K.V. Construction Co., Yamunanagar V. ITO, Yamunanagar

ITA 719/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80963 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 11-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AJAY KUMAR JAIN
• Keywords: Unexplained cash credit; Gift
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 719/CHD/2014 ASSESSMENT YEAR : 2008-09 M/S K.V. CONSTRUCTION CO. LTD., VS. THE INCOME TAX OFFICER, S.K. ROAD, RADAUR, WARD 3, YAMUNANAGAR. YAMUNANAGAR. PAN: AAIFK9222C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY KUMAR JAIN RESPONDENT BY : SHRI MAHAVIR SINGH, DR DATE OF HEARING : 28.10.2014 DATE OF PRONOUNCEMENT : 31.10.2014 O R D E R PER BHAVNESH SAINI, J.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEAL S), KARNAL DATED 13.11.2013 FOR ASSESSMENT YEAR 2008-09 . 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. ON ISSUE NO.1, THE ASSESSEE CHALLENGED ADDITION OF RS.3,86,8 00/- ON APPLYING PROFIT RATE OF 9% AGAINST 1.41.% SHOWN BY THE ASSESSEE. THE ASSESSEE IS A GOVERNMENT CONTRACTOR ENGAGED IN THE CONSTRUCTION. THE ASSESSING OFFICER NOTICE D DEFECTS IN MAINTENANCE OF BOOKS OF ACCOUNT. IT WAS FOUND THA T NO STOCK REGISTER HAS BEEN MAINTAINED AND ABOUT 2/3 RD OF THE 2 PURCHASES HAVE BEEN MADE IN CASH WHICH ARE NOT FULL Y VOUCHED AND MOST OF THE EXPENSES ARE NOT VERIFIABLE . THE ASSESSING OFFICER, THEREFORE, REJECTED THE BOOK RES ULTS UNDER SECTION 145(3) OF THE INCOME TAX ACT AND APPLIED TH E NET PROFIT RATE OF 9% AND AFTER ALLOWING SALARY AND INT EREST PAID TO THE PARTNERS, COMPUTED THE NET PROFITS AT RS.4,96,1 79/- AND ACCORDINGLY MADE ADDITION OF RS.3,86,300/- THE AD DITION WAS CHALLENGED BEFORE THE LEARNED CIT (APPEALS) AND WRI TTEN SUBMISSION OF THE ASSESSEE IS INCORPORATED IN THE A PPELLATE ORDER IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT CIVIL CONSTRUCTION WORK IS CARRIED OUT ON DIFFERENT SITES SIMULTANEOUSLY AND THE PAYMENTS TO THE LABOURERS AN D OTHER PARTIES ARE MADE IN CASH BECAUSE THEY REFUSED TO AC CEPT THE PAYMENTS BY CHEQUE. IT WAS ALSO SUBMITTED THAT TH E PROFIT RATE APPLIED BY THE ASSESSEE IS REASONABLE AND CITE D OTHER DECISIONS IN WHICH ABOUT 6.5% TO 7% PROFIT RATE HAS BEEN APPLIED. THE LEARNED CIT (APPEALS), HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DID NOT INTERFER E IN THE ORDER OF THE ASSESSING OFFICER AND CONFIRMED THE AD DITION. 3. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT REJECTION OF THE BOOKS OF ACCOUNT IS JUST IFIED IN THE MATTER. THE ASSESSING OFFICER HAS BROUGHT OUT SPE CIFIC DEFECTS IN THE MAINTENANCE OF BOOKS OF ACCOUNT AND THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT ARGUE ON T HIS LINE AS TO HOW REJECTION OF BOOKS OF ACCOUNT IS NOT JUSTIFI ED IN THE MATTER. THE ASSESSEE HAS, THEREFORE, ACCEPTED REJ ECTION OF BOOKS OF ACCOUNT. THE LEARNED COUNSEL FOR THE ASS ESSEE MAINLY ARGUED THAT THE PROFIT RATE IS VERY HIGH AS APPLIED BY 3 THE AUTHORITIES BELOW. CONSIDERING THE DECISIONS CITED BY THE ASSESSEE BEFORE THE LEARNED CIT (APPEALS) OF THE HO N'BLE HIGH COURTS IN WHICH THE PROFIT RATE OF 6.5% TO 7% HAS B EEN APPLIED AND THE ASSESSEE IS A GOVERNMENT CONTRACTOR, WOULD SUGGEST THAT THE PROFIT RATE OF 9% APPLIED BY THE ASSESSING OFFICER IS EXCESSIVE ON SIDE. HOWEVER, IT IS CLEAR THAT THE ASSESSING OFFICER HAS ALREADY ALLOWED SALARY AND INTEREST PAI D TO THE PARTNERS OF THE ASSESSEE FIRM. THEREFORE, IT WOUL D BE REASONABLE AND PROPER TO APPLY PROFIT RATE OF 8% IN STEAD OF 9% ADOPTED BY THE ASSESSING OFFICER. THE ORDERS OF TH E AUTHORITIES BELOW ARE, THEREFORE, MODIFIED TO THE E XTENT THAT THE ASSESSING OFFICER SHALL APPLY NET PROFIT RATE O F 8% AS AGAINST 9% APPLIED BY THE ASSESSING OFFICER TO THE INCOME OF THE ASSESSEE. ISSUE NO.1 PARTLY ALLOWED. 4. ON ISSUE NO.2, THE ASSESSEE HAS CHALLENGED ADDIT ION OF RS.5 LACS ON ACCOUNT OF UNEXPLAINED CASH CREDIT. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS INT RODUCED UNSECURED LOANS TO THE EXTENT OF RS.17,15,000/- IN THE NAMES OF THREE PERSONS. THE ASSESSING OFFICER, HOWEVER, MADE ADDITION OF RS.5 LACS IN RESPECT OF UNEXPLAINED LOA N IN THE NAME OF SHRI LAKHMI CHAND. THE ASSESSING OFFICER FOUND THAT SHRI LAKHMI CHAND, CREDITOR HAS DEPOSITED SUM OF RS.5 LACS ON 11.7.2007 AND SUM OF RS.50,000/- IN CASH ON 14.7.2007 IN PUNJAB NATIONAL BANK, MASANA, RANGAR. HE ADVANCED SUM OF RS.5 LACS THROUGH CHEQUE NO.336046 OF PUNJAB NATIONAL BANK ON 26.7.2007 TO THE ASSESSEE. AS PER THE STATEMENT OF SHRI LAKHMI CHAND, HE ALONGWITH HI S WIFE IS THE OWNER OF 22 ACRES OF LAND. BUT HE PRODUCED JAM ABANDI OF 4 11 ACRES OF LAND ONLY. HIS FAMILY INCOME IS ABOUT RS.10 LACS TO 12 LACS PER ANNUM OUT OF WHICH RS.3 LACS ARE HOU SEHOLD EXPENSES AND BALANCE AMOUNT OF RS.7 LACS WAS DEPOSI TED IN PUNJAB NATIONAL BANK, KHERI LAKHA SINGH EVERY YEAR AS PER THE STATEMENT OF PUNJAB NATIONAL BANK FROM 1.4.2007 TO 31.3.2008, THERE IS OPENING BALANCE OF RS.5751/- ON LY. THERE ARE NO DEPOSITS IN THE BANK ACCOUNT FOR EARLIER YEA RS. WHEN ASKED HOW THE CREDITOR HAD EARNED RS,10 LACS TO 12 LACS FROM THE LAND, WHEREAS GENERALLY THE INCOME OF THE LAND IN THE AREA IS ABOUT RS.3 LACS PER ACRE, WHICH MEANS THE TOTAL INCOME OF RS.6,60,000/- IS IN HIS AND IN THE NAME OF HIS WIFE AFTER CONSIDERING TOGETHER BUT HE HAS FILED JAMABANDI OF LAND IN HIS NAME ONLY. HE REPLIED THAT HIS LAND IS MORE FERTI LE, THERE IS MORE PRODUCTION AND GETS HIGHER RATES. THE PLEA OF THE ASSESSEE HAS NOT FOUND ANY FORCE SINCE THE CREDITOR HAS DEPOSITED CASH IN HIS BANK ACCOUNT BEFORE GIVING LO ANS TO THE ASSESSEE AND THE ASSESSEE HAS EXPLAINED THAT THIS M ONEY WAS RECEIVED FROM THE CONTRACTORS SHRI OM PARKASH AND LAKHWINDER SINGH IN CASH AND DEPOSITED THE SAME IN PUNJAB NATIONAL BANK. HE HAS, HOWEVER, REFUSED TO HAVE A NY WRITTEN AGREEMENT OF THE CONTRACT WITH THE SAID PERSONS. HE HAS FURTHER REFUSED TO HAVE TAKEN ANY MONEY ON CREDIT O R THROUGH GIFT FROM ANY PERSON DURING THE LAST YEARS. HE HA S ALSO NOT ADVANCED ANY LOAN. THE ASSESSING OFFICER, THEREFOR E, FOUND THAT THE CAPACITY OF THE CREDITOR AND GENUINENESS O F THE TRANSACTION HAVE NOT BEEN PROVED. THE ASSESSING O FFICER, THEREFORE, HELD THAT THE CREDITWORTHINESS OF THE CR EDITOR AND GENUINENESS OF THE TRANSACTION HAVE NOT BEEN EXPLAI NED BY THE 5 ASSESSEE, HENCE THE INTRODUCTION OF RS.5 LACS REMAI NED UNSATISFACTORY AND WAS ADDED TO THE INCOME OF THE A SSESSEE UNDER SECTION 68 OF THE INCOME TAX ACT. THE LEARN ED CIT (APPEALS) ON THE SAME REASONING CONFIRMED THE ADDIT ION AND DISMISSED THE APPEAL OF THE ASSESSEE BECAUSE NO PRO OF OF THE TWO CONTRACTORS FROM WHOM THE AMOUNTS HAVE BEEN REC EIVED, HAVE BEEN FILED BEFORE THE AUTHORITIES BELOW. THE APPEAL OF THE ASSESSEE WAS ACCORDINGLY, DISMISSED. 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. IT IS NOT IN DISPUTE THAT THERE WERE NO DEPOSITS IN THE BANK ACCOUNT OF THE CREDITOR IN THE FINANCIAL YEAR UNDER CONSIDERAT ION AND THE OPENING BALANCE WAS OF RS.5751/-. THE CREDITOR SH RI LAKHMI CHAND HAD DEPOSITED SUM OF RS.5 LACS ON 11.7.2007 A ND SUM OF RS.50,000/- ON 14.7.2007 IN CASH IN PUNJAB NATIO NAL BANK BEFORE ISSUING CHEQUE TO THE ASSESSEE ON 26.7.2007. THE CREDITOR HAS FAILED TO EXPLAIN THE SOURCE OF THE CA SH DEPOSIT IN HIS BANK ACCOUNT. WHATEVER CONTENTION RAISED WAS THAT THE MONEY WAS RECEIVED FROM OTHER CONTRACTORS SHRI OM P ARKASH AND SHRI LAKHWINDER SINGH IN CASH, WAS ALSO NOT SUBSTANTIATED THROUGH ANY EVIDENCE ON RECORD. THU S THE CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION HAS NOT BEEN PROVED BY THE ASSESSEE. THE I.T.A.T. AGRA BENCH OF THE TRIBUNAL IN THE CASE OF SUMAN GUPTA VS. ITO [138 TTJ 153 (AGRA)] CONSIDERED IDENT ICAL QUESTION AND SMALL BANK BALANCE IN THE ACCOUNTS OF THE CREDITORS AND EQUAL AMOUNT OF CASH DEPOSITED IN THE IR BANK ACCOUNTS HELD THAT THE ASSESSEE HAS FAILED TO PROVE THE 6 CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS O F THE TRANSACTIONS AND ACCORDINGLY CONFIRMED THE ADDITION UNDER SECTION 68 OF THE INCOME TAX ACT. THE ORDER OF TH E TRIBUNAL IS CONFIRMED BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SUMAN GUPTA VS. CIT & OTHERS IN INCOME TAX APPEA L NO.680 OF 2012 DATED 7.8.2012. SIMILAR VIEW IS TA KEN BY THE HON'BLE GUJRAT HIGH COURT IN THE CASE OF BLESSING CONSTRUCTION VS. ITO, 32 TAXMAN.COM 366 IN WHICH IT WAS HELD WHERE SIZEABLE AMOUNTS WERE DEPOSITED IN CASH IN THE ACCOUNT OF THE DEPOSITOR ONLY BEFORE THEIR WITHDRAW AL THROUGH CHEQUE IN FAVOUR OF THE ASSESSEE, ADDITION WAS JUST IFIED. CONSIDERING THE FINDINGS OF FACT RECODED BY THE AUT HORITIES BELOW IN LINE OF THE ABOVE JUDGMENTS, IT IS CLEAR T HAT THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF THE CASH D EPOSIT MADE IN THE ACCOUNT OF THE CREDITOR, THUS THE ASSESSEE F AILED TO PROVE THE CREDITWORTHINESS OF THE CREDITOR AND GENU INENESS OF THE TRANSACTION IN THE MATTER. WE ACCORDINGLY, D O NOT FIND ANY MERIT IN THIS GROUND OF APPEAL RAISED BY THE AS SESSEE. THE SAME IS DISMISSED. NO OTHER POINT IS ARGUED OR PRESSED IN THIS APPEAL. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2014. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST OCTOBER, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 7