M/s Rajeev & Company, Barabanki V. Asstt. Commissioner of Income Tax, Lucknow

ITA 728/LKW/2013

• Counselvise Citation: 72823714 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWATI RATNA
• Assessee Lawyers: K R RASTOGI
• Section: 44AD; 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.728/LKO/2013 ASSESSMENT YEAR:2009-10 M/S RAJEEV & COMPANY BHITRI PEER BATAWAN BARABANKI V. ACIT RANGE V LUCKNOW TAN/PAN:AAEFR6741H (APPELLANT) (RESPONDENT) ITA NO.787/LKO/2013 ASSESSMENT YEAR:2009-10 ACIT RANGE V LUCKNOW V. M/S RAJEEV & COMPANY BHITRI PEER BATAWAN BARABANKI TAN/PAN:AAEFR6741H (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI. K. R. RASTOGI, C.A. DEPARTMENT BY: SMT. SWATI RATNA, D.R. DATE OF HEARING: 15 04 2015 DATE OF PRONOUNCEMENT: 23 04 2015 O R D E R PER SUNIL KUMAR YADAV: THESE CROSS APPEALS ARE PREFERRED BY THE ASSESSEE AS WELL AS THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) PERTAINING TO ASSESSMENT YEAR 2009-10. 2. SINCE THESE APPEALS WERE HEARD TOGETHER, THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. WE, HOWEVER, PREFER TO ADJUDICATE THEM ONE AFTER THE OTHER. :- 2 -: I.T.A. NO. 728/LKW/2013: 3. IN THIS APPEAL, THE ASSESSEE HAS ASSAILED THE ORDER OF THE LD. CIT(A) THAT HE WAS NOT JUSTIFIED IN DISALLOWING RS.5 LAKHS OUT OF MATERIALS PURCHASED AND RS.6.50 LAKHS OUT OF LABOUR AND WAGES. THE ASSESSEE HAS ALSO CHALLENGED THE ORDER OF THE LD. CIT(A) FOR NOT CANCELLING THE INTEREST CHARGED UNDER SECTION 234B AND 234C OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'). 4. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE FACT THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED AND THE INCOME IS ESTIMATED BY APPLYING A PARTICULAR RATE, THE ADDITIONS UNDER DIFFERENT HEADS ARE NOT CALLED FOR. THEREFORE, THE DISALLOWANCES OF RS.5 LAKHS ON ACCOUNT OF MATERIAL PURCHASED AND RS.6.50 LAKHS OUT OF LABOUR AND WAGES ON AD-HOC BASIS, ARE NOT SUSTAINABLE IN THE EYES OF LAW. 5. THE LD. D.R. HAS SIMPLY PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A). 6. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE NET PROFIT RATE AT 8%. WHEN THE APPEAL WAS PREFERRED BEFORE THE LD. CIT(A), THE LD. CIT(A) HAS REDUCED THE NET PROFIT RATE AND GRANTED RELIEF OF RS.95,42,054/-. BESIDES, THE LD. CIT(A) HAS MADE A DISALLOWANCE OF RS.5 LAKHS OUT OF MATERIAL PURCHASED AND RS.6.50 LAKHS OUT OF LABOUR AND WAGE EXPENSES SHOWN AND CLAIMED IN THE PROFIT AND LOSS ACCOUNT. IT HAS BEEN REPEATEDLY HELD BY VARIOUS JUDICIAL PRONOUNCEMENTS THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED, NO FURTHER ADDITION IS CALLED FOR ON THE BASIS OF THE SAID BOOKS OF ACCOUNT BY MAKING DISALLOWANCE ON CERTAIN EXPENSES CLAIMED UNDER DIFFERENT HEADS. WE, THEREFORE, FIND NO MERIT IN THE DISALLOWANCES MADE BY THE LD. CIT(A) AND ACCORDINGLY WE DELETE THE SAME. :- 3 -: 7. SO FAR AS CHARGING OF INTEREST UNDER SECTION 234B AND 234C IS CONCERNED, IT IS CONSEQUENTIAL IN NATURE AND NEEDS NO INDEPENDENT ADJUDICATION. 8. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS DISPOSED OF. ITATN 787/LKW/2013: 9. IN THIS APPEAL, THE REVENUE HAS ASSAILED THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS:- 1. THE CIT (A) ERRED IN LAW AND ON FACTS OF THE CASE IN GIVING RELIEF OF RS.95,42,054/-. THE CIT(A), LUCKNOW HAS FAILED TO APPRECIATE THAT THE ASSEESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT AND BILLS AND VOUCHERS BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS AND THE AO IS RIGHTLY REJECTED THE BOOKS OF ACCOUNT INVOKING THE PROVISIONS OF SECTION 145(3) OF THE IT ACT, 1961. 2. THE CIT(A), LUCKNOW HAS FAILED TO APPRECIATE THAT THE AO HAS NO OPTION BUT TO APPLY NET PROFIT RATE OF 8% ON THE TOTAL TURNOVER AS PER THE SECTION 44AD OF THE IT ACT, 1961, THE ONLY GUIDING SECTION TO DEAL WITH SUCH TYPE OF BUSINESS OF CIVIL CONSTRUCTION WHERE THE PRESUMPTIVE RATE ARE APPLICABLE. 10. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION THAT THE ASSESSEE ITSELF HAS DECLARED NET PROFIT RATE AT 1.37% IN COMPARISON TO THE NET PROFIT RATE DECLARED IN OTHER YEARS RANGING BETWEEN 0.42% AND 0.54%. THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT AND HAS APPLIED THE NET PROFIT RATE AT 8% AND ASSESSED THE TOTAL INCOME AT RS.1,27,01,318.89 AGAINST THE INCOME DECLARED BY THE ASSESSEE AT RS.20,09,267/-. AN APPEAL WAS PREFERRED BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS EXAMINED THE PAST HISTORY OF THE ASSESSEE AND ESTIMATED THE NET PROFIT RATE AT 2.15% WHICH IS BETTER THAN THE EARLIER YEARS PROFIT RATE RANGING BETWEEN 0.52% AND 1.12%. COPY OF THE COMPARATIVE CHART IS :- 4 -: PLACED ON RECORD. IT WAS FURTHER CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT IN EARLIER YEARS THE ASSESSMENTS WERE FRAMED UNDER SECTION 143(3) OF THE ACT AND COPY OF THE ASSESSMENT ORDERS ARE ALSO PLACED ON RECORD. IT WAS FURTHER CONTENDED THAT IN THE LIGHT OF THESE FACTS, THE INCOME ESTIMATED BY THE LD. CIT(A) DESERVES TO BE APPROVED. 11. THE LD. D.R., HOWEVER, HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER WITH THE SUBMISSION THAT THE ASSESSING OFFICER HAS RIGHTLY ESTIMATED THE NET PROFIT RATE AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. 12. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE BOOKS OF ACCOUNT ARE REJECTED AND THE LD. CIT(A) HAS APPROVED THE REJECTION OF THE BOOKS OF ACCOUNT AND NO GROUND IS RAISED BEFORE US WITH REGARD TO THE VALIDITY OF THE REJECTION OF THE BOOKS OF ACCOUNT. UNDER THESE CIRCUMSTANCES, THE ISSUE BEFORE US IS ONLY WITH REGARD TO THE ESTIMATION OF NET PROFIT RATE OF THE ASSESSEE. FROM A CAREFUL PERUSAL OF THE COMPARATIVE CHART, WE FIND THAT IN EARLIER YEARS THE NET PROFIT RATE WAS DECLARED BY THE ASSESSEE RANGING BETWEEN 0.40% AND 0.54% WHEREAS IN THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE ITSELF HAS DECLARED NET PROFIT RATE AT 1.37%. IN EARLIER YEARS, THE ASSESSMENTS WERE FRAMED UNDER SECTION 143(3) OF THE ACT AND NET PROFIT RATES WERE ESTIMATED BETWEEN 0.52% TO 1.12% WHEREAS IN THE IMPUGNED ASSESSMENT YEAR, THE LD. CIT(A) HAS ESTIMATED THE NET PROFIT RATE AT 2.15%. THE COPY OF THE COMPARATIVE CHART PLACED AT PAGE 1 OF THE COMPILATION OF THE ASSESSEE IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- PARTICULARS 31.03.2005 31.03.2006 31.03.2007 31.03.2008 31.03.2009 GROSS RECEIPTS GROSS PROFIT 33,675,670.00 7.24% 55,231,784.00 7.14% 48,976,231.00 7.31% 72,504,478.00 10.19% 146,444,792.00 9.86% LESS: COST OF MATERIAL 79,000.00 - - 2,811,416.00 394,246.00 :- 5 -: NET RECEIPTS 33,596,670.00 55,231,784.00 48,976,231.00 69,693,062.00 146,050,546.00 NET PROFIT 135,445.00 222,145.00 255,146.00 377,326.00 2,009,266.00 NET PROFIT RATE 0.40% 0.40% 0.52% 0.54% 1.37% INCOME RETURN 135,450.00 222,145.00 255,146.00 377,330.00 2,009,270.00 INCOME ASSESSED U/S 143(3) 322,820.00 622,150.00 2,692,920.00 2,978,350.00 12,701,318.00 INCOME ASSESSED AFTER [CIT(APPEALS)] 322,820.00 622,150.00 255,146.00 427,326.00 3,159,266.00 NET PROFIT RATE AS ACCEPTED BY THE DEPARTMENT 0.96% 1.12% 0.52% 0.61% 2.15% 13. IN THE LIGHT OF THE COMPARATIVE CHART FURNISHED BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE ASSESSEE ITSELF HAS DECLARED BETTER RESULTS IN COMPARISON TO EARLIER YEARS AND SIMILARLY THE LD. CIT(A) HAS ALSO ESTIMATED THE NET PROFIT RATE AT 2.15% WHICH IS BETTER THAN EARLIER YEARS. THE TURNOVER OF THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR HAS ALSO BEEN SUBSTANTIALLY INCREASED AND IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT THE ESTIMATION MADE BY THE LD. CIT(A) IS QUITE REASONABLE AND HENCE DO NOT CALL FOR ANY INTERFERENCE. WE, THEREFORE, FIND NO MERIT IN THE REVENUES APPEAL. ACCORDINGLY, WE CONFIRM THE SAME. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23 RD APRIL, 2015 JJ:1504 :- 6 -: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR