUSINESS INCOME. 3 3. IN ITS CO, THE ASSESSEE HAS RAISED THE FOLLOWING SOLE GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 145(3) AND THEREAFTER CONFIRMING THE TRADING ADDITION OF RS. 7,11,310/- OUT OF TOTAL TRADING ADDITION OF RS. 28,37,716/- MADE BY THE A.O. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY BE GRANTED BY QUASHING THE REJECTION OF BOOKS AND DELETING THE TRADING ADDITION OF RS. 7,11,310/-. 4. FIRST GROUND OF REVENUES APPEAL AND SOLE GROUND OF ASSESSEES CO ARE RELATED TO ESTIMATED TRADING ADDI TION MADE IN THE CASE OF THIS ASSESSEE WHO IS CARRYING O N THE BUSINESS OF A CIVIL CONTRACTOR. ON GROSS CONTRACT RECEIPTS, THE ASSESSEE FIRM HAS DISCLOSED NET PROFIT OF RS. 16,73,373/- AFTER CLAIMING INTEREST TO PARTNERS AND THIRD PARTY OF RS. 6,52,388/- AND REMUNERATION FOR PARTNE RS OF 4 RS. 12,03,082/- AND ALSO DEPRECIATION OF RS. 36,780 /-. THE NET PROFIT BEFORE DEPRECIATION, INTEREST AND REMUNE RATION TO PARTNERS IN TERMS OF PERCENTAGE COMES TO 2.75% W HICH HAS BEEN CONSIDERED BY THE A.O. TO BE ON LOWER SIDE . THE A.O. REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE- FIRM AND HAS ADOPTED NET PROFIT RATE OF 10% TO MAKE THE IMPUGNED ADDITION. THE LD. CIT(A) HAS RESTRICTED I T TO 6.5%. THE ASSESSEE HAS DISCLOSED 5.49% OF NET PROF IT RATE. IN A.Y. 2006-07 WHILE COMPLETING ASSESSMENT THE A.O . APPLIED NET PROFIT RATE OF 8% AND THE MATTER TRAVEL LED UP TO THE ITAT. THE ISSUE WAS SET ASIDE BY THE TRIBUN AL TO THE A.O. WHO FRAMED ASSESSMENT U/S 256 R.W.S 143(3) OF THE ACT BY APPLYING NET PROFIT RATE OF 6%. IN THE IMMEDIATELY PAST A.Y. 2008-09, THE ASSESSEE SHOWED NET PROFIT RATE OF 5.85% AND IN A.Y. 2006-07 AS STATED ABOVE, NET PROFIT RATE OF 6% WAS ADOPTED. AS PER THE SETT LED POSITION, WHICH WE ARE CONSISTENTLY TAKING THAT EVE N AFTER REJECTION OF BOOKS OF ACCOUNT, THE NET PROFIT RATE OR GROSS PROFIT RATE ADOPTED IN THE IMMEDIATELY PRECEDING YE AR BEING THE PAST HISTORY OF THE ASSESSEE HAS TO BE IN VOKED. 5 IN THIS CASE, THE PAST HISTORY OF THE ASSESSEE IS A VAILABLE AND IN THE IMMEDIATELY PAST A.Y., NET PROFIT RATE O F 5.85% HAS BEEN ACCEPTED. THEREFORE, IN CONTINUITY OF CON SISTENT VIEW TAKEN BY US, WE DIRECT THAT 5.85% IN PLACE OF 6.5% ADOPTED BY THE LD. CIT(A) HAS TO BE CONSIDERED AND WHATEVER TRADING ADDITION REMAINS TO BE ADDED CAN B E ADDED. WITH THIS OBSERVATION, WE PARTLY ALLOW GROU ND RAISED IN CROSS OBJECTION AND DISMISS THE GROUND RA ISED IN APPEAL BY THE REVENUE. 5. WE MAY MENTION THAT THE CO OF THE ASSESSEE CONTA INS TWO PARTS FIRST PART CHALLENGES THE INVOKING OF P ROVISIONS OF SECTION 145(3) OF THE ACT WHICH WAS NOT PRESSED BY THE LD. A.R. AND THE SECOND PART WHICH WE HAVE DISPOSED OF. 6. IN REVENUES APPEAL, ONE MORE GROUND HAS BEEN RA ISED WHICH IS REGARDING TREATING THE INTEREST FROM FDRS AS INCOME FROM OTHER SOURCES. 6 7. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT B Y THE ASSESSEE THE FDRS WERE RAISED ON THE COMPULSION OF TAKING CONTRACT FROM GOVERNMENT DEPARTMENT ON WHICH INTERE ST ACCRUED TO THE ASSESSEE. THIS IS ALSO A SETTLED PO SITION OF LAW THAT IN SUCH CIVIL CONTRACT CASES, WHEN NECESSA RILY THE FDRS HAVE TO BE PURCHASED AND HAVE TO BE KEPT AS SE CURITY FOR OBTAINING CONTRACTS, SUCH INTEREST RECEIVED IS TREATED AS BUSINESS INCOME. THE LD. CIT(A) HAS CORRECTLY T AKEN DECISION ON GROUND NO. 2 AS WELL. GROUND NO. 2 OF REVENUES APPEAL ACCORDINGLY STANDS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED WHEREAS THE CROSS OBJECTION OF THE ASSESS EE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 12 TH JUNE, 2014. SD/- SD/- (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12 TH JUNE, 2014 VL/- 7 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR