DCIT, Jaipur V. K.B.S. ENTERPRISES, Jaipur

ITA 794/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5420 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 25-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA CIT ASSESS
• Keywords: Depreciation; Opportunity of being heard
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 794/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2010-11 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR. CUKE VS. M/S K.B.S. ENTERPRISES, 5A, DAYAL NAGAR, GOPALPURA BYEPASS, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAIFK 5727 G VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI O.P. BHATEJA (ADDL.CIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : NONE (NOTICE RETURNED UNSERVED) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 18/02/2016 MN?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 29/02/2016 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 12/09/2014 PASSED BY THE LEARNED CIT (A)-II, JAIPUR FOR A.Y. 2010-11. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED IN ESTIMATING THE NP RATE @ 8% OF TOTAL CONTRACTS RECEIPTS WHEREAS IN THE CASE OF M/S CHOUDHARY & BROTHERS BEING SIMILAR ITA 794/JP/2014_ DCIT VS. M/S KBS ENTERPRISES 2 CASE THE HONBLE ITAT (ITA NO. 1177/JP/2010) HAS UPHELD N.P. RATE OF 11.5% OF TOTAL CONTRACT RECEIPT S AS APPROPRIATE. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF DELAYED PAYMENT IN ESI AND PF ACCOUNT INSPITE OF THE FACT THAT THE ASSESSEE FAILED TO DEPOSIT THE SAME BEFORE THE PRESCRIBED DUE DATES OF RELEVANT ACTS/RULES IN TERM S OF SECTION 36(1)(VA) R.W.S. 2(24)(X) OF THE I.T. ACT , 1961. 2. THE FIRST GROUND OF REVENUES APPEAL IS AGAINST D ELETING THE ADDITION MADE BY THE ASSESSING OFFICER BY APPLYING THE NP RATE @ 11% BY APPLYING THE COMPARABLE CASE OF M/S CHOUDHARY & BROTHERS. THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS A C IVIL CONTRACTOR. THE FIRM HAS FILED RETURN ON 25/9/2010 DECLARING TOTAL INCOME OF RS. 43,33,460/-. THE CASE WAS SCRUTINIZED U/S 143(3) OF T HE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE LD ASSESSING OFFI CER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THE BASIS OF GP DISCL OSED BY THE ASSESSEE AS WELL AS COMPARABLE CASE OF M/S CHOUDHARY & BROTHE RS VS. ADDL.CIT IN ITA NO. 1177/JP/2010. THE ASSESSING OFFICER ALSO REJECTED THE BOOKS U/S 145(3) OF THE ACT ON THE BASIS THAT NO PROPER B ILL VOUCHERS HAVE BEEN MAINTAINED. SOME OF THE PAYMENTS WERE MADE IN C ASH, WHICH ARE NOT VERIFIABLE. NO BOOKS OF ACCOUNT FOR EACH OF THE CONTRACT HAD BEEN MAINTAINED. DAY TO DAY STOCK REGISTER AND QUANTITY REGISTER HAS NOT ITA 794/JP/2014_ DCIT VS. M/S KBS ENTERPRISES 3 BEEN MAINTAINED BY THE ASSESSEE. THE ASSESSEE ALSO R EPLIED BEFORE THE ASSESSING OFFICER. AFTER CONSIDERING THE ASSESSEES REPLY, HE HELD THAT THE ASSESSEES INCOME CANNOT BE DEDUCTED ON THE BAS IS OF BILL VOUCHERS/BOOKS OF ACCOUNT MAINTAINED BY IT, THEREFO RE, HE APPLIED PROVISIONS OF SECTION 145(3) OF THE ACT BY RELYING ON THE DECISION IN THE CASE OF S.N. NAMASIVAYAM CHETTIAR VS. CIT 38 ITR 579 AND VED PRAKASH VS. CIT 191 CTR 168/210 ITR 486. HE ALSO RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. BRITISH INDIA PAINTS LTD. 188 ITR 44. AFTER CONSIDERING THE M/S CHOUDHARY & BR OTHERS CASE COMPARABLE, THE LD ASSESSING OFFICER APPLIED 10% NE T PROFIT RATE ON TOTAL CONTRACT RECEIPTS SUBJECT TO DEDUCTION ON ACC OUNT OF FINANCIAL CHARGES, DEPRECIATION, INTEREST AND REMUNERATION TO THE PARTNER BUT THE INTEREST INCOME ON FDR OF RS. 2,43,774/- WAS ASSESSE D SEPARATELY. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASS ESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A), WHO HAD ALLOWED THE ASSESSEES APPEAL BY OBSERVING AS UN DER:- 2.3.2 WITH RESPECT TO ESTIMATION OF NET PROFIT, T HE ASSESSING OFFICER HAS APPLIED A NET PROFIT RATE OF 10% OF GRO SS CONTRACT RECEIPTS BEFORE DEDUCTION OF FINANCIAL CHA RGES, DEPRECIATION AND INTEREST AND REMUNERATION TO PARTN ERS BY RELYING UPON THE JUDGEMENT IN THE CASE OF CHOUDH ARY ITA 794/JP/2014_ DCIT VS. M/S KBS ENTERPRISES 4 & BROTHERS VS. ADDL. CIT, WHEREIN THE ITAT, JAIPUR (IT A NO. 1177/JP/2010) HAS APPLIED N.P. RATE OF 11.5% IN THE CASE OF THE ABOVE CIVIL CONTRACTOR. 2.3.3. THE APPELLANT HAS DISTINGUISHED THE FACTS OF ITS CASE WITH THE FACTS OF THE CASE OF CHOUDHARY & BROTHERS PRIMA RILY ON THE BASIS OF NATURE OF BUSINESS, VOLUME OF BUSIN ESS AND OTHER PARAMETERS. IN THIS CASE, THE BOOKS OF ACCOUNTS HAVE BEEN CORRECTLY REJECTED BY THE ASSESS ING OFFICER AND THE NET PROFIT RATE OF THE APPELLANT IS LESS THAN THE PRECEDING TWO YEARS. ALSO, IN A.Y. 2009-10, THE COUNSEL OF THE APPELLANT HAS HIMSELF ACCEPTED A NET PROFIT RATE OF 8% OF THE GROSS RECEIPTS PRIOR TO DEDUCTION OF FINANCIAL CHARGES, DEPRECIATION AND INTEREST AND REMUNERATION TO PARTNERS. THE REASONS GIVEN BY THE APPELLANT FOR DECREASE IN THE NET PROFIT RATE AS CO MPARED TO THE PRECEDING YEAR ARE GENERAL IN NATURE VIZ DUE TO INCREASE IN TURNOVER, EXECUTION OF WORK ALLOTTED IN PRECEDING YEAR ETC. SUCH CONDITIONS OF INCREASE IN TURNOVER AND COMPLETION OF WORK OF PRECEDING YEARS WA S ALSO EXISTENT IN A.Y. 2009-10. KEEPING IN VIEW, THE ABOVE DISCUSSION, THE DEFECTS IN THE BOOKS OF ACCOUNTS AN D THE PAST HISTORY OF THE APPELLANT, THE NET PROFIT IS ES TIMATED AT 8% OF THE GROSS RECEIPTS PRIOR TO DEDUCTION OF F INANCIAL CHARGES, DEPRECIATION AND INTEREST AND REMUNERATION TO PARTNERS, AS IN A.Y. 2009-10. THIS WILL RESULT IN SUS TAINING AN ADDITION OF RS. 12,38,043/-. THE BALANCE ADDITION IS ITA 794/JP/2014_ DCIT VS. M/S KBS ENTERPRISES 5 DELETED. GROUND NOS. 2, 3 AND 6 ARE PARTLY ALLOWED A ND GROUND NOS. 4 & 5 ARE ALLOWED. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR SUPPORTED THE ORDER OF THE LD. ASSESSING OFFICER AND ARGUED T HAT THE LD CIT(A) HAS CONFIRMED THE REJECTION OF BOOKS U/S 145(3) OF THE ACT BUT COMPARABLE CASE CITED BY THE ASSESSING OFFICER HAS NOT BEEN CO NSIDERED IN CONFIRMING THE PARTLY ADDITION IN CASE OF ASSESSEE. THEREFORE, HE REQUESTED TO CONFIRM THE ORDER OF THE ASSESSING OFF ICER. 5. NO ONE APPEARED ON BEHALF OF THE ASSESSEE, THERE FORE, WHATEVER EVIDENCE AND ARGUMENT SUBMITTED BEFORE THE LD CIT(A) HAS BEEN CONSIDERED TO DECIDE THE APPEAL. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE RE JECTION OF BOOKS OF ACCOUNT HAD BEEN CONFIRMED BY THE LD CIT(A) IS JUSTI FIED AND THE NP RATE APPLIED IS REASONABLE @ 8% AGAINST THE APPLICAT ION OF THE NP RATE @ 10% BY THE LD ASSESSING OFFICER. THE PAST HISTORY ALSO CONSIDERED BY THE LD CIT(A) I.E. IN A.Y. 2008-09, THE ASSESSEE HAD SHOWN NP RATE @ 6.87% AND IN A.Y. 2009-10, IT HAS BEEN SHOWN NET PRO FIT @ 7.24% WHERE ALSO THE ASSESSING OFFICER APPLIED NP RATE @ 8 %. THE ASSESSEE ITA 794/JP/2014_ DCIT VS. M/S KBS ENTERPRISES 6 HAS SHOWN NP RATE @ 6.73% DURING THE YEAR UNDER CONS IDERATION. HE HAS JUSTIFIED THE REASONS FOR DECLINE OF NET PROFIT RATE COMPARED TO PRECEDING YEAR BUT IT IS UNDISPUTED FACT THAT PART PAYMENTS WERE MADE IN CASH AND THE RAW MATERIAL PURCHASE FOR COMPLETE THE CONSTRUCTION WORK EITHER TAKEN FROM THE LOCAL AREA AND LABOURERS ALSO PAID IN CASH WHICH REQUIRED SOME DISALLOWANCES AS WHATEVER EXPENSES CLAIMED BY THE ASSESSEE ARE NOT SUBJECT TO VERIFICATION. THEREF ORE, WE UPHOLD THE ORDER OF THE LD CIT(A) AND 8% NET PROFIT RATE APPLIE D BY HIM IS REASONABLE. THUS, WE DISMISS THE REVENUES APPEAL ON THIS GROUND. 7. THE SECOND GROUND OF THE REVENUES APPEAL IS AGAI NST ALLOWING THE DELAYED PAYMENT ON ACCOUNT OF ESI AND PF. THE L D ASSESSING OFFICER HAD TABULATED THE PAYMENTS MADE TOWARDS EMPLOYEES CO NTRIBUTION ACCOUNT ON PAGE NO. 8 OF THE ASSESSMENT ORDER. HE D ISALLOWED THESE PAYMENTS IN TERMS OF PROVISIONS OF SECTION 36(1)(VA ) READ WITH SECTION 2(24)(X) OF THE ACT. ACCORDINGLY, HE DISALLOWED RS. 19,080/- ON ACCOUNT OF ALLEGED PAYMENTS MADE. THE LD CIT(A) HAS ALLOWED TH E APPEAL ON THE GROUND THAT THE ASSESSEE HAD MADE PAYMENTS FOR ALL THE OUTSTANDING OF ESI AND PF ON DUE DATE OF FILING OF THE RETURN U/S 139(1) OF THE ACT. VARIOUS RULINGS ARE IN FAVOUR OF THE ASSESSEE THAT IF THE ASSESSEE IS PAID THESE PAYMENTS BEFORE DUE DATE OF RETURN, IS ALLOWAB LE DEDUCTION. WE ITA 794/JP/2014_ DCIT VS. M/S KBS ENTERPRISES 7 ALSO CONCUR WITH THE FINDINGS OF THE LD CIT(A) THAT H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. UDAIPUR DUGDH UTPA DAK SAHAKARI SANGH LTD. (2014) 366 ITR 163 (RAJ) HAS HELD THAT IF THE PAYMENTS MADE BEFORE DATE OF FILING OF RETURN ARE ALLOWABLE. BY RESPECTFULLY FOLLOWING THE HONBLE JURISDICTIONAL HIGH COURT DECI SION IN VARIOUS CASES, WE ALSO UPHOLD THE ORDER OF THE LD CIT(A). ACCORDINGL Y, THIS GROUND OF THE REVENUES APPEAL IS ALSO DISMISSED. 8. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 29/02/2016. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 29 TH FEBRUARY, 2016 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE DCIT, CIRCLE-6, JAIPUR 2. IZR;FKHZ @ THE RESPONDENT- M/S K.B.S. ENTERPRISES, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 794/JP/2014) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR