RADHEY SHYAM GUPTA, Jaipur V. ITO, Jaipur

ITA 705/JPR/2013

• Counselvise Citation: 70523114 RSA 2013
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 14-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Rejection of books of accounts; Depreciation
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JAIPUR BENCH : JAIPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 705/JP/2013 (A.Y. 2008-09) M/S. RADHEY SHYAM GUPTA, VS. ITO, WARD-6(1), BAI JI KI KOTHI, NEAR PUBLIC PARK, JAIPUR. JAGATPURA ROAD, JAIPUR. PAN NO. AAFFR 4321 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.L. JAIN. DEPARTMENT BY : SHRI D.C. SHARMA - D.R. DATE OF HEARING : 29/01/2014. DATE OF PRONOUNCEMENT : 26/02/2014. O R D E R PER N.K. SAINI, A.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 11/06/2013 OF LD. CIT (A)-II, JAIPUR. THE FOLLOWIN G GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN NOT ACCEPTING THE INCOME SH OWN BY THE ASSESSEE AS PER REGULAR BOOKS OF ACCOUNTS MAINTAINED DURING THE COURSE OF BUSINESS. THUS & THEREFORE, INVOKING OF PROVISIONS OF SECTION 145(3) IS WITHOUT ANY EVIDENCE MATERIAL ON RECORD. 2 2. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND FACTS IN APPLYING NET PROFIT RATE OF 6.5% ON THE CONTRACT RECEIPT OF RS. 1,89,16,464/- SUBJECT TO REMUNERATION AND INTEREST TO PARTNERS AND DEPREC ATION. THE ASSESSEE DECLARED NET PROFIT OF RS. 5.05% BEFORE DE PRECIATION, REMUNERATION AND INTEREST TO PARTNERS. 3. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND FACTS IN NOT ALLOWING INTEREST PAID TO THIRD PARTY RS. 1,43,782.56/- FROM THE NET PROFIT DETERMINED BY HIM. COMPARATIVE CHART A/Y GROSS RECEIPTS NET PROFIT AFTER INTEREST & REMUNERATION TO PARTNERS N.P. RATE 2008-09 1,89,16,464.00 89,506.00 0.47% 2007 - 08 2,38,88,627.00 5,43,180.00 2.27% 4. RS. 12,914.6/- THAT THE LD. CIT(A) HAS GROSSLY E RRED IN LAW AND FACT IN WITHDRAWING INTEREST U/S 244A(3). 5. RS. 13,882/- THAT THE LD. CIT(A) HAS GROSSLY ERR ED IN LAW AND FACT IN CHARGING INTEREST U/S 234D. THAT THE APPELLANT RESERVES HIS RIGHT TO ADD , AMEN D OR ALTER THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF APPEAL HEARING. 2 VIDE GROUNDS NO. 1 & 2, THE GRIEVANCE OF THE ASSES SEE RELATES TO THE CONFIRMATION OF ADDITION MADE BY THE ASSESSING OFFI CER ON ACCOUNT OF NET PROFIT RATE. 3. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE FILED E RETURN OF INCOME ON 29/09/2008 DECLARING AN INCOME OF RS. 89,510/-, 3 WHICH WAS PROCESSED ON 30/06/2009. LATER ON, CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DECLARED NET PROFIT OF RS. 89,506/- FROM GROSS RECEIPTS OF RS. 1,89,16,464/-. THE COMP ARATIVE FIGURES OF THE NET PROFIT FOR THE YEAR UNDER CONSIDERATION AND THE PRECEDING YEAR WERE AS UNDER:- ASSESSMENT YEAR 2008 - 09 2007 - 08 GROSS RECEIPTS 1,89,16,464/ - 2,38,88,627/ - PROFIT (BEFORE DEPRECIATION, INTEREST & REMUNERATION TO PARTNERS 9,56,090/ - @ 5.05% 12,04,169/ - @ 5.04% DEPRECIATION 4,86,211/ - 77,102/ - INTEREST & REMUNERATION TO PARTNERS 3,80,373/ - 5,83,887/ - NET PROFIT (AFTER DEPRECIATION, INTEREST & REMUNERATION TO PARTNERS) 89,506/ - @ 0.47% 5,43,180/ - @ 2.27% THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUC E BOOKS OF ACCOUNTS WITH THE VOUCHERS FOR EXAMINATION. THE AS SESSING OFFICER POINTED OUT THE FOLLOWING DISCREPANCIES IN THE BOOK S OF ACCOUNTS:- 1. NO STOCK REGISTER HAS BEEN MAINTAINED. NO OPEN ING STOCK, CLOSING STOCK OR WORK IN PROGRESS HAS BEEN DECLARED, WHICH IS NOT POSSIBLE IN THE WORK OF CIVIL CONSTRUCTION. THE CORRECT VALUE OF OPENING/CLOSING STOCK AND WORK IN PROGRESS IS VERY ESSENTIAL TO DET ERMINE THE CORRECT PROFIT. 2. NO VOUCHERS FOR ANY EXPENDITURE WERE PROPERLY MA INTAINED. HENCE ACTUAL QUANTUM OF EXPENDITURE CANNOT BE ASCERTAINED . 4 3. THE LABOUR OR WAGES REGISTER WAS NOT PRODUCED. HENCE ACTUAL QUANTUM OF LABOUR CHARGES CANNOT BE ASCERTAINED. 4. ON THE BASIS OF THE ABOVE DISCREPANCIES, THE ASSE SSING OFFICER INVOKED THE PROVISIONS OF SECTION 145(3) OF THE I.T . ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) AND REJECTED THE BOOKS OF ACCOUNTS. THE SUBMISSIONS OF THE ASSESSEE WERE AS UNDER:- THE ASSESSEE IS BONAFIDE INCOME TAX ASSESSEE AND MAINTAINING THE COMPLETE AND CORRECT REGULAR BOOKS OF ACCOUNTS, CAS H BOOK, LEDGER BOOK, PURCHASE AND SALE VOUCHERS, MUSTER ROLE, SALARY REG ISTER ETC. THE SAME WERE PRODUCED AND VERIFIED. SALES AND PURCHASES AR E FULLY VERIFIED. THE PROFIT & LOSS ACCOUNT FURNISHED BY THE ASSESSEE DEP ICT CORRECT AND REAL PROFIT EARNED DURING THE YEAR. THE ASSESSING OFFICER WAS NOT SATISFIED FROM THE SU BMISSIONS OF THE ASSESSEE AND APPLIED NET PROFIT RATE OF 8% SUBJECT TO DEPRECIATION, INTEREST AND REMUNERATION TO THE PARTNERS. 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER T O THE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE OBSERVED THAT THE SHORTCOMINGS POINTED OUT BY THE ASSESSING OFFICER L IKE NON-MAINTENANCE OF STOCK REGISTER, UNVERIFIABLE EXPENSES IN THE ABS ENCE OF COMPLETE VOUCHERS AND NON-MAINTENANCE OF LABOUR WAGES REGIST ER, REMAIN UNDISPUTED. HE FURTHER OBSERVED THAT THE ESTIMATIO N OF 8% OF PROFIT WAS ON HIGHER SIDE AND THE SAME WAS TO BE APPLIED AS PE R THE PROVISIONS OF 5 SECTION 44AD OF THE ACT TO THE CIVIL CONTRACTORS WH OSE RECEIPTS DID NOT EXCEED RS. 40 LAC. HE FURTHER OBSERVED THAT THE AS SESSEE HAD DECLARED GROSS PROFIT RATE OF 5.05% AS AGAINST THE PROFIT RA TE OF 5.04% DECLARED ON HIRE RECEIPTS LAST YEAR, THEREFORE, IT WOULD REASON ABLE TO APPLY NET PROFIT RATE OF 6.5%. NOW THE ASSESSEE IS IN APPEAL. 6 . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT W HEN THE BOOKS OF ACCOUNTS ARE REJECTED, THE RIGHT COURSE WAS TO CONS IDER THE PAST HISTORY OF THE ASSESSEE AND AS THE NET PROFIT RATE DECLARED WAS BETTER IN COMPARISON TO THE EARLIER YEAR, THE LD. CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO APPLY GROSS PROF IT RATE OF 6.5%. 7 . IN HIS RIVAL SUBMISSIONS, LEARNED D.R. SUPPORTED THE ORDER OF THE LD. CIT(A). 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE WAS BETTER THAN THE EARLIER YEAR. IN SUCH TYPE OF CASES EVEN IF BOOKS OF ACCOUNTS WERE REJECTED, PAST HISTORY OF TH E ASSESSEE WAS TO BE 6 KEPT IN MIND WHILE APPLYING GROSS PROFIT RATE. IN THE PRESENT CASE, THE GROSS PROFIT RATE OF 5.05% AS AGAINST THE PROFIT RA TE OF 5.04% DECLARED IN THE EARLIER YEAR WAS BETTER. THEREFORE, NO TRADING ADDITION IS CALLED FOR ON ACCOUNT OF GROSS PROFIT RATE. ACCORDINGLY, THE ADDITION SUSTAINED BY THE LD. CIT(A) IS DELETED. 9 . THE NEXT ISSUE VIDE GROUND NO.3 RELATES TO THE IN TEREST PAID TO THE THIRD PARTY, WHICH WAS NOT ALLOWED FROM THE NET PRO FIT. 10 . FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT TH E ASSESSEE CLAIMED INTEREST OF RS. 1,43,782/- ON ACCOUNT OF 3 RD PARTY. THE ASSESSING OFFICER DID NOT ALLOW THE CLAIM OF THE ASSESSEE SINCE GROSS PROFIT RATE WAS APPLIED AFTER REJECTING THE BOOKS OF ACCOUNTS. THE LD. CIT (A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING THAT T HE ASSESSEE HIMSELF WHILE WORKING OUT PROFIT RATE 5.05% HAD NOT REDUCED THE INTEREST TO THE THIRD PARTY AS WAS CLEAR FROM THE INCOME AND EXPEND ITURE ACCOUNT FURNISHED BY THE ASSESSEE. HE, THEREFORE, DID NOT ACCEPT THE CLAIM OF THE ASSESSEE. NOW THE ASSESSEE IS IN APPEAL. 11 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND ARE OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN CONFI RMING THE ACTION OF THE ASSESSING OFFICER BECAUSE THE ASSESSEE HIMSELF HAD BEEN REDUCED THE 7 INTEREST TO THIRD PARTY WHILE WORKING OUT THE PROF IT RATE OF 5.05%. WE, THEREFORE, DO NOT SEE MERIT IN THIS GROUND OF THE A SSESSEES APPEAL. 12. THE GROUNDS NO. 4 & 5 ARE RELATING TO WITHDRAWAL OF INTEREST UNDER SECTION 244A(3) OF THE ACT AND CHARGING INTEREST UN DER SECTION 234D OF THE ACT. LD. CIT(A) ON THE SAID ISSUES STATED THAT THE SE ARE CONSEQUENTIAL IN NATURE. DURING THE COURSE OF HEARING, NOTHING CONT RARY TO THE DECISION OF LD. CIT(A) ON THIS ISSUE WAS BROUGHT ON RECORD. WE , THEREFORE, DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) ON THESE ISSUES. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D PARTLY. (ORDER PRONOUNCED IN THE COURT ON 26 TH FEBRUARY, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26 TH FEBRUARY, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JAIPUR.