M/S SINGHAL BUILDERS CONTRACTOR, Jaipur V. ` ACIT, Jaipur

ITA 675/JPR/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7538 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-02-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 11-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Keywords: Depreciation

Judgement Text

1 ITA 675(2)-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI SANJAY ARORA ITA NO. 675/JP/2011 ASSTT. YEAR : 2008-09. M/S. SINGHAL BUILDERS, CONTRACTOR, VS. THE ACIT, C IRCLE, A-98, RANJEET NAGAR, BHARATPUR. BHARATPUR. ITA NO. 657/JP/2011 ASSTT. YEAR : 2008-09. THE ACIT, CIRCLE, VS. M/S. SINGHAL BUILDERS CON TRACTORS, BHARATPUR. BHARATPUR. (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI MAHENDRA GARGIEYA DEPARTMENT BY : SHRI D.K. MEENA DATE OF HEARING : 06.02.2012. DATE OF PRONOUNCEMENT : 10.02.2012. ORDER DATE OF ORDER : 10/02/2012. PER R.K. GUPTA, J.M. THESE ARE TWO CROSS APPEALS BY ASSESSEE AND DEPART MENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2008-09. 2. GROUND NOS. 1 AND 3 IN THE APPEAL OF THE ASSESSE E WERE NOT PRESSED BY LD. A/R, THEREFORE, THEY ARE DISMISSED AS NOT PRESSED. 3. GROUND NO. 2 IS AGAINST CONFIRMING THE INVOCATIO N OF SECTION 145(3) OF THE IT ACT AND CONSEQUENTLY SUSTAINING TRADING ADDITION OF RS. 12,22,295/- BY APPLYING NP RATE OF 11.27% SUBJECT TO DEPRECIATION, INTEREST AND REMUNE RATION TO PARTNERS, INTEREST TO THIRD 2 PARTIES AND BANK GUARANTEE AGAINST 12.50% APPLIED B Y THE AO SUBJECT TO DEPRECIATION, INTEREST AND REMUNERATION TO PARTNERS ETC. 4. THE DEPARTMENT IS ALSO OBJECTING IN REDUCING THE NP RATE FROM 12.5% TO 11.2%. 5. SINCE THE ISSUE INVOLVED IN BOTH THESE APPEALS A RE COMMON, THEREFORE, THE SAME IS DISPOSED OFF TOGETHER. 6. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR. THE ASSESSEE HAS SHOWN GROSS TURN OVER OF RS. 14.4 CRORE AND NP OF R S. 68.27 LAC WHICH WOULD GIVE NP RATE OF 4.47% AFTER INTEREST TO THE PARTNERS, DEPRE CIATION, INTEREST PAID TO THE BANK. THE AO FOUND THAT THE ASSESSEE DID NOT MAINTAIN STOCK R EGISTER, NO BILLS/VOUCHERS OF LABOUR, BAJRI AND GITTI WERE MAINTAINED, SITE-WISE DETAILS WERE NOT MAINTAINED, EXPENSES OF SALARY AND LABOUR NOT FULLY VOUCHED, NO VOUCHERS FOR TRACT OR AND EQUIPMENT WERE KEPT, NO VOUCHERS FOR MITTI DHALI, MORAN KUTAI, DIESEL CONSU MPTION, CEMENT CONSUMPTION AND BITUMEN CONSUMPTION WERE KEPT. THE AO REJECTED THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF IT ACT. THE AO RELIED UPON VARIOUS CASE LAWS AND FINALLY APPLIED NP @ 12.5% ON GROSS CONTRACT RECEIPTS. 7. IT WAS CONTENDED BEFORE LD. CIT (A) THAT - THE RETURN OF INCOME DECLARING AN INCOME OF RS. 68,27,327/-. THE AO COMPLETED THE ASSESSMENT ON THE TOTAL INCOME OF RS. 1,08,18,780/-. THE AO APPLIED THE NP RATE OF 12.5% AGAINST THE NP RATE OF 10.4% DECLARED BY THE ASSESSEE. THIS MAY KINDLY BE REDUCED AND RATE AND P ROFIT SHOWN BY THE ASSESSEE MAY KINDLY BE ACCEPTED. THE ASSESSEE FIRM MAINTAIN ED PURCHASE VOUCHERS FOR BITUMEN, DIESEL AND PARTS OF THE VEHICLES. THE ASSE SSEE FIRM DID NOT MAINTAIN VOUCHERS FOR GITTI. THE ASSESSEE PURCHASED GITTI FR OM QUARIES IN HARYANA. IN THE ASSESSMENT YEAR 1998-99 THE AO APPLIED THE NP RATE OF 10.5% AND LD. CIT (A), ALWAR REDUCED IT TO 9.5%. THE JAIPUR BENCH OF TRIB UNAL APPLIED NP RATE OF 10%. IN THE ASSESSMENT YEAR 2003-04 THE TRIBUNAL ACCEPTE D THE GP RATE OF 9.09% ON THE 3 BASIS OF DECISION IN THE CASE OF CIT VS. GOTAN LIME KHANIZ UDYOG, 256 ITR 243. THE AO APPLIED THE NP RATE OF 12.5% ON THE BASIS OF PAST HISTORY OF THE CASE. THE LD. CIT (A) APPLIED THE NP RATE OF 11.2% SUBJEC T TO BANK INTEREST, BANK GUARANTEE, INTEREST TO PARTNERS AND DEPRECIATI ON IN APPEAL NO. 418/06-07 A.Y. 2004-05 APPEAL NO. 366/07-08 A.Y. 2005-06, APP EAL NO. 11/08-09, A.Y. 2006-07 DECIDED ON 24.02.2011. IT IS , THEREFORE, REQUESTED THAT THE RATE OF 12.5% APPLIED BY THE AO MAY KINDLY BE REDUCED AND RATE AN D PROFIT DECLARED BY THE ASSESSEE MAY KINDLY BE ACCEPTED. THE AO HAS ILLEGA LLY AND AGAINST FACTS APPLIED THE NP RATE OF 12.5% ON THE PAYMENTS OF RS. 6,68,41 7/- THE WORKS EXECUTED BY THE SUB CONTRACTOR. THE ASSESSEE RECEIVED ONLY 7% PROFI T FROM THE SUB CONTRACTOR, THE RATE OF 7% MAY KINDLY BE ACCEPTED. THE LD. AO HAS ILLEGALLY AND AGAINST THE FACTS DISALLOWED BANK GUARANTEE CHARGES AMOUNTING TO RS. 7,34,799/- PAID TO BANK, THESE MAY KINDLY BE ALLOWED. THE LD. AO ALREADY ALL OWED BANK GUARANTEE AS DEDUCTION IN THE AY 2005-06 AND 2006-07 IN THE ASSE SSMENT ORDER. YOUR HONOUR ALSO APPLIED THE NP RATE OF 11.2% SUBJECT TO BANK I NTEREST, BANK GUARANTEE INTEREST TO PARTNERS AND DEPRECIATION IN THE APPEAL NO. 418/ 06-07 AY 2004-05, APPEAL NO. 366/07-08 AY 2005-06, APPEAL NO. 11/08-09 AY 2006-0 7 DECIDED ON 24.02.2011. THE BANK GUARANTEE EXPENSES MAY KINDLY BE ALLOWED. 8. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, THE LD. CIT (A) ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE IN PART BY GIVING HISS FINDING RECORDED IN PARA 4.3 AS UNDER :- 4.3. I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS SUBMISSION OF THE ASSESSEE AND CASE RELIED UPON AND PAST HISTORY OF T HE CASE, THE HONBLE ITAT IN CASE OF ASSESSEE IN A.Y. 2001-02 IN ITA NO. 196 AND 197/JP/2005/2005 DATED 13.304.2007 HAS HELD THAT 11 .2% NP IS REASONABLE AND IN ITA NO. 284/JP/2007 A.Y. 2003-04 DATED 16.05.2008 HAS HELD THAT GP RATE 9.09% AND NP RATE 6.2% SUBJEC T TO INTEREST, SALARY TO THE PARTNERS AND DEPRECIATION AS REASONABLE. IN YE AR CONSIDERATION BEFORE ME THE CONSOLIDATED NP HAD BEEN SHOWN BY THE ASSESS EE AS 10.4% SUBJECT TO INTEREST TO THE PARTNERS, DEPRECIATION AND INTER EST PAID TO THE BANK. THE 4 CASE LAWS CITED BY THE ASSESSEE IS NOT APPLICABLE. KEEPING IN THE PAST HISTORY AND THE CASE APPEAL ORDER FOR THE YEAR 2004 -05 THE NP RATE 11.2% IS JUSTIFIED ON CONTRACT RECEIPT OF RS. 14,37,99,38 0/- TO MEET THE END OF JUSTICE SUBJECT TO INTEREST TO THE PARTNERS, DEPREC IATION, INTEREST PAID TO THE BANK AND BANK GUARANTEE CHARGES. THE AO IS DIRECTE D TO CALCULATE INCOME ACCORDINGLY. THE ASSESSEE GETS RELIEF PARTLY. 9. NOW BOTH ARE IN APPEAL AGAINST THIS FINDING OF L D. CIT (A). 10. THE LD. COUNSEL OF THE ASSESSEE HAS FILED WRITT EN SUBMISSION AND CONTENTION RAISED BEFORE THE LOWER AUTHORITIES WERE REITERATED. COPY OF ORDER OF TRIBUNAL FOR EARLIER YEAR WAS ALSO FILED. IT WAS ALSO SUBMITTED THAT FACTS I NVOLVED IN THE YEAR UNDER CONSIDERATION ARE MATERIALLY SAME AS INVOLVED IN EARLIER YEAR. T URNOVER OF THE ASSESSEE HAS BEEN INCREASED SUBSTANTIALLY I.E. 56.52% AND, THEREFORE, MARGINAL DECLINE IN NP RATE SHOULD NOT BE DISTURBED. 11. ON THE OTHER HAND, THE LD. D/R PLACED STRONG RE LIANCE ON THE ORDER OF THE AO. IT WAS FURTHER SUBMITTED THAT THE AO HAS GIVEN HIS REA SONING FOR APPLYING HIGHER NP RATE OF L2.5% WHICH IS REASONABLE AND LIABLE TO BE RESTORED . 12. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT ASSESSEE DESERVES TO SUCCEED IN THE G ROUND RAISED IN PART. HOWEVER, THERE IS NO SUBSTANCE IN THE GROUND OF THE DEPARTMENT. THE FACTS OF THE CASE ARE SIMILAR AS COMPARED TO EARLIER YEAR. THE SAME BUSINESS IS DON E BY ASSESSEE SINCE LONG. THE PROFIT RATE SHOWN BY ASSESSEE RIGHT FROM ASSESSMENT YEARS 2003-304 TO 07-08 ARE PROGRESSIVE. HOWEVER, IN THE YEAR UNDER CONSIDERATION, THERE IS A MARGINAL DECLINE IN PROFIT RATE I.E. 10.57%. IN THE IMMEDIATELY PRECEDING YEAR THE PROFI T RATE WAS SHOWN AT 11.69% WHICH WAS ACCEPTED BY THE DEPARTMENT. IN EARLIER YEAR I.E . 2006-07 THE RATE WAS SHOWN AT 11%. THE AO APPLIED 12.5%. THE LD. CIT (A) REDUCED IT T O 11.27%. HOWEVER, ON SECOND 5 APPEAL, THE TRIBUNAL REDUCED THE SAME TO 11% I.E. D ECLARED BY THE ASSESSEE. IN SIMILAR MANNER THE RATE SHOWN BY ASSESSEE IN THE ASSESSMENT YEARS 2003-04 TO 05-06 WAS ACCEPTED BY THE TRIBUNAL. ORDERS OF TRIBUNAL ARE P LACED ON RECORD. IN THE YEAR UNDER CONSIDERATION, THE TURNOVER OF THE ASSESSEE HAS BEE N INCREASED TO RS. 14.40 CRORES OR ODD FROM RS. 9.19 CRORES OR ODD SHOWN IN THE IMMEDIATEL Y PRECEDING YEAR. IN THE EARLIER YEAR, THE RATE OF PROFIT SHOWN WAS 11.46%. HOWEVER, IN T HE YEAR UNDER CONSIDERATION, THE RATE OF PROFIT IS SHOWN AT 10.57%. THERE IS A DECLINE O F 1% OF PROFIT RATE. IN EARLIER YEAR, THE TRIBUNAL HAS ACCEPTED THE RATE FOR THE REASON THAT PROFIT RATE WAS SIMILAR OR PROGRESSIVE. THEREFORE, PROFIT RATE SHOWN BY ASSESSEE WAS ACCEPT ED. HOWEVER, AS STATED ABOVE, THE PROFIT RATE SHOWN BY ASSESSEE IS DECLINED BY 1%. HO WEVER, THERE IS A SUBSTANTIAL INCREASE IN TURNOVER. KEEPING IN MIND ALL THESE FACTS AND CI RCUMSTANCES, WE ARE OF THE VIEW THAT IF A LUMP SUM ADDITION OF RS. 2,50,000/- IS SUSTAINED TO COVERED THE LEAKAGE, IF ANY, THAT WILL MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. T HIS GROUND OF THE ASSESSEE IS ALLOWED IN PART AND GROUND OF THE DEPARTMENT FAILS. 13. REMAINING GROUND OF THE ASSESSEE AS WELL AS IN THE APPEAL OF THE DEPARTMENT IS AGAINST SETTING ASIDE THE ISSUE IN RESPECT OF SALES TAX PAYMENT OF RS. 18,00,734/- . BOTH THE PARTIES ARE OBJECTING SETTING ASIDE THE ISSUE. 14. THE DEPARTMENT IS SAYING THAT AO WAS RIGHT IN M AKING THE DISALLOWANCE. 15. ON THE OTHER HAND, ASSESSEE IS OBJECTING IN MAK ING THE DISALLOWANCE. 16. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. CIT (A), WE FIND THAT THERE IS NO INFIRMITY IN THE FINDING OF LD. CIT (A). THE FACTS IN THIS REGARD ARE THAT ASSESSEE CREDITED THE GROSS CONTRACT RECEIPTS IN WORKS ACCOUNT AND DE BITED SALES-TAX AMOUNT OF RS. 18,00,734/- IN WORKS ACCOUNT. THE SALES-TAX DEDUCT ED BY VARIOUS DEPARTMENTS FROM THE CONTRACT RECEIPTS OF THE ASSESSEE. THE VARIOUS DEP ARTMENTS DEPOSITED THE SALES TAX TO THE 6 GOVERNMENT TREASURY. IT WAS ARGUED THAT SINCE GOVE RNMENT DEPARTMENTS HAVE ALREADY DEPOSITED THE SALES TAX AMOUNT, THEREFORE, THE SAME IS TO BE ALLOWED. IT WAS ALSO SUBMITTED THAT SIMILAR ISSUE WAS DECIDED FOR ASSESS MENT YEAR 2004-405 IN APPEAL NO. 418/06-07 AND FOR ASSESSMENT YEAR 05-06 IN APPEAL N O. 11/08-09. THE LD. CIT (A) AFTER CONSIDERING THESE SUBMISSIONS DIRECTED THE AO TO CO NSIDER THE APPELLATE ORDER OF TRIBUNAL AND LD. CIT (A) FOR EARLIER TWO YEARS AND TAKE THE DECISION IN THE LIGHT OF DECISION OF TRIBUNAL IN EARLIER YEAR. SINCE LD. CIT (A) HAS DI RECTED THE AO TO DECIDE THE SAME IN THE LIGHT OF DECISION OF TRIBUNAL, THEREFORE, WE SEE NO UNREASONABLENESS IN THE FINDING OF LD. CIT (A). ACCORDINGLY WE CONFIRM HIS FINDINGS ON TH IS ISSUE. THE GROUND OF THE ASSESSEE AS WELL AS GROUND OF THE DEPARTMENT FAILS. 17. GROUND NO. 5 IN APPEAL OF THE ASSESSEE IS AGAIN ST CHARGING OF INTEREST UNDER SECTION 234A, 234B, 234C AND 234D AND IN WITHDRAWIN G INTEREST GRANTED UNDER SECTION 244A, IT WAS STATED THAT THE SAME IS CONSEQUENTIAL, THEREFORE, THE AO IS DIRECTED TO GIVE CONSEQUENT RELIEF, IF ANY. 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART AND APPEAL OF THE DEPARTMENT IS DISMISSED. 19. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10 .02.2012. SD/- SD/- ( SANJAY ARORA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- 7 COPY FORWARDED TO :- M/S. SINGHAL BUILDERS CONTRACTORS, BHARATPUR. THE ACIT, CIRCLE, BHARATPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 675(2)/JP/2012) BY ORDER, AR ITAT JAIPUR.