Income-tax Officer, V. M/s. Balaji Constructions, Pune

ITA 694/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0948 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 09-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Business income; Business expenditure; Corroborative evidences
• Section: 44AD; 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , !', $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.694/PN/2014 ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER, WARD 5(4), PUNE. . APPELLANT VS. M/S BALAJI CONSTRUCTIONS, C/O RAJENDRA D. SADARE, C-801, 8 TH FLOOR, THE LEGEND, LAKETOWN ROAD, BIBWEWADI, PUNE 411 037. PAN : AAIFB0285C . RESPONDENT / APPELLANT BY : SHRI B. C. MALAKAR / RESPONDENT BY : NONE / DATE OF HEARING : 13.10.2015 / DATE OF PRONOUNCEMENT: 28.10.2015 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL FILED BY THE REVENUE IS AGAINS T THE ORDER OF CIT(A)-III, PUNE DATED 19.02.2014 RELATING TO ASSES SMENT YEAR 2009-10 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A)- III, PUNE ERRED IN GRANTING RELIEF OF RS.16,85,093/ - ADOPTING THE PROFIT PERCENTAGE AT THE SAME RATE I.E. 5.3% AT IT WAS DIS CLOSED BY THE ASSESSEE DURING THE IMMEDIATELY PRECEDING YEARS WHEREAS NO D OCUMENTS WAS MADE AVAILABLE BY ASSESSEE DURING SCRUTINY PROCEEDING IN SUPPORT O F ASSESSEE'S CLAIM. 2. FOR THESE AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE COMMISSIONER OF INCOME-TA X (APPEALS)-III, PUNE MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2 ITA NO.694/PN/2014 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF THE APPELLAT E PROCEEDINGS BEFORE THE ITAT. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF SPECIFIC INFORMATION OF HEARING. IT IS SEEN FROM THE RECORD THAT THE MA TTER WAS EARLIER LISTED ON 13.08.2015, WHEREIN THE ADJOURNMENT WAS GRANTED AT THE REQUEST OF THE ASSESSEE AND THE HEARING WAS RE-FIXED FOR TODAY I.E. 13.10.2 015. PARTIES WERE DULY INFORMED ABOUT THE APPOINTED DATE OF HEARING IN THE OPEN COURT. SINCE THE ASSESSEE HAS CHOSEN TO REMAIN ABSENT INSPITE OF EAR LIER ADJOURNMENT ON BEHEST OF THE ASSESSEE AND FOLLOWING THE RULE 24/25 OF THE INCOME-TAX (APPELLATE TRIBUNAL) RULES, 1963 THE MATTER WAS PROCEEDED EX-P ARTE IN THE ABSENCE OF THE ASSESSEE AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 4. THE ONLY DISPUTE RAISED BY THE REVENUE IN THE PR ESENT APPEAL IS CORRECTNESS OF RELIEF OF RS.16,85,093/- GRANTED BY THE CIT(A) BY ADOPTING THE PROFIT PERCENTAGE AT THE SAME RATE I.E. 5.3% AS DIS CLOSED BY THE ASSESSEE DURING THE IMMEDIATELY PRECEDING ASSESSMENT YEAR AS AGAINS T THE ESTIMATION OF INCOME DERIVED @ 8% OF THE TOTAL CONTRACT RECEIPTS BY THE ASSESSING OFFICER. 5. THE RELEVANT FACTS, IN BRIEF, AS PER THE ASSESSM ENT ORDER ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 27.10.2009 DECLARING TO TAL INCOME OF RS.13,89,700/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT. HOWEVER, AS THERE WAS NO COMPLIANCE OR RESPONSE BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, A SHOW-CAUSE NOTICE WAS ISSUED BY THE ASSESSING OFFICER WHEREIN IT WAS PROPOSED TO ESTIMATE THE TOTAL INCOME OF THE ASSESSEE @ 8% OF THE TOTAL TURNOVER. RESPONDING TO THE SAID NOTICE, SHRI R.D. SARDE, PARTNER OF THE FIRM ATTENDED BEFORE THE ASSESSING OFFICER AND STATED TO HAVE FURNISHED FINANCIAL STATEMENTS, WORK ORDER DETAILS, BANK PASS BOOK EXTR ACTS, PURCHASE REGISTER ETC.. HOWEVER, AS PER THE ASSESSING OFFICER, THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE SUPPORTING THE EXPENDITURE CLAIMED AND PRO FITS SHOWN. IT WAS ALSO NOTED BY THE ASSESSING OFFICER THAT THOUGH THE TURN OVER OF THE ASSESSEE WAS MORE THAN RS.6 CRORES, NO AUDIT REPORT UNDER SECTIO N 44AB OF THE ACT WAS 3 ITA NO.694/PN/2014 FURNISHED WHICH LED THE ASSESSING OFFICER TO DRAW T HE INFERENCE THAT THE ASSESSEE FAILED TO GET ITS ACCOUNTS AUDITED. IN TH E BACKGROUND, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THERE WAS NO SA NCTITY TO THE PROFITS SHOWN BY THE ASSESSEE AND HE PROCEEDED TO REJECT THE BOOK S RESULTS SHOWN BY THE ASSESSEE AND ESTIMATED THE NET PROFIT @ 8% OF THE T OTAL TURNOVER, LEADING TO AN ADDITION OF RS.34,29,712/-. 6. BEFORE THE CIT(A), THE ASSESSEE OBJECTED TO THE REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF INCOME DERIVED @ 8% OF TH E CONTRACT RECEIPTS. THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT THE PARTN ER OF THE ASSESSEE FIRM FILED COMPUTATION OF TOTAL INCOME, AUDITED COPY OF THE PR OFIT & LOSS ACCOUNT AND BALANCE SHEET, COPIES OF WORK ORDERS, EXTRACT OF BA NK BOOKS AND PURCHASE REGISTER, ETC. BEFORE THE ASSESSING OFFICER. THE A SSESSEE, HOWEVER, WAS PREVENTED FROM ATTENDING THE FURTHER PROCEEDINGS AF TER HIS FIRST ATTENDANCE. HE HAS BEEN WORKING AT BIHAR NEAR INDO NEPAL BORDER AS SENIOR PROJECT MANAGER FOR HIS EMPLOYER. IN VIEW OF THE AFORESAID, THE DE TAILS CALLED FOR SUCH AS TAX AUDIT REPORT, BOOKS OF ACCOUNT COULD NOT BE PRODUCE D AS THESE WERE MISPLACED DUE TO SHIFTING AND WERE NOT TRACEABLE. THE ASSESS ING OFFICER WRONGFULLY REJECTED THE BOOK RESULT ON THE GROUND THAT THE AUD IT REPORT AND SUPPORTING EVIDENCES TO JUSTIFY THE PROFIT AND EXPENSES WERE N OT PRODUCED. THE AUDIT REPORT UNDER SECTION 44AB OF THE ACT FOR THE RELEVA NT ASSESSMENT YEAR 2008-09 WERE, HOWEVER, PRODUCED BEFORE THE CIT(A). COPIES OF CERTAIN WORK CONTRACTS WERE ALSO PLACED BEFORE THE CIT(A). ON BEHALF OF T HE ASSESSEE, IT WAS REITERATED BEFORE THE CIT(A) THAT DUE TO GENUINE DI FFICULTY, THE ASSESSEE WAS PREVENTED FROM COMPLYING WITH THE REQUIREMENTS OF T HE ASSESSING OFFICER, NAMELY, FILING OF THE TAX AUDIT REPORT AND SUPPORTI NG EVIDENCES TO CORROBORATE PROFITS AND EXPENDITURE SHOWN IN THE PROFIT & LOSS ACCOUNT. ON MERITS, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE CIT( A) THAT INSPITE OF THE PRESENCE OF AUDITED FINAL ACCOUNTS COPIES OF TDS CE RTIFICATES, PURCHASE REGISTER, RELEVANT DETAILS OF DIRECT, INDIRECT EXPE NSES GIVEN IN TRIAL BALANCE, THE ASSESSING OFFICER HAS INCORRECTLY INVOKED THE PROVI SIONS OF SECTION 145(3) OF THE ACT AND RESORTED TO ESTIMATION OF INCOME DERIVE D @ 8% OF THE TOTAL CONTRACT RECEIPTS. IT WAS SUBMITTED THAT THE AUDIT ED FINAL ACCOUNTS PROVES THE 4 ITA NO.694/PN/2014 CORRECTNESS OF ACCOUNTING RECORDS. PURCHASES HAVE BEEN MADE BY CHEQUE WHICH IS EVIDENT FROM BANK BOOK DULY FILED. IT WAS PLEADED ON BEHALF OF THE ASSESSEE THAT THOUGH THE BOOKS OF ACCOUNT AND TAX A UDIT REPORT WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER, THE ASSESSIN G OFFICER SHOULD AT BEST COULD MAKE DISALLOWANCE @ 10% OF THE EXPENSES AS AG AINST 8% OF THE TOTAL CONTRACT RECEIPTS ESTIMATED BY HIM. 7. THE CIT(A), HOWEVER, AGREED WITH THE FINDINGS OF THE ASSESSING OFFICER THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE REASON ABLENESS OF THE PROFITS DISCLOSED, BY PRODUCING SUPPORTING BOOKS OF ACCOUNT AND CORROBORATING EVIDENCES NOR IT COULD SHOW THAT SUCH BOOKS, IF ANY , GOT AUDITED UNDER SECTION 44AB OF THE ACT AS AUDIT REPORT WAS NOT FILED DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, AS PER PARA 4.1 OF THE CIT (A)S ORDER, HE OBSERVED CERTAIN DEFECTS IN THE TAX AUDIT REPORT FILED BEFOR E HIM AND IN THE ABSENCE OF BOOKS OF ACCOUNT AND DAY-TO-DAY STOCK REGISTER FOR RAW MATERIAL AND WORK-IN- PROGRESS (WIP), ETC. COUPLED WITH LACK OF BONAFIDES OF VALUATION OF STOCK ETC. AND HE FOUND JUSTIFICATION IN THE ACTION OF THE ASS ESSING OFFICER IN RESORTING TO SECTION 145(3) OF THE ACT. HE ALSO RELIED UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF NATIONAL P LASTIC INDUSTRIES REPORTED IN 309 ITR 191 (BOM) TO SUPPORT THE ACTION OF THE ASSE SSING OFFICER. HOWEVER, HE ADOPTED THE PROFIT PERCENTAGE @ 5.3% OF THE CONT RACT RECEIPTS AS PROFIT DURING THE YEAR ON ESTIMATION BASIS QUANTIFIED AT R S.17,44,619/- BASED ON THE VALUE ADDITION MADE OF RS.3,29,17,352/- TO THE OPEN ING WIP OF RS.2,73,25,297/-. AS A RESULT, THE ADDITION OF RS. 34,29,712/- MADE BY THE ASSESSING OFFICER WAS RESTRICTED TO RS.17,44,619/- AND CONSEQUENTIAL RELIEF OF RS.16,85,093/- WAS GRANTED TO HIM. 8. THE REASONINGS FOR GRANTING PARTIAL RELIEF BY TH E CIT(A) WHICH IS UNDER CHALLENGE BY THE REVENUE IS EXTRACTED AS UNDER :- B) QUANTUM OF ESTIMATION OF GROSS PROFIT : 4.2 NOW THE ISSUE THAT REMAINS FOR CONSIDERATION IS ABOUT THE QUANTUM OF ESTIMATION AND THE RESULTANT ADDITION MADE IN TH E ASSESSMENT ORDER. THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS.34,29 ,712/- BY ADOPTING THE NET PROFIT AT 8% OF THE TOTAL RECEIPTS/TURNOVER. THE AS SESSING OFFICER HAS NOT 5 ITA NO.694/PN/2014 BROUGHT ANY REASON OR BASIS FOR ADOPTING THE NET PR OFIT AT 8%. NO COMPARISON OR PROFIT RATIO OF PRECEDING YEARS DISCLOSED BY THE APPELLANT IS DRAWN NOR ANY COMPARATIVE INSTANCES OF CASES ENGAGED IN SIMILAR L INE OF BUSINESS HAS BEEN BROUGHT OUT BY THE ASSESSING OFFICER. APPARENTLY, T HE ASSESSING OFFICER'S ACTION IS DRIVEN BY THE PROVISIONS OF SEC.44AD WHICH PRESC RIBES 8% NET PROFIT IN CASE OF CIVIL CONTRACTORS HAVING TURNOVER OF LESS THAN R S.40 LAKHS. HOWEVER, THE ASSESSING OFFICER IS NOT JUSTIFIED IN GOING BY THE SAID PROVISIONS MERELY BECAUSE THE APPELLANT ALSO HAPPENS TO BE A CIVIL CO NTRACTOR. MOREOVER, THE TURNOVER OF THE APPELLANT IS SUBSTANTIALLY MORE THA N RS.40 LAKHS. FOR ESTIMATING THE PROFIT AT CERTAIN PERCENTAGE, THE ASSESSING OFF ICER HAS TO NECESSARILY SHOW THAT THE ASSESSEE MAY HAVE ACTUALLY EARNED PROFIT T O THAT EXTENT BY HIGHLIGHTING POSITIVE PARAMETERS. AS ALREADY BROUGHT OUT ABOVE, NO SUCH EXERCISE HAS BEEN CARRIED OUT BY THE ASSESSING OFFICER BUT HE HAS STR AIGHT AWAY DETERMINED THE PROFIT AT 8% OF THE TURNOVER. EVEN IN CASES OF A FI RM WHERE PROVISIONS OF SEC.44AD ARE ATTRACTED, THE ASSESSEE IS FURTHER ENT ITLED TO DEDUCT REMUNERATION AND INTEREST TO PARTNERS FROM THE PROFIT SO DETERMI NED. IN THE PRESENT CASE, SUCH ASPECTS ALSO HAVE NOT BEEN CONSIDERED BY THE ASSESS ING OFFICER WHILE DETERMINING THE PERCENTAGE OF PROFIT. THEREFORE, IN MY CONSIDERED OPINION, THERE IS NO DOUBT THAT PROFIT DETERMINED BY THE ASS ESSING OFFICER IS NOT ONLY WITHOUT ANY BASIS BUT ALSO UNJUSTIFIABLE IN THE FAC TS AND CIRCUMSTANCES. 4.2.1 HAVING HELD SO, NOW THE NEXT QUESTION THAT IS TO BE ANSWERED IS AS TO WHAT WILL CONSTITUTE REASONABLE PROFIT IN THE CASE OF THE APPELLANT AND THAT WHETHER THE PROFIT DISCLOSED BY THE APPELLANT CAN B E CONSIDERED TO THE REASONABLE PROFIT OR NOT. AS PER THE PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS DISCLOSED A GROSS PROFIT OF RS.27,41,196/- ON A GROSS SALES OF RS.6,02,42,649/- WHICH WORKS OUT TO 4.5%. HOWEVER, DURING THE IMMEDIATELY PRECEDING YEAR, THE GROSS PROFIT STOOD AT 14.37% WHILE THE NET PROFIT DISCLOSED STOOD AT 5.36% OF THE WIP. THIS MA KES IT CLEAR THAT THERE IS CONSIDERABLE INCREASE IN THE DIRECT EXPENSES DURING THE YEAR. IN THIS REGARD, IT WOULD BE RELEVANT TO CARRY OUT A COMPARATIVE ANALYS IS OF THE COMPONENTS OF DIRECT EXPENSES DURING THIS YEAR AND THE PRECEDING YEAR:- ITEMS A.Y.2008-09 2009-10 CLOSING WIP / ADDITION 2,73,25,297 3,29,17,352 PURCHASES 1,79,61,135 *1,94,95,875 LABOUR CHARGES 54,35,788 96,22,925 TRANSPORT EXPENSES - 10,57,355 PERCENTAGE OF PURCHASES TO WIP / ADDITION 65.73% 59.2% % OF LABOUR CHARGES TO WIP / ADDITION 19.89% 29.23% % OF TRANSPORT EXPENSES TO WIP / ADDITION 0% 100% * EXCLUDING CLOSING STOCK 4.2.2 DURING THE YEAR, THE APPELLANT HAS MADE VALUE ADDITION OF RS.3,29,17,352 / -J TO THE OPENING WIP BROUGHT FORWARD FROM LAST YEAR. FROM THE ABOVE ANALYSIS, IT CAN BE SEEN THAT WHILE THERE IS A DECREASE IN THE EXPENSES ON ACCOUNT OF PURCHASES DURING THIS YEAR AS COMPARED T O THE PRECEDING YEAR, THE EXPENDITURE ON ACCOUNT OF LABOUR HAS SHOT UP CONSID ERABLY FROM 19.89% IN THE PRECEDING YEAR TO 29.23% IN THE YEAR UNDER CONSIDER ATION. SIMILARLY, WHILE THERE WAS NO CLAIM ON ACCOUNT OF TRANSPORT IN THE A .Y. 2008-09, THE SAME HAS BEEN CLAIMED AT RS.10,57,355/- DURING THE YEAR. IT CANNOT BE POSSIBLE THAT THE APPELLANT DID NOT INCUR ANY EXPENDITURE AT ALL ON T RANSPORT AGAINST WIP OF RS.2, 73,25,297/- DURING THE PRECEDING YEAR BUT THE ENTIRE EXPENDITUR E HAS BEEN INCURRED DURING THE YEAR. FURTHER, THE AUTHENTICITY AND ADMISSIBILITY OF THESE CLAIMS AS BUSINESS EXPENDITURE ALSO REMAINED TO BE VERIFIED BY THE ASSESSING OFFICER DUE TO THE FAILURE OF THE APPELLANT IN PRES ENTING THE NECESSARY SUPPORTING EVIDENCE BEFORE THE ASSESSING OFFICER. H ERE, IT WILL ALSO BE PERTINENT 6 ITA NO.694/PN/2014 TO NOTE THAT ADMITTEDLY, THE APPELLANT WAS WORKING ON TWO PROJECTS, NAMELY ON BEHALF OF VIDYA PRATHISTHAN, BARAMATI AND SHREE PAN DURANG PRATHISTHAN, PANDHARPUR. AS PER THE COPY OF THE WORK ORDER DATED 10/01/2009 GIVEN BY SHREE PANDURANG PRATHISTHAN, THE WORK WAS TO BE COM MENCED FROM 15/01/2009 I.E. DURING THE YEAR UNDER CONSIDERATION AND COMPLETED BY 15/05/2009. HOWEVER, NO WIP IN RESPECT OF THIS WORK IS SHOWN IN THE PROFIT & LOSS ACCOUNT AND THE ENTIRE SALES PERTAIN TO THE OT HER WORK I.E. PERTAINING TO VIDYA PRATHISTHAN. THESE DISCREPANCIES, COUPLED WIT H THE DECLINE IN THE PERCENTAGE OF G.P., DEFINITELY LEAD TO AN INFERENCE THAT THE DIRECT EXPENSES MAY BE INFLATED, THEREBY PUTTING A QUESTION MARK OVER T HE REASONABLENESS OF PROFIT DISCLOSED BY THE APPELLANT FOR THE YEAR. THEREFORE, RATIO OF PROFIT DISCLOSED BY THE APPELLANT CANNOT BE CONSIDERED TO BE THE ACTUAL OR REASONABLE PROFIT. THERE ARE A PLETHORA OF COURT DECISIONS TO THE EFFECT THA T PROFITS CAN BE ESTIMATED, IN THE CONTEXT OF REJECTION OF BOOKS, BASED ON ANOTHER PERSON'S BUSINESS OF SIMILAR KIND IN THE SAME AREA OR ON THE ASSESSEE'S OWN FINA NCIAL RESULTS OF THE PRECEDING YEARS. 4.2.3 HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT IT WOULD BE FAIR AND REASONABLE TO ADO PT THE PROFIT PERCENTAGE AT THE SAME RATE AS WAS DISCLOSED BY THE APPELLANT DUR ING THE IMMEDIATELY PRECEDING YEAR. THIS IS BEING SO DONE AFTER CONSIDE RING THE FACT THAT THE PROFIT DISCLOSED BY THE APPELLANT DURING THIS YEAR ALSO PE RTAINS TO THE SAME PROJECT WHICH IT HAD COMMENCED IN THE PRECEDING YEAR AND TH E APPELLANT HAS NOT MADE OUT ANY GROUND FOR CLAIMING HIGHER EXPENDITURE DURI NG THIS YEAR. ACCORDINGLY, ADOPTING THE PROFIT PERCENTAGE AT 5.3%, THE PROFIT DURING THE YEAR IS ESTIMATED AT RS.17,44,619/- ON THE VALUE ADDITION MADE OF RS. 3,29,17,352/- TO THE OPENING WIP OF RS.2,73,25,297/-. ACCORDINGLY, THE ADDITION OF RS.34,29,712/- MADE BY THE ASSESSING OFFICER IS RES TRICTED TO RS.17,44,619/-. APPELLANT GETS A CONSEQUENTIAL RELI EF OF RS.16,85,093/-. GROUND OF APPEAL NO.L & 2 ARE PARTLY ALLOWED. 9. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE STRONGLY RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND SUBMITT ED THAT IN THE ABSENCE OF BOOKS OF ACCOUNT, THERE IS NO JUSTIFICATION TO ADOP T THE NET PROFIT RATE OF THE PREVIOUS YEAR AS EACH YEAR IS INDEPENDENT FINANCIAL YEAR. ADMITTEDLY, THE BOOKS OF ACCOUNT HAVE NOT BEEN PRODUCED FOR WHICH T HE GROUNDS CITED ARE VERY FLIMSY. THE TAX AUDIT REPORT WAS ALSO NOT PRODUCED FOR ANY JUSTIFICATION AND THEREFORE THE ASSESSING OFFICER WAS PREVENTED FROM MAKING ANY ENQUIRY WHATSOEVER. THEREFORE, ACTION OF THE ASSESSING OFF ICER IN ADOPTING 8% OF THE CONTRACT RECEIPTS AS THE ESTIMATED TAXABLE INCOME I N TUNE WITH SECTION 44AD OF THE ACT IS REASONABLE AND JUSTIFIED. THE ACTION OF THE CIT(A) IN GRANTING PARTIAL RELIEF IS UNCALLED FOR. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS ON BEHALF OF THE REVENUE, ORDERS OF THE AUTHORITIES BELOW. IT IS AN ADMITTED POSITION THAT BOOKS OF ACCOUNT HAVE NOT BEEN PRODUCED AT ALL FOR THE RELEVANT ASSE SSMENT YEAR. THE CIT(A) 7 ITA NO.694/PN/2014 HIMSELF HAS RECORDED A FINDING OF FACT IN PARA 4.1 OF HIS ORDER THAT THE TAX AUDIT REPORT FILED BEFORE HIM FOR THE FIRST TIME IS MARRE D WITH SERIOUS DISCREPANCY LIKE; SECURING OF LOAN AND DEPOSIT IN CASH ARE IN Q UESTION CONTRAVENTION OF PROVISIONS OF SECTION 269SS AND 269T OF THE ACT. I T WAS ALSO OBSERVED THAT TAX AUDIT REPORT GIVES A DISCLOSURE THAT CLOSING WIP VA LUE ARE CERTIFIED BY THE PARTNER ONLY AND NO PHYSICAL VERIFICATION THEREOF W AS CARRIED OUT. THE TAX AUDIT REPORT IS ALSO SILENT ABOUT THE METHOD ADOPTED BY T HE ASSESSEE IN DETERMINING THE VALUE OF CLOSING STOCK/WIP. THE CIT(A) ALSO OB SERVED THAT AS PER PARA 6 OF ANNEXURE TO AUDIT REPORT, THE AUDITOR HAS RELIED ON THE INFORMATION AND EXPLANATION GIVEN BY THE PARTNERS WHEREVER SUPPORTI NG DOCUMENTS ARE NOT AVAILABLE. FROM THE AUDIT REPORT, IT IS NOT KNOWN WHETHER THE ASSESSEE HAD MAINTAINED ANY DAILY STOCK REGISTER FOR RAW MATERIA L AND WIP AND EVEN IF THE SAME IS MAINTAINED WHETHER THE VALUATION OF THE STO CK WAS DONE IN ACCORDANCE WITH ACCEPTED ACCOUNTING STANDARD AND PRACTICES IS NOT KNOWN. IN THE BACKDROP OF ERROR OF SUCH MAGNITUDE AS OBSERVED BY THE CIT(A ), WE HARDLY FIND ANY JUSTIFICATION TO SCALE DOWN THE ESTIMATION MADE BY THE ASSESSING OFFICER. THE STATUTORY PROVISION AS PER SECTION 44AD OF THE ACT ENTITLES THE ASSESSEE OF RELATIVELY SMALLER SIZE ENGAGED IN THE ELIGIBLE BUS INESS INCLUDING THE IMPUGNED BUSINESS TO COMPUTE PROFITS AND GAINS OF BUSINESS O F PRESUMPTIVE BEING EQUAL TO 8% OF THE TOTAL TURNOVER OR GROSS RECEIPTS. THI S IS A PROVISION OF BENEFICIAL NATURE WHICH SEEKS TO REDUCE HARDSHIPS AND TAX HASS LES. IT OVERRIDES THE NORMAL PROVISIONS OF SECTION 28 TO SECTION 43C OF THE ACT TO UNABLE THE ASSESSEE TO AVAIL THIS ALTERNATIVE ROUTE FOR COMPUTATION OF TAX ABLE BUSINESS INCOME. THE STATUTORY PERCENTAGE ESTIMATED AT 8% OF THE TOTAL T URNOVER OR GROSS RECEIPTS THOUGH MADE AVAILABLE TO THE ASSESSEE OF THE SMALLE R SIZE I.E. HAVING A TURNOVER OF RS.40,00,000/- IS PRESUMED TO BE BASED ON EMPIRI CAL STUDIES AND ANALYSIS OF SAMPLE OF STATISTICAL DATAS TO ARRIVE AT THE FAIR E STIMATE. THE PERCENTAGE PRESCRIBED CANNOT BE DEEMED TO BE ARBITRARY OR WITH OUT ANY RATIONAL BASIS. THEREFORE, ADOPTING A RATE OF 8% OF THE CONTRACT RE CEIPTS, IN OUR VIEW, IS IN HARMONY WITH THE STATUTORY PERCENTAGE WHICH ACTS AS A FAIR BENCHMARK. IN OUR VIEW, IN THE GIVEN SET OF FACTS, THERE IS NO JUSTIF ICATION TO ADOPT THE PROFIT PERCENTAGE DECLARED BY THE ASSESSEE HIMSELF IN THE PRECEDING YEAR IN PREFERENCE TO THE STATUTORY PERCENTAGE. THE BOOKS OF ACCOUNT, WHICH IS THE BASIS FOR 8 ITA NO.694/PN/2014 COMPUTATION OF ACTUAL PROFITS IS NOT AVAILABLE. WE FIND THE REASONINGS MARSHALED GIVEN BY THE ASSESSEE ARE MUNDANE, SHALLO W AND FLIMSY IN NATURE. THE BENEFIT CANNOT BE BESTOWED UPON THE ASSESSEE FO R NON-PRODUCTION OF BASIC DOCUMENTS BASED ON VAGUE AND LISTLESS CONSIDERATION S. THERE IS NO INDICATION FROM THE MATERIAL PLACED BEFORE US THAT THE ACCOUNT S OF THE EARLIER YEAR HAS BEEN SCRUTINIZED AND IS SUPPORTED BY BOOKS OF ACCOUNT AN D QUANTITATIVE TALLY AND THEREFORE ADOPTING THE PROFIT RATE OF THE ASSESSEE IN THE PRECEDING YEAR IS NOT JUSTIFIED. IN THE LIGHT OF THE AFORESAID OBSERVATI ONS, WE ARE CONSIDERED VIEW THAT THE RELIEF GRANTED BY THE CIT(A) IS NOT JUSTIF IED IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND GROUNDS RAISED BY THE REVENUE DESERVES TO BE UPHELD. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED AND THE ORDER OF THE ASSESSING OFFICER IS RESTORED. ORDER PRONOUNCED ON THIS 28 TH DAY OF OCTOBER, 2015. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 28 TH OCTOBER, 2015. & ' ()* +*( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE