A.C.I.T., Circle-3(1), Gwalior V. Naresh Katare Contractor, Gwalior

ITA 8/AGR/2013

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0651 (ITAT-AGRA)
• Duration Of Justice: 6 year(s) 4 month(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-05-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 03-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Business income; Depreciation; TDS
• Section: 40(b)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 08/AGRA/2013 ASSTT. YEAR : 2009-10 A.C.I.T., CIRCLE 3(1) VS. NARESH KATARE CONTRAC TOR, GWALIOR. SINGHPUR ROAD, MORAR, GWALIOR. (PAN : AAFFN 3404 N) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI WASEEM ARSHAD, SR. D.R. RESPONDENT BY : SHRI RAJENDRA SHARMA, ADVOCATE DATE OF HEARING : 01.05.2013 DATE OF PRONOUNCEMENT OF ORDER : 03.05.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), GWALIOR DATED 25.10.2012 FOR THE ASSESSMENT YEAR 20 09-10 ON THE FOLLOWING GROUND : WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION O F RS.51,00,549/- BY REDUCING THE NET PROFIT RATE FROM @12.5% TO 6%. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED RETURN OF INCOME DECLARING INCOME OF RS.19,20,210/-. THE ASSESSEE IS A PARTNERSHIP FIRM AND EARNED INCOME FROM CIVIL CONSTRUCTION ON CONTRACT BASIS FO R CONTRACTS RECEIVED FROM ITA NO. 08/AGRA/2013 2 GOVERNMENT AND SEMI-GOVERNMENT DEPARTMENTS. THE ASS ESSEE MAINTAINED MERCANTILE SYSTEM OF ACCOUNTING. DURING THE YEAR IT HAS ADMITTED A SUM OF RS.13,53,83,530/- IN THE PROFIT AND LOSS ACCOUNT TO WARDS CONTRACT RECEIPTS. THE AO ON CONSIDERATION OF THE EXPENDITURE FOUND THAT MAJO RITY OF THE EXPENSES ARE MADE IN CASH AND CERTAIN VOUCHERS WERE PRODUCED, BUT THE SAME WERE NOT AMENABLE FOR VERIFICATION AND NOT SUPPORTED BY ANY EVIDENCE. THE AO CONSIDERING THE DEFECTS IN THE VOUCHERS OF THE EXPENSES, REJECTED THE BOOK RES ULTS AND APPLIED PROFIT RATE OF 12.5% ON GROSS RECEIPTS SUBJECT TO ALLOWING DEDUCTI ON U/S. 40(B) AND DEPRECIATION AND COMPUTED THE INCOME OF ASSESSEE AT RS.1,32,23,5 61/-. THE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A) ON SEVERAL GROUNDS . THE WRITTEN SUBMISSION OF THE ASSESSEE IS INCORPORATED IN THE APPELLATE ORDER, IN WHICH THE ASSESSEE MAINLY EXPLAINED THAT HE MAINTAINED COMPLETE BOOKS, WHICH ARE AUDITED AND COMPLETE DETAILS INCLUDING BANK ACCOUNT, TDS AND PAYMENTS MA DE TO SUB-CONTRACTORS ALONG WITH BILLS AND VOUCHERS WERE FURNISHED. THEREFORE, REJECTION OF BOOKS OF ACCOUNT IS NOT JUSTIFIED. SINCE THE ASSESSEE HAS TO WORK IN DI FFERENT AND FAR OFF PLACES, THEREFORE, IN ITS URGENCY, THE WORKS HAD TO BE COMP LETED WITHIN THE SET TIME FRAME AND IT IS NOT POSSIBLE TO MAINTAIN ALL THE BILLS AN D VOUCHERS OF CIVIL CONSTRUCTION. THE ASSESSEE FILED COMPARATIVE CASES TO SHOW THAT P ROFIT RATE APPLIED @ 12.5% IS UNJUSTIFIED. THE LD. CIT(A), AS FAR AS THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS IS CONCERNED, CONFIRMED THE ORDER OF THE AO BECAUSE TH E ASSESSEE COULD NOT PRODUCE ITA NO. 08/AGRA/2013 3 SOME OF THE VOUCHERS FOR EXPENSES. HOWEVER, CONSIDE RING THE ORDERS PASSED BY THE AO IN VARIOUS OTHER COMPARABLE CASES, IN WHICH PROF IT RATE OF 6% OR LESSER HAS BEEN ACCEPTED IN SIMILAR TYPE OF BUSINESS, DIRECTED THE AO TO APPLY 6% PROFIT ON THE GROSS RECEIPTS AND CONFIRMED THE ADDITION OF RS .62,02,802/- AND THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED. IN VIEW OF THE ABO VE FINDINGS, THE LD. CIT(A) DELETED THE ADDITION OF RS.51,00,549/-, ON WHICH TH E REVENUE IS IN APPEAL. 3. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT WHILE DECIDING THE APPEAL OF THE ASSESSEE IN ITA NO. 567/AGRA/2012 FOR SAME ASSESSMENT YEAR 2009-10, THE TRIBUNAL GRANTED FURTHER RELIEF TO THE ASSESSEE AND THE APPEAL OF THE ASSESSEE HAS BEEN ALLOWED VIDE ORDER DATED 15.03.20 13, COPY OF WHICH IS PLACED ON RECORD. THE LD. DR DID NOT DISPUTE THIS FACT. 4. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF T HE VIEW THAT THE DEPARTMENTAL APPEAL IS LIABLE TO BE DISMISSED. ITAT, AGRA BENCH WHILE DECIDING THE APPEAL OF THE ASSESSEE FOR SAME ASSESSMENT YEAR VIDE ORDER DA TED 15.03.2013 (SUPRA) IN PARA 6 OF THE ORDER HELD AS UNDER : 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL AVAILABLE ON RECORD. THE ASSESSEE IN ASSES SMENT YEAR UNDER APPEAL, I.E., 2009-10 HAS SHOWN PROFIT RATE OF 1.53 % AFTER DEDUCTION OF INTEREST AND SALARY PAID TO THE PARTNERS. IN PRECED ING ASSESSMENT ITA NO. 08/AGRA/2013 4 YEARS 2007-08 AND 2008-09, THE ASSESSEE HAS DECLARE D PROFIT RATE OF 0.62% AND 1.73%. THE AO HAS ALLOWED DEDUCTION U/S. 40(B) AND DEPRECIATION IN A SUM OF RS.8,10,776/-, RS.13,67,63 8/- AND RS.15,20,966/- (TOTAL RS.36,99,380/-) WHILE COMPUTI NG THE INCOME OF ASSESSEE BY APPLYING PROFIT RATE OF 12.5%. THE LD. CIT(A) RIGHTLY CONSIDERING THE COMPARABLE CASES OF VARIOUS OTHER A SSESSEES IN WHICH THE AO HAS APPLIED PROFIT RATE OF 6% IN SIMILAR CIR CUMSTANCES, CORRECTLY FOUND THAT THE PROFIT RATE APPLIED BY THE AO WAS HIGHLY EXCESSIVE AND UNREASONABLE. SIMILARLY, THE AO HAS P OINTED OUT SPECIFIC DEFECTS IN MAINTENANCE OF VOUCHERS OF EXPE NSES, THEREFORE, IT IS CLEAR THAT THE ASSESSEE HAS INFLATED THE EXPENSE S. THEREFORE, THE REJECTION OF BOOKS OF ACCOUNT IS JUSTIFIED IN THE M ATTER AND FOR REJECTING THE BOOKS OF ACCOUNT, THE AO HAS INVOKED THE PROVISIONS OF SECTION 145(3) OF THE IT ACT. THEREFORE, THERE IS N O NEED TO TAKE UP ALL OTHER PROVISIONS OF LAW. THEREFORE, WE DO NOT FIND ANY REASON TO ADMIT THE ADDITIONAL GROUND OF APPEAL. HOWEVER, THE QUEST ION IS LEFT AS TO WHAT REASONABLE PROFIT HAS TO BE ESTIMATED IN THE F ACTS AND CIRCUMSTANCES OF THE CASE. THE LD. COUNSEL FOR THE ASSESSEE CLEARLY STATED THAT IN CASE REASONABLE NET PROFIT RATE IS A PPLIED, HE WOULD NOT CLAIM FURTHER DEDUCTION U/S. 40(B) AND DEPRECIATION ETC. CONSIDERING THE HISTORY OF THE ASSESSEE AS NOTED ABOVE, WE ARE OF THE VIEW THAT IT WOULD BE REASONABLE AND PROPER TO APPLY THE NET PRO FIT RATE OF 3% AGAINST ADMITTED RECEIPTS FOR THE PURPOSE OF COMPUT ING THE BUSINESS INCOME OF THE ASSESSEE AS AGAINST 6% PROFIT RATE AP PLIED BY THE LD. CIT(A) WITHOUT GIVING FURTHER DEDUCTION TO THE ASSE SSEE. WE, THEREFORE, MODIFY THE ORDERS OF THE AUTHORITIES BEL OW AND DIRECT THE AO TO APPLY NET PROFIT RATE OF 3% AGAINST ADMITTED RECEIPT OF THE ASSESSEE AND PROFIT WOULD BE ESTIMATED AT RS.40,61, 505/- AND AFTER DEDUCTING INCOME DECLARED BY THE ASSESSEE AT RS.19, 20,210/-, THE ADDITION WOULD BE MAINTAINED IN A SUM OF RS.21,41,2 95/-. WHILE TAKING THIS FIGURE, DEDUCTION CLAIMED BY THE ASSESS EE OF DEPRECIATION, SALARY PAID TO THE PARTNERS AND INTEREST ON CAPITAL SHALL BE TAKEN CARE OF TO WHICH PROPOSITION THE LD. COUNSEL FOR THE ASS ESSEE HAS ALSO AGREED. WE MAY NOTE HERE THAT LESSER NET PROFIT RAT E IS APPLIED IN THIS CASE FOR COMPUTING BUSINESS INCOME CONSIDERING THE EARLIER HISTORY OF ASSESSEE AND OBJECTIONS OF THE AO FOR INFLATING EXP ENSES AND THAT THE ASSESSEE EARNED INCOME MAINLY FROM GOVERNMENT AND S EMI- GOVERNMENT WHERE PROFIT MARGIN IS ALWAYS LESSER. IN VIEW OF THE ABOVE, FINAL ADDITION IS MAINTAINED IN A SUM OF RS. 21,41,295/- AS AGAINST ADDITION CONFIRMED BY THE LD. CIT(A) IN A S UM OF ITA NO. 08/AGRA/2013 5 RS.62,02,802/-. AS A RESULT, THE APPEAL OF THE ASSE SSEE DESERVES TO BE PARTLY ALLOWED. 4.1 IN VIEW OF THE ABOVE, THE DEPARTMENTAL APPEAL H AS BECOME INFRUCTUOUS AND IS LIABLE TO BE DISMISSED BECAUSE FURTHER RELIEF HAS A LREADY BEEN ALLOWED IN FAVOUR OF THE ASSESSEE. THEREFORE, THE DEPARTMENTAL APPEAL SH ALL HAVE TO BE DISMISSED. HOWEVER, WE NOTE HERE THAT IT IS THE DUTY OF BOTH T HE PARTIES TO INTIMATE THE TRIBUNAL AT THE TIME OF HEARING OF APPEAL OF THE AS SESSEE THAT THE DEPARTMENTAL APPEAL IS ALSO FILED ON THE SAME SUBJECT BECAUSE IT IS DESIRABLE THAT BOTH THE APPEALS SHOULD HAVE BEEN DECIDED TOGETHER. WE HOPE, THE PAR TIES WILL TAKE CARE OF SUCH FACTS IN FUTURE. 5. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY