ACIT, Sawai Madhopur V. VASUDEV GUPTA CONTRACTOR, KARAULI

ITA 705/JPR/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54272 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Keywords: Rejection of books of accounts; Depreciation
• Section: 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.705/ JP/2010 ASSESSMENT YEAR 2005-06 PAN: AAFFV 4330 J THE ACIT VS. M/S. VASUDEV GUPTA CONTRACTOR CIRCLE- SAWAI MADHOPUR KARAULI (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI D.K. MEENA ASSESSEE BY : SHRI MANISH AGARWAL DATE OF HEARING: 17-11-2011 DATE OF PRONOUNCEMENT: 22-11-2011 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER O F THE LD. CIT(A), AJMER DATED 19-03-2010 FOR THE ASSESSMENT YEAR 2005-06. 2.1 THE FIRST GROUND OF APPEAL OF THE REVENUE IS TH AT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 15,52,965/- MADE BY TH E AO AFTER REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. 2.2 THE AO DURING THE COURSE OF ASSESSMENT PROCEEDI NGS PROVIDED THE NUMBER OF OPPORTUNITIES TO THE ASSESSEE TO PRODUCE VOUCHERS F OR PURCHASE OF ALL THE ITEMS INCLUDED IN THE PURCHASE ACCOUNT. HENCE, THE PURCHASES MADE ARE NOT VERIFIABLE. THE AO FURTHER NOTICED THAT THE ASSESSEE HAS NOT CORRECTLY DEBITED THE EXPENSES UNDER THE HEAD LABOUR AND TRANSPORTER EXPENSES. SUCH EXPENSES ARE ALSO NO T VERIFIABLE. THE AO ACCORDINGLY REJECTED THE BOOKS OF ACCOUNTS AND APPLIED THE NET PROFIT RATE OF 16.5%. 2 2.3 THE LD. CIT(A) HAS UPHELD THE PROVISIONS OF SEC TION 145 OF THE ACT. ACCORDING TO THE LD. CIT(A), THE AO HAS NOT GIVEN ANY REASON FO R APPLYING NET PROFIT RATE OF 16.5% AND THEREFORE, THE ADDITION OF RS. 15,5,2,965/- WAS DELETED. 2.4 BEFORE US, THE LD. DR SUBMITTED THAT THE ASSESS EE HAS SHOWN THE NET PROFIT RATE OF 3.56% AS AGAINST 9.13% DECLARED IN THE IMMEDIATELY PRECEDING YEAR. THE ASSESSEE HAS FAILED TO PRODUCE THE VOUCHERS AND HENCE THE AO WAS JUSTIFIED IN APPLYING THE NET PROFIT RATE OF 16.5%. THE LD. CIT(A) HAS CONFIRMED THE PRO VISIONS OF SECTION 145(3) OF THE ACT. THE ASSESSEE HIMSELF HAS DISCLOSED THE NET PROFIT R ATE OF 9.13% IN THE IN THE IMMEDIATELY PRECEDING YEAR. THE LD. CIT(A) HAS REFERRED TO VARI OUS DECISIONS OF ITAT IN WHICH PROFIT OF 5% HAS BEE APPLIED. THE LD. DR HAS REFERRED TO D ECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JAIN CONSTRUCTION CO., 245 ITR 527 IN WHICH NET PROFIT RATE OF 12.5% WAS APPLIED. 2.5 BEFORE US, THE LD. AR HAS FILED THE WRITTEN SUB MISSION IN WHICH IT WAS SUBMITTED THAT IN THE IN THE IMMEDIATELY PRECEDING YEAR, THE REJECTION OF BOOKS OF ACCOUNTS WAS NOT UPHELD BY THE TRIBUNAL. DURING THE YEAR UNDER REFER ENCE, THE RECEIPTS ARE TO THE EXTENT OF RS. 1.30 CRORES AS AGAINST RS. 41.00 LACS IN THE IM MEDIATELY PRECEDING YEAR. IN THE ASSESSMENT YEAR 2003-04, THE RECEIPTS WERE TO THE E XTENT OF RS. 1.50 CRORES WHILE NET PROFIT RATE SHOWN WAS AT 2.58%. THE LD.AR FURTHER SUBMITTED THAT IN THE CASE OF JAIN CONSTRUCTION COMPANY (SUPRA), THE NET PROFIT RATE A FTER INTEREST AND DEPRECIATION WAS ONLY 1.1%. REFERENCE WAS MADE TO THE DECISION OF THIS BE NCH IN THE CASE OF KAMAL ENGG. & CONTRACTORS (P) LTD. VS. ACIT (ITA NO.134/ JP/1998 DATED 10-12-2004) IN WHICH THE TRIBUNAL ESTIMATED THE NET PROFIT RATE AT 4.65% SUB JECT TO DEPRECIATION AND INTEREST. 3 2.6 WE HAVE HEARD BOTH THE PARTIES. IN THE INSTANT CASE, THE AO REQUIRED THE ASSESSEE TO PRODUCE THE VOUCHER. THE EXPENDITURE DEBITED TOW ARDS LABOUR AND TRANSPORTATION WAS ALSO NOT VERIFIABLE. THE ASSESSEE IS NOT APPEAL BEF ORE US. THEREFORE, THE ISSUE OF INVOKING THE PROVISIONS OF SECTION 145(3) IS NOT BEFORE US. THE ISSUE BEFORE US IS ONLY AS TO WHETHER TRADING ADDITION DELETED BY THE LD. CIT(A) IS APPROPRIATE OR NOT. IT IS TRUE TAT THE TURNOVER DURING THE YEAR IS THREE TIMES OF THE TUR NOVER OF THE IMMEDIATELY PRECEDING YEAR. THE NET PROFIT RATE BEFORE INTEREST, REMUNERA TION AND DEPRECIATION HAS BEEN SHOWN AT 3.56%. WE THEREFORE, FEEL THAT IT WILL BE FAIR AND REASONABLE IF NET PROFIT RATE OF 5% IS APPLIED BEFORE INTEREST, REMUNERATION AND DEPRECIAT ION. WHILE APPLYING SUCH NET PROFIT RATE, WE HAVE CONSIDERED THE FACT THAT THE AO HAS M ADE DISALLOWANCE OUT OF OUTSTANDING LABOUR WAGES AND TRANSPORTATION CHARGES. SUCH DISAL LOWANCES WERE CONFIRMED BY TREATING THE DIFFERENCE BETWEEN OPENING OUTSTANDING AS AGAIN ST CLOSING OUTSTANDING AND PERCENTAGE OF DISALLOWANCE WAS REDUCED. THIS ASPECT HAS BEEN C ONSIDERED FOR DIRECTING TO APPLY 5% NET PROFIT RATE 3.1 THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 10,55,770/- MADE BY TH E AO ON ACCOUNT OF OUTSTANDING WAGES. 3.2 WE HAVE HEARD BOTH THE PARTIES. IN THE IMMEDIAT ELY PRECEDING YEAR, THE TRIBUNAL HAS HELD THAT OUTSTANDING WAGES SHOULD BE DISALLOWE D. AFTER CONSIDERING THE WAGES AT THE BEGINNING OF THE YEAR AND AT THE CLOSE OF THE YEAR, 10% OF DIFFERENCE BETWEEN WAGES AT THE END OF THE YEAR AND AT THE END OF THE OPENING OF T HE YEAR WAS CONFIRMED IN THE IMMEDIATELY PRECEDING YEAR. SINCE WE HAD ALREADY UP HELD PART OF THE TRADING ADDITION THEREFORE, THERE IS NO PURPOSE OF MAKING FURTHER AD DITION ON ACCOUNT OF OUTSTANDING 4 WAGES. THE LD. CIT(A) THEREFORE, WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 10,5,5,770/-. 4.1 THE THIRD GROUND OF APPEAL OF THE REVENUE IS T HAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 4,33,188/- MADE BY THE AO ON ACCOUNT OF OUTSTANDING TRANSPORTATION CHARGES. 4.2 WE HAVE HEARD BOTH THE PARTIES. OUR FINDINGS AR E THE SAME AS AGAINST CONFIRMING THE ORDER OF THE LD. CIT(A) IN RESPECT OF DELETION OF ADDITION ON ACCOUNT OF OUTSTANDING WAGES. HENCE, WE HOLD THAT THE LD. CIT(A) WAS JUSTI FIED IN DELETING THE ADDITION. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22-11 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 22 /11/2011 *MISHRA COPY FORWARDED TO :- 1. THE ACIT, CIRCLE- SAWAI MADHOPUR 2. M/S. VASUDEV GUPTA CONTRACTOR, KARAULI 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.705/JP /10) A.R, ITAT, JAIPUR 5 6