ACIT, Jaipur V. M/S LADDURAM BABULAL, Jaipur

ITA 789/JPR/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7828 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 04-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ADJ APPLICATION REJE CTED

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JAIPUR BENCH JAIPUR BEFORE SHRI SHAILEND RA K UMAR YADAV, JUDICIAL MEMBER, AND SHRI B. C. MEENA , ACCOUNTANT MEMBER . ITA.NO. 7 89 /JP /20 1 2 (ASSESSMENT YEAR: 200 9 - 1 0 ) ASSTT. COMMISSIONER OF INCOME - TAX, CIRCLE - 7, JAI PUR APPELLANT VS. M/S. LADDURAM BABULAL MAL KI DHANI, SANGANER, JAIPUR RESPONDENT PAN: A A C FL9622M / BY APPELLANT : SHRI KAILASH MANGAL , D.R. / BY RESPONDENT : ADJ. APPLICATION REJECTED / DATE OF HEARING : 01 .1 2 .2014 / DATE OF PRONOUNCEMENT : 5 .1 2 .2014 ORDER PER SHAILENDRA KUMAR YADAV, J . M: THIS APPEAL HAS BEEN FILED BY THE REVENU E AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - III , JAIPUR , DATED 27 . 0 7 .201 2 FOR A.Y. 200 9 - 1 0 ON THE FOLLOWING GROUND: I.T .A. NO. 7 8 9 / JP /2 0 1 2 A.Y. 200 9 - 1 0 ( AC IT VS. M/S LADDURAM BABULAL ) PAGE 2 I . THE ORDER OF THE CIT(A) IS PERVE RSE IN RESTRICTING THE REASONED DISALLOWANCE OF RS.26,95,162/ - OUT OF EXPENSES, MADE SPECIFICALLY AND IN DIRECTING THE ADOPTION OF N.P. RATE OF 7.63%. II . THE CIT(A) S ORDER IS PERVERSE AS SPECIFIC DEFECTS, IN CASE OF NON - GENUINE AND NON - VERIFIABLE PURCHAS ES HAVE BEEN IGNORED, IN PREFERENCE TO ARBITRARILY ADOPTED N.P. RATE OF 7.63% ONLY. III. THE CIT(A) HAS ERRED IN ASSUMING THAT THE N.P. RATE OF 7.63% WOULD SUFFICE, IN THE FACTS AND CIRCUMSTANCES OF UNVERIFIED PURCHASES, DETAILED BY THE AO. 2. ASSESSEE I S A CIVIL CONTRACTOR AND WORKS UPON CONTRACTS GIVEN BY RAJASTHAN HOUSING BOARD AND JAIPUR DEVELOPMENT AUTHORITY. ASSESSING OFFICER MADE TRADING ADDITION OF RS.26,95,162/ - BY OBSERVING AS UNDER: THE ASSESSEE IS A CIVIL CONTRACTOR AND WORKS UPON CONTRACTS G IVEN BY RAJASTHAN HOUSING BOARD AND JAIPUR DEVELOPMENT AUTHORITY. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN A NET PROFIT OF RS.39,59,903/ - (AT 7.56%) ON GROSS RECEIPTS OF RS.5,24,40,337/ - AS COMPARED TO A NET PROFIT OF RS.26,20,979/ - (AT 7.63%) ON GROSS RECEIPTS OF RS.3,40,90,719/ - . THERE IS DECREASE IN THE NET PROFIT RATE. WHILE EXAMINING THE BOOKS OF ACCOUNTS, IT WAS NOTICED THAT THE ASSESSEE HAD NOT BEEN MAINTAINING STOCK REGISTER AND THAT THE INVENTORIED VALUATION OF CLOSING AND OPE NING STOCK WAS NOT AVAILABLE. IT WAS FURTHER NOTICED THAT FOR THE PURCHASES OF STONES, BAJRI, CONCRETE AND BRICKS, NO BILLS WERE AVAILABLE . ON BEING ASKED FOR JUSTIFICATION, THE ASSESSEE SUBMITTED THE FOLLOWING VIDE HIS SUBMISSIONS DATED 05.12.2011 AND 0 8.12.2011. THE ASSESSEE S REPLY WAS CONSIDERED BUT WAS NOT FOUNT ACCEPTABLE. IN VIEW OF THE ABSENCE OF BILLS FOR PURCHASE AND A PERUSAL OF THE COPY OF CERTIFICATED FORM OF THE I.T .A. NO. 7 8 9 / JP /2 0 1 2 A.Y. 200 9 - 1 0 ( AC IT VS. M/S LADDURAM BABULAL ) PAGE 3 MINING AND SALES DEPARTMENT ALONG WITH THE RECEIPTS OF PAYMENT OF VAT, THE FOLLOWING CAME TO THE FORE: A. THE ASSESSEE WAS ASKED TO PRODUCE ALL THE WORK ORDER STATEMENT. HOWEVER, THE ASSESSEE PRODUCED ONLY 2 WORK ORDERS FOR CONSTRUCTION OF HIG B (DUPLEX) 09 NO. OF HOUSES AT SECTOR 26, ZONE I AND MIG B (DUPLEX ) 07 NO. OF HOUSES AT SECTOR 26, ZONE VII ONLY, THOUGH THE COPY OF CERTIFICATES FROM BOTH THE MINING AND SALES TAX DEPARTMENTS WERE ALSO FOR ZONE II, IX ETC. THIS DID NOT HELP IN DISCERNING A FULL PICTURE OF THE TOTAL WORK DONE BY THE ASSESSEE DURING THE YEAR. B. THE CERTIFICATES FOR EACH ZONE SPOKE ABOUT ISSUANCE OF CERTAIN QUANTITIES OF STONES, CONCRETE AND BAJRI FOR CERTAIN PERIODS WHICH RANGED OVER BOTH THE FINANCIAL YEARS 2008 - 09 AND 2009 - 10. THIS DID NOT VERIFY THE PURCHASES MADE FOR THE ASSESSMENT YEAR 2009 - 10 FULLY. BIFURCATION OF THE ISSUANCES BY THE MINING DEPARTMENT COULD NOT BE DONE BY THE ASSESSEE. C. ONE OF THE CERTIFICATES OF RECONSTRUCTION OF MIG B (DUPLEX) 07 NO. OF HOUSES AT SECTOR 26, ZONE III AT PRATAP NAGAR, SANGANER WAS CANCELLED. T HE ASSESSEE WAS ASKED ABOUT THIS FOR WHICH NO REPLY WAS GIVEN TO ME. D. FURTHER, CERTIFICATES PROVING THE USE OF BAJRI, CONCRETE AND STONES IN CONSTRUCTION OF MIG B (DUPLEX) 07 NO. OF HOUSES AT SECTOR ZONE III AND ZONE IV HAVE THE SAME FIGURES OF BAJRI, ST ONES, CONCRETE, ETC. IN TONS. MOREOVER, THE DATES FOR CONSTRUCTION ARE SIMILAR. IN CASE OF NON - PRODUCTION OF WORK ORDER STATEMENTS FOR THESE ZONES, THE VERACITY OF THE PURCHASES REMAINED UNCLEAR. E. ALSO, THE COPIES OF RECEIPTS OF VAT AND ROYALTY PAYMENTS COVER THE MONTH OF MARCH, 2009 ONLY. NO DESCRIPTION OF GOODS TRANSPORTED WAS GIVEN EXCEPT FOR TWO ON WHICH BAJRI WAS WRITTEN. EVEN THE WEIGHTS WERE NOT INDICATED. THE POINT OF CONTENTION IS NOT THAT THE ASSESSEE DID NOT PURCHASE BAJRI, CONCRETE, STONES AND BRICKS, BUT THAT THE PURCHASES MADE ARE NOT VERIFIABLE WITH SUPPORTING BILLS AND VOUCHERS WHICH GIVES IT THE CHARACTER OF BEING NON - GEN U INE OR BEING INFLATED. I.T .A. NO. 7 8 9 / JP /2 0 1 2 A.Y. 200 9 - 1 0 ( AC IT VS. M/S LADDURAM BABULAL ) PAGE 4 IN VIEW OF THE ABOVE, OUT OF TOTAL PURCHASES OF CONCRETE (OF RS.20,44,049/ - ); OF STONES (OF R S.46,99,140/ - ): OF BAJRI (OF RS.48,21,500/ - ) AND OF BRICKS (OF RS.19,11,123/ - ) 20% ARE TREATED TO BE NON - GENUINE AND NON - VERIFIABLE. THE TOTAL ADDITION ON THIS ACCOUNT WILL BE RS.26,95,162/ - . PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED SEPARATELY. 2.3 MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE. HAVING CONSIDERED THE SUBMISSION ON BEHALF OF ASSESSEE, CIT(A) DIRECTED THE ASSESSING OFFICER TO RESTRICT THE ESTIMATION OF INCOME BY A DOPTING THE NP RATE AT 7.63% ONLY, AS AGAINST THE MULTIPLE ADDITIONS OF RS.26,95,162/ - , MADE IN THIS REGARD. 2.4 LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF ASSESSING OFFICER AND SUBMITTED THAT CIT(A) WAS NOT JUSTIFIED IN ARBITRARY ADOPTING THE NP RATE AT 7.63%. CIT(A) ERRED IN ASSUMING THE NP RATE 7.63% WAS SUFFICE IN FACTS AND CIRCUMSTANCES OF CASE, WHICH IS NOT CORRECT. ACCORDINGLY, ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. NONE ON BEHALF OF ASSESSEE. HOWEVER , THEY HAVE MOVED APPLICATION FOR ADJOURNMENT ON THE GROUND THAT COUNSEL OF ASSESSEE WHO IS LOOKING AFTER THE MATTER IS OUT OF STATION FOR HIS PERSONAL WORK. WE DO NOT FIND ANY MERIT IN ADJOURNMENT PETITION, SO, REJECTING THE SAME, MATTER IS BEING DECIDED ON THE BASIS OF ARGUMENT OF LD. DEPARTMENTAL REPRESENTATIVE AND MATERIAL ON RECORD. 2.5 AFTER GOING THROUGH THE SUBMISSION OF LD. DEPARTMENTAL REPRESENTATIVE AND MATERIAL ON RECORD, WE FIND THAT ASSESSEE IS I.T .A. NO. 7 8 9 / JP /2 0 1 2 A.Y. 200 9 - 1 0 ( AC IT VS. M/S LADDURAM BABULAL ) PAGE 5 A CIVIL CONTRACTOR AND IN CURRENT YEAR HE HAS S HOWN NP RATE AT 7.56% ON TURN OVER OF RS.5,24,40,337/ - , WHEREAS IN EARLIER YEAR, IT WAS FOUND AT 7.63% AT TURN OVER OF RS.3,40,90,719/ - . IN THE YEAR UNDER CONSIDERATION, ASSESSING OFFICER MADE AN ADHOC ADDITION OF RS.26,95,162/ - ON MULTIPLE BASIS BEING 20 % OF EXPENSES CLAIMED, PURCHASES OF RAW MATERIALS LIKE CONCRETES RS.20,44,049/ - , STONES RS.46,99,140/ - , BAZARI RS.48,21,500/ - AND BRICKS RS.19,11,123/ - ETC., AS ASSESSEE WAS FOUND NOT MAINTAINING STOCK REGISTER AND ALSO PROPER DETAILS AND SUPPORTING VOUCHE RS IN THIS REGARD. ASSESSING OFFICER POINTED SPECIFIC DEFECTS IN BOOKS OF ACCOUNTS LIKE NON MAINTENANCE OF STOCK REGISTER, LACK OF PROPER SUPPORTING BILLS AND VOUCHERS ETC. SHE ALSO GAVE HER SPECIFIC FINDING THAT DUE TO ABOVE ASPECTS, PURCHASES AND TRADIN G RESULTS WERE NOT VERIFIABLE. SO, ASSESSING OFFICER RIGHTLY REJECTED THE BOOKS OF ACCOUNT AS SAME WERE FOUND UNRELIABLE. IN THIS BACKGROUND, ASSESSING OFFICER RIGHTLY APPLIED PROVISIONS OF SECTION 1 45(3) AND HAVING DONE SO, CIT(A) WENT AHEAD WITH REGARD S TO VALIDITY OF MULTIPLE TRADING ADDITIONS. ASSESSING OFFICER HAS MADE GROSS TRADING ADDITION OF RS.26,95,162/ - REPRESENTING THE MULTIPLE ADDITONS IN THE FORM OF PARTIAL DISALLOWANCES OF VARIOUS PURCHASES AS CLAIMED BY ASSESSEE. HAVING FOUND SPECIFIC DE FECTS IN MAINTENANCE OF BOOKS OF ACCOUNT, THE CIT(A) FOUND THAT IN SIMILAR SET OF FACTS ITAT, JAIPUR BENCH, IN CASE OF M/S CHOUDHARY & BROTHERS WHILE DECIDING THE ABOVE APPEAL FOR A.Y. 2007 - 08 IN ITA NO. 1177/JP/2010 HAS DEALT THE SIMILAR ISSUE AS UNDER: I.T .A. NO. 7 8 9 / JP /2 0 1 2 A.Y. 200 9 - 1 0 ( AC IT VS. M/S LADDURAM BABULAL ) PAGE 6 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE IN ITS APPEAL: - THE LD. COMMISSIONER OF INCOME TAX(APPEAL) HAS ERRED IN FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.13994870/ - OUT OF VARIOUS EXPENSES BEING 10% OF SUCH EXPENSES AND ALS O DISALLOWING THE CLAIM OF WAGES OUTSTANDING AS FOLLOWS: - WAGES 2489621/ - REPAIR & MAINTENANCE 504190/ - DIESEL & PETROL EXPENSES 2426714/ - FREIGHT EXPENSES 230022/ - OUTSTANDING LIABILITIES (WAGES PAYABLE) 5914632/ - JOB WORK EXPENSES 763075/ - H IRE CHARGES 1666616/ - --------------- TOTAL 13994870/ - 6. AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN THIS GROUND IN PART. UNDISPUTEDLY SO MANY DISCREPANCIES WERE N OTED BY THE AO AND BOOKS OF ACCOUNT WERE NOT MAINTAINED PROPERLY. THEREFORE, THOUGH THE AO HAS NOT MENTIONED SPECIFICALLY IN HIS ORDER THAT THE PROVISIONS OF SECTION 145(3) ARE ATTRACTED B UT THE MISTAKE AND THE METHOD OF MAINTENANCE OF BOOKS OF ACCOUNT AR E SUCH WHICH IMPLIEDLY SHOWS THAT PROVISIONS OF SECTION 145(3) ARE ATTRACTED. IN IMMEDIATELY PRECEDING YEAR ALSO THE TRIBUNAL WHILE DECIDING THE APPEAL IN ITA NO. 583/JP/2009 DATED 30.09.2010 HAS HELD THAT PROVISIONS OF SECTION 145(3) ARE APPLICABLE ON TH E FACTS OF THE PRESENT CASE. THE TRIBUNAL IN EARLIER YEAR HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO BUT AFTER CONSIDERING THE DISCREPANCIES IN THE BOOKS OF ACCOUNT AND VOUCHERS AND THE CONTENTIONS OF THE LD. A/R THAT NO USEFUL PURPOSE WILL BE SERVED A S THE MATTER IS SENT BACK TO THE AO. THEREFORE, THE ADDITION SUSTAINED BY LD. CIT(A) SHOULD BE ALLOWED REASONABLY. 7. IN THIS BACK GROUND OF THE CASE, WE ARE OF THE VIEW THAT THIS ISSUE SHOULD BE DECIDED HERE ITSELF. I.T .A. NO. 7 8 9 / JP /2 0 1 2 A.Y. 200 9 - 1 0 ( AC IT VS. M/S LADDURAM BABULAL ) PAGE 7 8. IT IS SEEN THAT N.P. RATE SHOWN B Y ASSESSEE DURING THE YEAR IS 10.07% AGAINST 10.82% IN IMMEDIATELY PRECEDING YEAR. THEREFORE, WE ARE OF THE VIEW THAT INSTEAD OF DISALLOWING VARIOUS EXPENSES UNDER THE INDIVIDUAL HEAD, IT WILL BE BETTER IF A REASONABLE NET PROFIT RATE IS APPLIED. KEEPING IN MIND THE PAST HISTORY OF THE CASE AND DEFECTS NOTED BY AO, WE ARE OF THE VIEW OF THAT IF A N.P. RATE OF 11.5% IS APPLIED THEN IT WILL MEET THE ENDS OF JUSTICE. ACCORDINGLY, THE AO IS DIRECTED TO RE - COMPUTE THE PROFIT BY APPLYING N.P. RATE OF 11.5% AGA INST N.P. RATE OF 10.07% SHOWN BY ASSESSEE. FOR THE SAKE OF CLARIFICATIONS, THE LD. COUNSEL OF THE ASSESSEE HAS STATED THAT INSTEAD OF DISALLOWING EXPEN S ES HEAD - WISE, A REASONABLE N.P. RATE SHOULD BE APPLIED. THIS CONTENTION OF THE ASSESSEE IS REASONABLE . ACCORDINGLY WE DIRECT THE AO TO APPLY N.P. RATE OF 11.5% MENTIONED ABOVE. THIS GROUND OF THE ASSESSEE IS ALLOWED IN PART. CIT(A) OBSERVED THAT JAIPUR BENCH IN CASE OF M/S CHOUDHARY & BROTHERS (SUPRA) HAS DISAPPROVED THE MULTIPLE ADDITIONS. IN VIEW O F ABOVE FACTUAL AND LEGAL POSITION WHICH ALSO APPLIES TO THE FACTS OF PRESENT CASE . A CCORDINGLY, CIT(A) REJECTED THE MULTIPLE ADDITIONS MADE BY ASSESSING OFFICER. HAVING REJECTED THE BOOK RESULT, CIT(A) HELD FOR ESTIMATION OF INCOME LOOKING FROM THE PAST HISTORY, IT WAS FOUND THAT ASSESSEE HAS ADMITTED NP RATE AT 7.63% IN PREVIOUS YEAR WHEREAS IN CURRENT YEAR SAME HAS BEEN OFFERED AT 7.56% ONLY. THUS, IN VIEW OF ABOVE BACKGROUND, CIT( A) APPLIED NP RATE OF PREVIOUS YEAR I.E. 7.63% IN CURRENT YEAR AND ASSE SSING OFFICER WAS DIRECTED TO RESTRICT THE ESTIMATION OF INCOME BY ADOPTING NP RATE AT 7.63% ONLY AS AGAINST MULTIPLE ADDITION OF RS.26,95,162/ - MADE IN THIS REGARD AND ASSESSEE WAS GRANTED RELIEF ACCORDINGLY. THIS I.T .A. NO. 7 8 9 / JP /2 0 1 2 A.Y. 200 9 - 1 0 ( AC IT VS. M/S LADDURAM BABULAL ) PAGE 8 REASONED FACTUAL FINDING OF CIT(A), NEED S NO INTERFERENCE FROM OUR SIDE. SAME IS UPHELD. 3 . AS A RESULT, APPEAL FILED BY THE REVENU E IS DISMISSE D . PRONOUNCED IN THE OPEN COURT ON THIS THE 5 TH DAY OF DECEMBER , 2014. SD/ - SD/ - ( B. C. MEENA ) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY S.K.SINHA COPY FORWARDED TO: 1. THE APPELLANT - ACIT, CIRCLE - 7, JAIPUR 2. THE RESPONDENT - M/S LADDURAM BABULAL 3. THE CIT 4. CIT(APPEALS) 5. THE DR 6. GUARD FILE (ITA NO. 7 8 9 /JP/ 201 2 ) BY ORDER A.R., JAIPUR.