Sh. Des Raj Nagpal, Jammu V. Addl. CIT, Jammu

ITA 75/ASR/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8695 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 01-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Question of law; Corroborative evidences; Revised return
• Section: 44AD; 143(3); 142(1); 139(5); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.75(ASR)/2012 ASSESSMENT YEAR:2006-07 PAN :AAEFD6653J M/S. DES RAJ NAGPAL, VS. ADDL. COMMR. OF INCOME TAX, 401, SHASTRI NAGAR, JAMMU. RANGE-1, JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO.84(ASR)/2012 ASSESSMENT YEAR:2006-07 PAN :AAEFD6653J DY. COMMR. OF INCOME TAX, VS. M/S. DES RAJ NAGPAL, CIRCLE-1, JAMMU. 401, SHASTRI NAGAR, JAMMU. (APPELLANT) (RESPONDENT) ASSESSEE BY: SH.JOGINDER SINGH, CA DEPARTMENT BY: SH.TARSEM LAL, DR DATE OF HEARING: 05/03/2015 DATE OF PRONOUNCEMENT:23/03/2015 ORDER PER BENCH: THESE CROSS APPEALS OF THE ASSESSEE AND THE REVEN UE ARISE THE ORDER OF THE CIT(A), JAMMU DATED 05.12.2011 FOR THE ASSE SSMENT YEAR 2006-07. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : ITA NO.75 & 84(ASR)/2012 2 2. IN ITA NO.75(ASR)/2012, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS OF THE CASE IN NOT CONSIDERING THE CONTENTION OF THE ASSESSEE PROP ERLY THAT IN THE ABSENCE OF ISSUE OF NOTICE U/S 143(2) ON THE RE VISED RETURN EITHER BY THE DCIT OR BY THE ADDL. CIT IN ASSUMING THE CHARGE FOR MAKING THE ASSESSMENT AND THE ASSESSMENT SO MAD E U/S 143(3) BY THE AO IS ILLEGAL, INVALID, NULL AND VOI D AND LIABLE TO BE QUASHED AND CANCELLED. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN NOT ACCEPTING THE CONTENTION OF THE ASSESSEE THAT T HE ESTIMATION OF PROFIT RATE ARE MADE BY THE AO AT 100% AMOUNTIN G TO RS.1,45,32,793/- ON THE CONTRACT RECEIPTS OF RS.1,4 5,32,7930/- AS AGAINST 4% DECLARED BY THE ASSESSEE AMOUNTING TO RS.5813117/- IS ARBITRARY AND WITHOUT ANY BASIS AND REDUCED THE NET PROFIT RATE OF 10% TO 7% ONLY RESULTING IN ADDI TION OF RS.4359838/- TO THE RETURNED INCOME WHICH IS SOUGHT TO BE DELETED. 3. IN ITA NO.84(ASR)/2012, THE REVENUE HAS RAISED F OLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DIRECTING THE AO TO ADOPT NET PROFIT RATE OF 7% OF THE TOTAL RECEIPTS INSTEAD OF 10% APPLIED BY THE AO WHE RE NO BOOKS OF ACCOUNT HAD BEEN MAINTAINED BY THE ASSESSEE. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DIRECTING THE AO TO ADOPT NET PROFIT RATE OF 7% OF THE TOTAL RECEIPTS INSTEAD OF 10% APPLIED BY THE AO IN VIEW OF THE DECISION OF HONBLE ITAT CHANDIGHAR A BENCH IN TH E CASE OF M/S. SHIVAM CONSTRUCTION CO. AND AFFIRMED BY THE HO NBLE HIGH COURT OF PUNJAB & HARYANA IN THEIR ORDER IN IT A NO.183 OF 2007 DATED 14.05.2007. ITA NO.75 & 84(ASR)/2012 3 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DIRECTING THE AO TO ADOPT NET PROFIT RATE OF 7% OF THE TOTAL RECEIPTS INSTEAD OF 10% APPLIED BY THE AO WHE N THE JURISDICTIONAL BENCH OF ITAT AMRITSAR IN THE CASE OF M/S. POOJA CONSTRUCTION CO; REPORTED II ITA NO.750(ASR)/ 1992 HAD HELD THAT THE APPLICATION OF NET PROFIT RATE OF 10% ON GROSS RECEIPTS IS PROPER. THE SAID ORDER OF THE JURISDICT IONAL ITAT HAS BEEN CONFIRMED BY THE HONBLE HIGH COURT OF P & H IN THEIR ORDER IN ITA NO.166 OF 1999 DATED 10.09.2010. 4. THE BRIEF FACTS OF THE CASE ARE THAT IN THE RETU RN OF INCOME FILED BY THE ASSESSEE IT HAS BEEN STATED THAT THE BOOKS OF ACCOU NT HAVE NOT BEEN MAINTAINED AND THE PROFIT HAS BEEN ESTIMATED @ 4% O N CONTRACT RECEIPTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SH. DA RSHAN LAL NAGPAL, COUNSEL SUBMITTED THAT NO BOOKS OF ACCOUNT HAVE BEE N MAINTAINED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 AND, THER EFORE, THE NET PROFIT HAS BEEN ESTIMATED AT 4% OF THE CONTRACT RECEIPTS. HE A LSO SUBMITTED THAT NO EVIDENCES FOR THE PURCHASES AND OTHER EXPENSES ATTR IBUTABLE TO THE BUSINESS OF THE ASSESSEE CAN BE FURNISHED IN THE ABSENCE OF THE BOOKS OF ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON 8.12 .2008 ATTENTION OF SH.NAGPAL, COUNSEL WAS DRAWN TOWARDS THE PROVISIONS OF SECTION 44AD OF THE ACT WHEREBY THE BOOKS OF ACCOUNT ARE NOT MAINTA INED BY THE ASSESSEE, THE NET PROFIT FROM THE CONTRACT BUSINESS IS TO BE COMPUTED AT 8% OF THE TOTAL CONTRACT RECEIPTS. ALTHOUGH, THE SAID PROVISIONS AR E APPLICABLE TO A CASE WHERE CONTRACT RECEIPTS ARE LESS THAN RS.40 LAKHS, THE PROVISION CAN PROVIDE ITA NO.75 & 84(ASR)/2012 4 GUIDANCE IN ORDER TO DETERMINE THE CORRECT RATE OF PROFIT IN A CASE WHERE THE CONTRACT RECEIPTS ARE MORE THAN RS.40 LAKHS AND WHE RE BOOKS OF ACCOUNT ARE NOT MAINTAINED AND EVIDENCES RELATING TO PURCHASES AND OTHER EXPENDITURES RELATING TO THE CONTRACT BUSINESS ARE NOT FURNISHED . ATTENTION OF SH. NAGPAL , COUNSEL WAS ALSO DRAWN TOWARDS THE DECISION OF THE ITAT, CHANDIGARH BENCH IN THE CASE OF SHIVAM CONSTRUCTION CO. VS. AC IT IN ITA NOS. 383 & 384/2004, 622/2005, 385 & 386/2004 AND 785/2005. TH E SAID ORDER OF THE ITAT HAS BEEN AFFIRMED BY THE HONBLE P & H HIGH CO URT IN THEIR ORDER IN ITA NO.183 OF 2007 DATED 14.5.2007. IN THE SAID DEC ISION, IT WAS HELD BY THE ITAT THAT IN THE CASE OF A CIVIL CONTRACTOR, NET RA TE OF 10% OF GROSS RECEIPTS WAS A FAIR ESTIMATE TO SUBSTANTIATE THE BOOKS OF AC COUNT WITH THE EVIDENCES. IN THE CASE OF THE ASSESSEE, IT IS ADMITTED THAT BO OKS OF ACCOUNT HAVE NOT BEEN MAINTAINED NOR CAN THE EVIDENCES FOR PURCHASES AND EXPENDITURE RELATING TO THE CONTRACT BUSINESS BE FURNISHED IN THE ABSENCE O F BOOKS OF ACCOUNT. IN VIEW OF THE ABOVE REASON, THE ASSESSEE WAS REQUIRE D TO EXPLAIN WHY THE NET PROFIT OF THE ASSESSEE FROM CONTRACT BUSINESS SHOUL D NOT BE TAKEN AT 10% OF THE CONTRACT RECEIPTS OF THE ASSESSEE FOR THE YEAR AS AGAINST 4% DECLARED BY THE ASSESSEE. THE ASSESSEE REQUESTED FOR TIME UPTO 12.12.2008 TO FURNISH THE EXPLANATION IN THIS REGARD. ITA NO.75 & 84(ASR)/2012 5 5. THE ASSESSEE SUBMITTED THE EXPLANATION DATED 12. 12.2008 WHICH IS REPRODUCED AT PAGES 3 TO 9 OF AOS ORDER. AFTER CON SIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AO VIDE PAGE 10 TO 15 OF HIS O RDER OBSERVED AND THE RELEVANT FINDINGS OF THE AO ARE REPRODUCED FOR THE SAKE OF CONVENIENCE AS UNDER: THE SUBMISSIONS MADE BY THE ASSESSEE HAVE BEEN DUL Y CONSIDERED. HOWEVER, THE SAME ARE NOT ACCEPTABLE FOR THE FOLLOW ING REASONS: 1. THE CONTENTION OF THE ASSESSEE THAT M/S. SHIVAM CONSTRUCTION CO. IS A FIRM SITUATED IN LUDHIANA AND NOT OF J & K STATE DOES NOT HELP THE CASE OF THE ASSESSEE. BOTH LUDHIANA AND J & K ARE PART OF INDIA WHERE THE MODEL AND MODUS OPERANDI OF THE BUSINESS ARE THE SAME. THE DIFFERENT AGENCIES WHICH GRANT CONTRACTS TO THE CONTRACTORS WORK MORE OR LESS UNDER THE SAME POLICY GUIDELINES, SET BY THE AGENCIES. THERE MAY BE MINOR VARIATIONS HERE AND THERE BUT TH EY ARE NOT SO MATERIAL THAT IN LUDHIANA, A CONTRACTOR WOULD EARN AT LEAST 10% OF THE CONTRACT RECEIPTS AS INCOME WHILE A CONTRACTOR IN J & K WOULD EARN 4% OF THE CONTRACT RECEIPTS AS INCOME. IN ANY CASE, THE ASSESSEE HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD WHICH WOULD SUGGEST THAT A FIRM IN LUDHIAN WOULD MAKE AT LEAST 10% OF ITS GROS S RECEIPTS AS INCOME WHILE A FIRM IN J & K WOULD MAKE ONLY 4% OF ITS GROSS RECEIPTS AS ITS INCOME. 2. THE CONTENTION OF THE ASSESEE THAT COMPARABLE CA SES RELATED TO A.YS 1999-2000, 2000-2001 & 2001-02 BUT THE CASE OF THE ASSESSEE RELATES TO A.Y. 2006-07 AND THE PREVAILING RATES FO R THE AYS 1999- 2000, 2000-01 & 2001-02 FOR RAW MATERIALS AND EXPEN SES WOULD BE MUCH LESS AS COMPARED TO A.Y.2006-07 ALSO DOES NOT HELP THE CASE OF THE ASSESSEE. EVEN IF THE PREVAILING RATES FOR RAW MATERIALS AND EXPENSES DURING THOSE YEARS WOULD BE LESS COMPARED TO AY 2006-07, THE CONTRACT RATES WOULD ALSO BE LESS DURING THOSE YEARS. THE RATES OF RAW MATERIALS AND EXPENSES ARE ALWAYS TAKEN INTO CO NSIDERATION WHILE QUOTING A PRICE FOR CONTRACT. HENCE, IF THE COST O F RAW MATERIALS AND EXPENSES WERE MORE, THE RATES AT WHICH CONTRACTS W ERE TAKEN BY THE ASSESSEE WOULD ALSO BE MORE. THEREFORE, THE HIGHER RATES OF RAW ITA NO.75 & 84(ASR)/2012 6 MATERIALS AND EXPENSES WOULD BE DULY COMPENSATED FO R BY THE HIGHER RATES OF CONTRACT RECEIPTS. 3. IT HAS BEEN CONTENDED BY THE ASSESSEE THAT SHIVA M CONSTRUCTION CO. IS SITUATED IN LUDHIANA AND STEEL AND CEMENT AR E AVAILABLE LOCALLY AND NEARBY AND NOT MUCH FREIGHT IS INVOLVED BUT IN ASSESSEES CASE, IT IS NOT SO. HOWEVER, THIS CONTENTION OF THE ASSESSEE IS ALSO NOT ACCEPTABLE IN VIEW OF THE FACT THAT ALL THESE VARIA BLES ARE FACTORED IN BY THE CONTRACTORS WHILE QUOTING THE ATE FOR A CON TRACT. IT IS NOT AS IF THE ASSESSEE WOULD NOT HAVE FACTORED IN THE EXPENDI TURE ON ACCOUNT OF FREIGHT WHILE QUOTING THE RATES FOR DIFFERENT CONTR ACTS. AS MENTIONED EARLIER, BOTH PUNJAB WHERE LUDHIANA IS SITUATED AND JAMMU AND KASHMIR ARE PART OF INDIA AND THE MODEL OF BUSINESS AS WELL AS THE MODUS OPERANDI OF BUSINESS WOULD BE MORE OR LESS TH E SAME. 4. ASSESSEES CONTENTION THAT THE RATE OF PROFIT DE PENDS ON THE NATURE OF CONTRACT WORK, AMOUNT OF CONTRACT BIG O R SMALL, PLACE OF CONTRACT WHETHER NORMAL OR DIFFICULT AND RESTRICTED AREA, ETC. AND THE SAME RATE CANNOT BE APPLIED IN ALL CONTRACT CASES ALL OVER INDIA IS NOT ACCEPTABLE. IT IS POSSIBLE THAT THE RATE OF PROFIT MAY VARY FROM CONTRACT TO CONTRACT, DEPENDING ON VARIOUS FACTORS. HOWEVER, THE ONUS WOULD BE ON THE ASSESSEE TO PROVE, FROM ITS AUDITED BOOKS OF ACCOUNTS AND ALSO SUPPORTING EVIDENCES THAT THE RATE OF PROFIT D ISCLOSED BY IT IS TRUE AND CORRECT. THE ASSESSEE CANNOT CLAIM, WITHOUT AN Y BASIS THAT WHAT IT HAS DISCLOSED AS ITS NET PROFIT RATE IS CORRECT AND SHOULD BE ACCEPTED. HE HAS TO BACK HIS CLAIM WITH EVIDENCES IN SUPPORT OF THE CLAIM. THE ASSESSEE HAS FAILED TO DO SO IN RESPECT OF ITS CLAI M THAT THE RATE OF PROFIT DECLARED BY IT IS CORRECT. FURTHER, THE CONTRACT RA TES QUOTED BY THE CONTRACTORS TAKE INTO CONSIDERATION ALL FACTORS BEF ORE QUOTING THE CONTRACT RATES. IT IS ALSO COMMON KNOWLEDGE THAT DI FFICULT TASKS COMMAND A HIGHER PRICE. 5. THE FACT THAT M/S. SHIVAM CONSTRUCTION CO. HAD I TSELF DECLARED NET PROFIT RATE OF 10% IS INDICATIVE OF THE FACT TH AT THE NET PROFIT RATE IN THE CASE OF CONTRACTORS IS AT LEAST 10%. NON MAINTE NANCE OF BOOKS OF ACCOUNTS IS A BIGGER LAPSE THAN NON PRODUCTION OF B OOKS OF ACCOUNT. AT LEAST IN THE CASE OF SHIVAM CONSTRUCTION CO; THE B OOKS OF ACCOUNT WERE AUDITED BY THE C.A. THE BOOKS WERE SUBJECTED T O BASIS VERIFICATION. HOWEVER, IN THE CASE OF THE ASSESSEE, SINCE NO BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED, THEY HAVE NOT EVEN U NDERGONE ANY ITA NO.75 & 84(ASR)/2012 7 AUDIT. THE ASSESSEE HAS NOT SUPPORTING EVIDENCES I N FAVOUR OF THE NET PROFIT DECLARED BY IT. THE ASSESSEES CASE FOR THE A.Y.2005-06 CANNOT BE BINDING FOR ALL THE YEARS TO COME SINCE EVERY AS SESSMENT YEAR IS SEPARATE AND INDEPENDENT. EVERY ASSESSMENT HAS TO B E COMPLETED BASED ON THE MATERIALS AND EVIDENCES PRODUCED BEFOR E THE AO IN SUPPORT OF THE RETURN OF INCOME FILED. DURING THE A .YS. 2005-06, THE BOOKS OF THE ASSESSEE WERE AUDITED AND THE ASSESSEE PRODUCED THE DETAILS CALLED FOR BY THE A.O. FROM TIME TO TIME. B ASED ON THE TEST CHECK OF THE ACCOUNTS, ASSTT. FOR THE A.Y. 2005-06 HAS BEEN COMPLETED. HOWEVER, THIS DOES NOT GIVE THE ASSESSEE BLANKET R IGHT TO DECLARE THE INCOME AS PER ITS OWN CALCULATION AND WISH WITHOUT ANY BACKING IN THE FORM OF BOOKS OF ACCOUNTS AND EVIDENCES IN SUPPORT OF SUCH INCOME. TE INCOME DECLARED BY THE ASSESSEE CAN BE ACCEPTED ONLY IF IT IS ABLE TO SUBSTANTIATE THE CORRECTNESS OF SUCH INCOME. THE ASSESSEE, BY ITS OWN ADMISSION, IS NOT IN A POSITION TO DO SO. ALTHOUGH THE INCOME OF THE ASSESSEE FOR THE A.Y.200 5-06 WAS ASSESSED AT A RATE LOWER THAN 10% OF THE CONTRACT R ECEIPTS, THE ASSESSEE CANNOT TAKE THIS AS THE BASIS FOR JUSTIFYING THE NE T PROFIT DECLARED BY IT DURING THE A.Y. 2006-07. AS ALREADY STATED EARLIER, ASSESSMENT FOR EACH ASSESSMENT YEAR IS INDEPENDENT OF EACH OTHER. THE ASSESSEE TO PROVE ITS CONTENTIONS RIGHT SEPARATELY FOR EACH AS SESSMENT YEAR. IN THE ABSENCE OF ANY BOOKS OF ACCOUNT AND EVIDENCES IN SU PPORT OF THE INCOME DECLARED BY THE ASSESSEE AND THE GENUINENESS AND CORRECTNESS OF EXPENSES CLAIMED BY IT, IT IS NOT POSSIBLE FOR T HE ASSESSEE IN AS FAR AS THE EXPENSES DEBITED TO THE PROFIT & LOSS A/C IS CO NCERNED OR THE CORRECTNESS OF THE INCOME DISCLOSED. THERE MAY BE A POSSIBILITY THAT THE ASSESSEE MAY HAVE INFLATED ITS PURCHASE S OR IN FLATED ITS EXPENSES FOR THE A.Y.2006-07, BUT THE A.O IS NOT IN A POSITI ON TO VERIFY THESE FACTS BECAUSE THE ASSESSEE HAS FAILED TO PRODUCE EI THER THE BOOKS OF ACCOUNTS OR THE DETAILS OF EXPENSES AND PURCHASES N OR HAS IT BEEN ABLE TO FURNISH THE EVIDENCES IN SUPPORT OF THE VARIOUS PURCHASES AND EXPENSES. THE ASSESSEE CANNOT UNILATERALLY FIX THE PROFIT PERCENTAGE AS PER ITS OWN WISH WITHOUT JUSTIFYING THE SAME WITH M ATERIAL EVIDENCES. HENCE, TO BASE THE PROFIT PERCENTAGE OF THE ASSESSE E ON THE PROFIT PERCENTAGE FOR THE A.Y. 2005-06 WOULD NOT BE THE CO RRECT COURSE OF ACTION. FURTHER, IN THE ABSENCE OF THE BOOKS OF AC COUNT AND SUPPORTING DOCUMENTS AND EVIDENCES, IT CANNOT BE ASCERTAINED W HETHER THE ASSESSEE, BEING A CONTRACTOR, IS HIT BY THE PROVISI ONS OF SECTION 40(A)(IA) OF THE ACT FOR ANY TRANSACTION. ALL THE A BOVE, FACTORS ARE ITA NO.75 & 84(ASR)/2012 8 THEREFORE MATERIAL WHILE ESTIMATING THE PROFITS OF THE ASSESSEE FOR THE A.Y. 2006-07. 6. THE MAIN CONTENTION OF THE ASSESSEE FOR WORKING OUT THE PROFITS @ 4% HAVE ALREADY BEEN DEALT WITH IN THE FOREGOING PARAS. ASSESEES CONTENTION THAT TWO OF THE CONTRACTS ARE IN HIGHLY RESTRICTED AREA WHERE WORKING TIME IS LESS AND THE WORK HERE INVOLVES WAS TAGE OF MATERIAL ETC AND HENCE, THE PROFIT PERCENTAGE IN THESE TWO C ONTRACTS IS LESS IS NOT ACCEPTABLE. THIS IS BECAUSE ALL THESE FACTORS ARE N ORMALLY TAKEN INTO CONSIDERATION WHILE WORKING OUT THE COSTING FOR WO RK TO BE UNDERTAKEN AND, IT IS ONLY AFTER THIS, THAT RATES A T WHICH CONTRACTS ARE DECIDED TO BE TAKEN IS QUOTED. EVEN THE AGENCIES WH O ARE AWARDING THE CONTRACT ARE AWARE OF THESE RESTRICTIONS AND TH E CONTRACTS ARE AWARDED AFTER CONSIDERING THESE FACTORS. THE ASSESS EE IS IN BUSINESS AND IS NOT IN BUSINESS FOR CHARITY. IT WOULD LIKE T O MAKE MAXIMUM PROFITS FORM ITS BUSINESS ACTIVITIES AND WOULD TAKE THE CONTRACT ONLY IF IT IS PROFITABLE AFTER TAKING ALL FACTORS INTO CONS IDERATION. ASSESSEE HAS NOT GIVEN ANY MATERIAL TO SHOW THAT THE RATE OF PRO FIT IN THESE TWO CONTRACTS AT JINDRAH WAS MUCH LOWER THAN THE AVERAG E. VII) ASSESSEE HAS PLACED RELIANCE ON CERTAIN CASE L AWS IN THE CASE OF ASSESSES ENGAGED IN CIVIL CONSTRUCTION. THE SE WOULD, HOWEVER, NOT HELP THE CASE OF THE ASSESSEE. (A) CIT VS JVL BUILDERS (P) LTD. 2006 CTR 303 MAD IN THIS CASE, THE FACTS OF THE CASE ARE NOT GIVEN. THE HONBLE HIGH COURT HAS DISMISSED THE APPEAL ON THE GROUND THAT THE TRIBUNALS FINDING IS MERELY A FIND ING OF FACT AND NO QUESTION OF LAW ARISES. THE ABOVE DECISION, THEREFORE, DOES NOT HELP THE AS SESSEE TO PROVE THAT THE PROFIT DECLARED BY IT IS CORRECT. B) SAHYOG SHAKARI SHARAM SAMVIDA SAMITI LTD THE ISSUE IN THIS APPEAL WAS WHETHER PENALTY U/S 271(1)(C) CAN BE LEVIED WHEN THE PROFIT HAS BEEN DETERMINED ON ESTIMATE BASIS AND NOT AS TO WHAT WOU LD BE THE RATE OF PROFIT IN THE CASE OF CIVIL CONTRACTORS . ITA NO.75 & 84(ASR)/2012 9 HERE, THE RATE OF PROFIT WAS FINALLY DETERMINED BY CIT(A) AT 6% OF THE CONTRACT RECEIPTS. C) SHRI RAM JHANWAR LAL V. ITO THE DECLARE RATE OF PROFIT WAS CONFIRMED BY THE TRI BUNAL AT 8%. IN THIS CASE, THE ASSESSEE HAD NOT MAINTAINE D BOOKS OF ACCOUNTS IN A MANNER WHICH COULD ASSIST TH E COMPUTATION OF CORRECT INCOME. THERE WAS NON- MAINTENANCE/IRREGULAR MAINTENANCE OF VOUCHERS IN SUPPORT OF EXPENSES. THE HONBLE TRIBUNAL NOTED THA T IN ORDER TO DETERMINE THE CORRECT RATE OF PROFIT, WE A RE REGULARLY SEEKING GUIDANCE FROM THIS SECTION AND APPLYING 8% NET PROFIT RATE.. D) CIT, LUCKNOW VS AJAY CONSTRUCTION THE AO HAD APPLIED THE NET RATE OF 8% WHICH WAS REDUCED TO 4% BY ITAT. THE HONBLE HIGH COURT DID N OT SUSTAIN THE ORDER OF THE ITAT. THE MATTER WAS REMAN DED TO THE AO FOR REDETERMINATION OF RATE OF PROFIT. THE ABOVE DECISION WOULD SHOW THAT THE RELIANCE OF THE ASSESSEE ON THE ABOVE CASE LAWS IS MISPLACED. IN FA CT, IT HAS BEEN CLEARLY HELD BY THE ITAT IN THE CASE OF SH . RAM JHANWAR LAL THAT GUIDANCE CAN BE SOUGHT FROM THE PROVISIONS OF SECTION 44AD. IT HAS ALSO BEEN OBSERV ED BY THE LD. MEMBERS IN THE CASE OF SHIVAM CONSTRUCTION CO. LTD. THERE ARE MANY CASES OF THE CHANDIGARH BENCH WHERE THE NET PROFIT HAS BEEN DETERMINED AT 10%. THE CONTENTION OF THE ASSESSEE ABOUT CRASHING OF TH E HARD DISC IN WHICH THE BOOKS ARE CLAIMED TO HAVE BEEN MAINTAINED IS NOT VERIFIABLE. IN ANY CASE, SINCE TH E TRIAL BALANCE WAS AVAILABLE AND IF ALL SUPPORTING VOUCHER S/BILLS FOR EXPENSES WERE AVAILABLE, THE ASSESSEE COULD HAV E RECONSTRUCTED THE BOOKS OF ACCOUNTS, SINCE THE RETU RN WAS FILE ONLY ON 31.10.2006 AND THE ASSESSEE HAD MORE T HAN FIVE MONTHS TO RECONSTRUCT THE BOOKS, IF THE HARD D ISC HAD FACTUALLY CRASHED. ITA NO.75 & 84(ASR)/2012 10 THE CASE OF SHIVAM CONSTRUCTION CO. IS NOT AN ISOLA TED CASE. IT IS PERTINENT TO BRING ON RECORD HERE THAT IN THE CASE OF ANTHER ASSESSEE OF J & K STATE M/S. STAR CONSTRUCTION FOR THE A.Y.2005-06, THE A.O. HAD APPL IED A NET RATE OF PROFIT OF 8% ON THE CONTRACT RECEIPTS O F RS.8.28 CRORES FOR DETERMINING THE TOTAL INCOME OF THE ASSE SSEE. THE ORDER OF THE A.O. HAS BEEN UPHELD BY THE CIT(A ), BATHINDA. THE ASSESSEE HAS NOT PREFERRED APPEAL AGA INST THE ORDER OF THE LD. CIT(A). IN VIEW OF THE DETAILED DISCUSSIONS AS ABOVE AND FOR REASONS GIVEN, SINCE THE ASSESSEE HAS NOT MAINT AINED ANY BOOKS OF ACCOUNTS, HAS NOT GOT HIS BOOKS AUDITE D IN VIEW OF NON-MAINTENANCE OF BOOKS AND HAS ALSO NOT FURNISHED ANY EVIDENCE IN SUPPORT OF THE VARIOUS EXPENSES ATTRIBUTABLE TO THE BUSINESS, I APPLY A NE T PROFIT RATE OF 10% OF THE CONTRACT RECEIPTS OF RS.14,53,27 ,930/- DECLARED IN THE REVISED RETURN OF INCOME FOR WORKIN G OUT THE TOTAL INCOME OF THE ASSESSEE IN VIEW OF THE DEC ISION OF ITAT IN THE CASE OF M/S. SHIVAM CONSTRUCTION CO. LT D. AND AFFIRMED BY THE HNBLE P & H HIGH COURT IN THEI R ORDER IN ITA NO.183 OF 2007 DATED 14.5.2007. PROFIT OF THE ASSESSEE FROM THE CONTRACT BUSINESS IS ACCORDINGLY DETERMINED AT 10% OF (RS.14,53,27,930/-) = RS.1,45,32,793/-. AS AGAINST THIS, THE ASSESSEE HAS DISCLOSED PROFIT OF ONLY RS.58,13,117/- . HENCE, TH E BALANCE PROFIT OF RS.87,19,676/- IS ADDED TO THE TO TAL INCOME OF THE ASSESSEE. IT IS ALSO PERTINENT TO MEN TION HERE THAT I THE CASE OF M/S. SHIVAM CONSTRUCTION CO . THE HONBLE MEMBERS HAVE OBSERVED THAT THERE ARE SEVERA L DECISIONS OF THE CHANDIGARH BENCH OF THE TRIBUNAL W HERE THE NET PROFIT HAS BEEN ESTIMATED AT 10%. 6. BEFORE THE LD. CIT(A), THE ASSESSEE RAISED THE LEGAL OBJECTION WITH REGARD TO THE RE-OPENING OF THE ASSESSMENT WHICH WA S REJECTED BY THE LD. ITA NO.75 & 84(ASR)/2012 11 CIT(A). THE LD. CIT(A) ON MERIT APPLIED THE NET PR OFIT RATE OF 7% FOR THE REASONS MENTIONED IN HIS ORDER IN PARA 15. 7. THE LD. COUNSEL FOR THE ASSESSEE FILED THE ADDIT IONAL GROUNDS, AS UNDER: 1. THAT THE LD. AO HAS ERRED IN LAW BY ESTIMATING THE INCOME OF THE ASSESSEE BY APPLYING NET PROFIT RATE IN THE ASS ESSMENT ORDER PASSED U/S 143(3) OF THE ACT WITHOUT INVOKING THE P ROVISIONS OF SECTION 145(3) OF THE ACT. 2. THAT THE LD. AO HAS ERRED IN LAW BY MAKING THE B EST JUDGMENT ASSESSMENT U/S 143(3) WITHOUT INVOKING THE PROVISIO NS OF SECTION 145(3) OF THE ACT INSTEAD OF MAKING ASSESSM ENT U/S 144 OF THE ACT. 8. THE LD. COUNSEL FOR THE ASSESSEE RELYING UPON TH E DECISION OF THE HONBLE SUPREME COURT, IN THE CASE OF NATIONAL THER MAL POWER CO. LTD. VS. CIT (1998) 229 ITR 383 (SC), ARGUED THAT IT IS A L EGAL ISSUE AND GOES DEEP INTO THE ROOT OF MATTER AND HAVING A GREAT BEARING ON THE TAX LIABILITY OF THE ASSESSEE AND THEREFORE, PRAYED TO ADMIT THE ADDITIO NAL EVIDENCE. 9. THE LD. DR, ON THE OTHER HAND, OPPOSED THE SAME. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ADDITIONAL GROUNDS RAISED BY THE LD. COUNSEL FO R THE ASSESSEE ARE LEGAL GROUND AND THE SAME GO DEEP INTO THE ROOT OF THE MA TTER AND HAVE A BEARING ON THE TAX LIABILITY OF THE ASSESSEE AND ACCORDINGL Y IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT, IN THE CASE OF NATION AL THERMAL POWER CO. ITA NO.75 & 84(ASR)/2012 12 LTD. VS. CIT (SUPRA), WE ADMIT BOTH THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE. 11. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT TH E ASSESSEE DOES NOT MAINTAIN BOOKS OF ACCOUNT AND HAVE NOT COMPLIED WIT H THE NOTICES SENT UNDER SECTION 142(1) OF THE ACT. THEREFORE, THE AO WAS REQUIRED TO MAKE ASSESSMENT U/S 144 OF THE ACT. THE ASSESSMENT CANNO T BE MADE U/S 143(3) OF THE ACT SINCE BOTH THE ASSESSMENTS ARE QUIET DIFFER ENT. IN THE ASSESSMENT U/S 143(3), THE ASSESSEE ON THE DATE SPECIFIED IN THE NOTICE U/S 143(2) OR SO AFTERWARDS, AS MAY PRODUCES SUCH BOOKS OF ACCOUNT OR OTHER EVIDENCES, AS REQUIRED BY THE AO AND THE AO AFTER HEARING SUCH E VIDENCES, AS ASSESSEE MAY PRODUCE AND SUCH OTHER EVIDENCES, THE AO MAY R EQUIRE ON SPECIFIED POINTS AND AFTER TAKING INTO ACCOUNT ALL RELEVANT M ATERIAL WHICH HE HAS GATHERED, MAKE AN ASSESSMENT AND DETERMINE THE SUM PAYABLE AND REFUND, IF ANY AMOUNT DUE TO THE ASSESSEE ON THE BASIS OF SUC H ASSESSMENT. WHEREAS IN THE BEST JUDGMENT ASSESSMENT U/S 144, IF ANY PERSON FAILS TO MAKE ANY RETURN REQUIRED U/S 139(1) OR 139(4) OR 139(5) ON ONE HAND OR FAILS TO COMPLY WITH ALL THE TERMS OF NOTICES U/S 142(1) AND 142(2A) AND THIRDLY FAILS TO COMPLY WITH ALL THE GROUNDS OF NOTICES ISSUED U/S 143(2) OF THE ACT, THEN THE AO AFTER GIVING SHOW CAUSE NOTICE TO THE ASSESSEE OR B Y ISSUING NOTICE U/S 142(1) OF THE ACT, SHALL PROCEED TO MAKE BEST JUDGMENT ASS ESSMENT U/S 143(3) OF THE ITA NO.75 & 84(ASR)/2012 13 ACT. INSPITE OF THE FACT, THE ASSESSEE DOES NOT MAI NTAIN BOOKS OF ACCOUNT AND HAS FILED RETURN OF INCOME ONLY ON ESTIMATED BASIS OF THE CONTRACT RECEIPTS AND HAS NOT FURNISHED DETAILS RELATING TO CONTRACT BUSINESS. THEREFORE, THE AO IS NOT JUSTIFIED IN MAKING ASSESSMENT U/S 143(3) OF THE ACT AND PRAYED TO QUASH THE SAME. 12. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE AO AND OPPOSED THE ARGUMENTS MADE BY THE LD. COUNSEL FOR T HE ASSESSEE. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AT THE OUTSET, WE MAY POINT OUT THAT UNDER 1922 ACT , A BEST JUDGMENT ASSESSMENT WAS ALSO PROVIDED FOR U/S 23 BUT WAS N OT GIVEN AN INDEPENDENT HEAD. UNDER THE PRESENT ACT IT HAS GIVEN INDEPENDE NT CLASSIFICATION, NAMELY, SECTION 144, AS DISTINGUISHED FROM OTHER SECTIONS O F ASSESSMENT DEALT WITH IN SECTION 143. UNDER THE BEST JUDGMENT ASSESSMENT, TH E ITO COULD DETERMINE THE TAX PAYABLE BY THE ASSESSEE AND NO MORE UNDER T HE 1922 ACT, WHEREAS IN THE PRESENT ACT, THE AO IS EMPOWERED NOT ONLY TO D ETERMINE THE TOTAL INCOME, BUT ALSO THE LOSS AND DETERMINE THE SUM PA YABLE BY THE ASSESSEE OR REFUNDABLE TO THE ASSESSEE, AS THE CASE MAY BE, ON THE BASIS OF SUCH ASSESSMENT.THE ASSESSMENT I.E. BEST JUDGMENT ASSESS MENT IS A DISTINCT PROCEDURE ASSUMED BY TAX LAW. FOR THE SAKE OF CONV ENIENCE, WE REPRODUCE SECTION 144 OF THE INCOME-TAX ACT, 1961, HEREINBELO W: ITA NO.75 & 84(ASR)/2012 14 SECTION 144 (1) IF ANY PERSON- (A) FAILS TO MAKE THE RETURN REQUIRED {UNDER SUB-SE CTION(1) OF SECTION 139] AND HAS NOT MADE A RETURN OR A REVISED RETURN UNDER SUB-SECTION (4) OR SUB-SECTION(5) OF THAT SEC TION, OR (B) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB- SECTION(1) OF SECTION 142 [ OR FAILS TO COMPLY WITH A DIRECTION ISSUED UNDER SUB-SECTION (2A) OF THAT SECTION] OR (C) HAVING MADE A RETURN, FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (2) OF SECTION 143. THE ASSESSING OFFICER, AFTER TAKING INTO ACCOUNT AL L RELEVANT MATERIAL WHICH THE ASSESSING OFFICER HAS GATHERED, [SHALL, A FTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, MAKE THE AS SESSMENT] OF THE TOTAL INCOME OR LOSS TO THE BEST OF HIS JUDGMENT AN D DETERMINE THE SUM PAYABLE BY THE ASSESSEE ON THE BASIS OF SUCH ASSESS MENT 14. FROM THE READING OF THE PROVISIONS OF SECTION 1 44, IT IS EVIDENT THAT ONE OF THE THREE DEFAULTS REQUIRES THE AO TO PROCEE D TO MAKE BEST JUDGMENT ASSESSMENT I.E. FIRSTLY WHERE THE ASSESSEE FAILS T O MAKE ANY RETURN U/S 139(1), 139(4) OR 139(5) BEFORE MAKING ASSESSMENT. SECONDLY, WHERE THE ASSESSEE HAS FAILED TO PRODUCE ACCOUNTS, DOCUME NTS, INFORMATION OR A STATEMENT OF ASSETS AND LIABILITIES AS REQUIRED IN SECTION 142(1), FOR THE PRODUCTION OF WHICH THERE IS A PROPER REQUISITION, OR THIRDLY, WHERE THE ASSESSEE, HAVING MADE A RETURN FILED, FAILS TO ATTE ND BEFORE THE AO AND TO PRODUCE OR CAUSE TO BE PRODUCED DOCUMENTS OR EVIDEN CE AS REQUIRED BY SECTION 143(2) OF THE ACT. 15. APART FROM THE GENERAL CONDITIONS FOR INVOKIN G SECTION 144, THE IMPORTANCE OF PROVISO TO SECTION 144 IS IN REQUIRIN G ANY OPPORTUNITY TO THE ITA NO.75 & 84(ASR)/2012 15 ASSESSEE BY A NOTICE CALLING UPON THE ASSESSEE TO S HOW CAUSE, WHY ASSESSMENT SHOULD NOT BE MADE TO THE BEST OF JUDGME NT. IN THE ABSENCE OF SUCH NOTICE, THE DEFAULT BY ITSELF IN COMPLYING WIT H STATUTORY NOTICE WILL NOT BE SUFFICIENT. THE CLEAR IMPORT OF THE ABOVE MENTIO NED PROVISIONS IS THAT, ON THE ASSESSEES COMMITTING ANY ONE OF THE ABOVE DEFA ULTS, THE AO IS BOUND TO MAKE AN ASSESSMENT TO THE BEST OF HIS JUDGMENT. IT WAS SO HELD BY THE HONBLE SUPREME COURT, IN THE CASE OF CIT VS. SEGU BUCHIAH SETTY, REPORTED IN 77 ITR 539 IN THE CONTEXT OF ANALOGOUS PROVISION S OF SECTION 23(4) OF 1922 ACT. 16. IN THE PRESENT CASE, THE ASSESSEE HAS FILED THE RETURN OF INCOME ONLY ON ESTIMATED BASIS AND THE AO HAS ALSO OBSERVED THAT T HE ASSESSEE WAS NOT MAINTAINING BOOKS OF ACCOUNT AND HAS NOT PRODUCED A NY EVIDENCE OF THE PURCHASE AND EXPENDITURE RELATING TO CONTRACT BUSIN ESS. THESE FACTS ARE REPRODUCED IN THE ORDER OF THE AO AT PAGE 2. HOWEVE R, THE AO MENTIONED THAT THE DETAILS AND EXPLANATIONS CALLED FOR WERE FURNISHED BY THE ASSESSEE AND THE CASE WAS DISCUSSED WITH THE ASSESSEE AT PAG E 1 OF THE ORDER. PROBABLY, THE AO IS CONFUSED AND IS MIS-CONCEIVED O F THE DETAILS AND EXPLANATIONS, WHICH WERE FURNISHED BEFORE THE AO AR E BEST KNOWN TO HIM. HOWEVER, IN THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT COMPLIED WITH THE TWO SITUATI ONS MENTIONED IN SECTION ITA NO.75 & 84(ASR)/2012 16 144 OF THE ACT I.E. THE ASSESSEE HAS NOT COMPLIED W ITH THE PROVISIONS OF SECTION 142(1) WHERE THE ASSESSEE HAS FAILED TO PRO DUCE ACCOUNTS, DOCUMENTS, INFORMATION AND STATEMENT OF ASSETS AND LIABILITIES. SECONDLY, HAVING MADE A RETURN FILED AND FAILS TO COMPLY WIT H ALL THE TERMS OF A NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT AND MOREOVER , AS PER PROVISIO TO SECTION 144 OF THE ACT, NO SHOW CAUSE NOTICE FOR MA KING EX-PARTE ASSESSMENT U/S 144 OF THE ACT HAS BEEN ISSUED TO THE ASSESSEE. THEREFORE, THE AO WAS REQUIRED TO MAKE BEST JUDGMENT ASSESSMENT U/S 144 O F THE ACT, WHICH IN FACT, HAS NOT BEEN MADE. THE AO PROCEEDED TO MAKE ASSESSM ENT U/S 143(3) OF THE ACT ON THE PREMISE THAT THE ASSESSEE HAS SUBMITTED SOME DETAILS AND EXPLANATIONS CALLED FOR WHICH IN FACT HAVE NOT BEEN FURNISHED IS A MATTER OF RECORD, AS RECORDED BY THE AO IN PARA 1 & 2 OF HIS ORDER. SUCH ASSESSMENT MADE U/S 143(3) IS LIABLE TO BE QUASHED. WE ACCORDI NGLY, DIRECT THE AO TO QUASH THE ASSESSMENT SO MADE BY THE AO. 16. IT IS PERTINENT TO MENTION EVEN IF THE ASSESSME NT HAS BEEN MADE U/S 143(3) OR IN A MANNER PROVIDED U/S 144 OF THE ACT, THE AO SHOULD HAVE INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT , WHICH HAS NOT BEEN DONE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AL SO, THE ASSESSMENT MADE BY THE AO IS BAD IN LAW AND IS DIRECTED TO BE QUASH ED. THUS, ADDITIONAL GROUNDS OF THE ASSESSEE MENTIONED HEREINABOVE ARE A LLOWED AND THE ITA NO.75 & 84(ASR)/2012 17 ASSESSMENT SO MADE IS DIRECTED TO BE QUASHED. THERE FORE, WE NEED NOT TO DECIDE THE OTHER GROUNDS RAISED BY THE ASSESSEE AND THAT BY THE REVENUE AND ACCORDINGLY, WE ALLOW THE APPEAL OF THE ASSESSEE AN D DISMISS THE APPEAL OF THE REVENUE. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I TA NO.75(ASR)/2012 IS ALLOWED AND THAT OF THE REVENUE IN ITA NO.84(ASR)/2 012 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23RD MARCH, 2015. SD/- SD/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23RD MARCH, 2015 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH.DES RAJ NAGPAL, JAMMU. 2. THE ADDL. CIT,RANGE-1, JAMMU. 3. THE CIT(A), JAMMU. 4. THE CIT, JAMMU. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.