ACIT, Ludhiana V. M/s Garg Sons Estate Promoters (P) Ltd., Chandigarh

ITA 843/CHANDI/2014

• Counselvise Citation: 84321514 RSA 2014
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 09-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHIL VERMAN
• Assessee Lawyers: POORIT GOYAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 843/CHD/2014 ASSESSMENT YEAR: 2008-09 THE ACIT, VS M/S GARG SONS ESTATE CENTRAL CIRCLE-III, PROMOTERS (P) LTD. LUDHIANA. 260, SECTOR 9-C, CHANDIGARH. PAN: AAC CG3312Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUSHIL VERMAN RESPONDENT BY : SHRI POORIT GOYAL DATE OF HEARING : 06.10.2015 DATE OF PRONOUNCEMENT : 07.10.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(APPEALS)-I LUDHIANA DATED 14.07.2014 FOR ASSESSMENT YEAR 2008-09 CHALLENGING THE DELETION OF ADDITION OF RS. 39,61,815/-. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE WAS AGGRIEVED AGAINST THE ORDER OF ASSESSING OFFICER ON THE GROUND THAT THE ENTIRE AMOUNT OF SALE OF MATERIAL O F RS. 43,06,319/- HAS BEEN TREATED AS PROFIT FOR WORKING OUT THE GROSS PROFIT ON CONTRACT RECEIPTS. THE ASSESSING O FFICER HAS POINTED OUT SEVERAL DEFECTS IN MAINTENANCE OF T HE BOOKS OF ACCOUNT AND ACCORDINGLY REJECTED THE SAME UNDER SECTION 145(3) OF THE ACT. THEREAFTER, THE ASSESSIN G OFFICER 2 OBSERVED THAT ASSESSEE HAD SHOWN GROSS PROFIT OF RS . 45,50,072/- ON THE TOTAL WORK DONE OF RS. 10,88,77, 849/- WHICH INCLUDED AN AMOUNT OF RS. 43,06,319/- BY WAY OF SALE OF MATERIALS. THE ASSESSING OFFICER CONCLUDED THAT ACTUAL CONTRACT RECEIPT PROFIT WAS DECLARED AT RS. 2,43,752/- WHICH GAVE PROFIT RATE OF 0.22% AND THE SAME WAS, THEREFORE, HELD TO BE ON LOWER SIDE. THE ASSE SSING OFFICER, THEREFORE, ON REJECTION OF THE BOOKS OF AC COUNT PROCEEDED TO ESTIMATE GROSS PROFIT @ 8% OF THE CONT RACT RECEIPTS LEADING TO ADDITION OF RS. 84,66,746/-. 3. THE ASSESSEE CHALLENGED THIS ADDITION BEFORE LD. CIT(APPEALS) AND WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE APPELLATE ORDER IN WHICH THE ASSE SSEE BRIEFLY EXPLAINED THAT ASSESSING OFFICER MADE THIS ADDITION WRONGLY AFTER CONSIDERING THE ENTIRE VALUE OF SALE OF HOT MIX MATERIAL OF RS. 43,06,319/- AS INCOME WITHOUT DEDUCTING COST OF MATERIAL SOLD. THE ASSESSING OFF ICER SHOULD HAVE APPLIED THE PROFIT RATE ON THE SALE VAL UE OF THE MATERIAL SOLD TO ASCERTAIN THE COST OF MATERIAL SOL D BEFORE WORKING OUT THE GROSS PROFIT ON SALE OF SUCH HOT MI X MATERIAL. IT WAS SUBMITTED THAT ASSESSING OFFICER HAS MADE A WRONG CALCULATION WHEREAS ASSESSING OFFICER SHOUL D HAVE WORKED OUT COST OF THE MATERIAL SOLD TO ASCERTAIN T HE GROSS PROFIT ON SALE OF MATERIAL OF RS.43,06,319/- AND TH EREAFTER, THE GROSS PROFIT ON SALE OF MATERIAL SHOULD HAVE BE EN DEDUCTED FROM TOTAL GROSS PROFIT SHOWN IN THE PROFI T & LOSS ACCOUNT TO DERIVE OUT THE ACTUAL PROFIT ON WORK EXE CUTED. THE ASSESSEE ALSO FILED HIS OWN CALCULATION IN SUPP ORT OF 3 THE CONTENTION TO SHOW THAT ADDITION TO THE EXTENT OF RS. 39,61,815/- IS WHOLLY UNJUSTIFIED. THE LD. CIT(APP EALS) ACCEPTED THE CONTENTION OF THE ASSESSEE AND DELETED PART ADDITION AS ABOVE. HIS FINDINGS IN PARA 4 OF THE A PPELLATE ORDER ARE REPRODUCED AS UNDER : I HAVE CONSIDERED THE FACTS OF THE CASE, THE BASIS OF ADDITION MADE BY THE ASSESSING OFFICER AND THE ARGU MENTS OF THE AR ON THE ISSUE DURING ASSESSMENT AS WELL AS AP PELLATE PROCEEDINGS. IT IS SEEN THAT THE APPELLANT HAD NOT PUT FORTH ANY CREDIBLE ARGUMENTS IN SUPPORT OF HIS CLAIM OF M AINTAINING PROPER BOOKS OF ACCOUNT AND AS AGAINST THAT THE ASS ESSING OFFICER HAD SPECIFIED VARIOUS DEFECTS ON THE BASIS OF WHICH ONE COULD CONCLUDE THAT TRUE AND FAIR PROFIT OF ENT ERPRISE COULD NOT BE WORKED OUT. THE ASSESSEE WAS FOUND TO HAVE N OT MAINTAINED THE STOCK REGISTER. THEREFORE THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT U/S 145(3) WAS LOGICAL INEVITABLE CONCLUSION, THE SAME IS THEREF ORE CONFIRMED. THE ASSESSING OFFICER HAS ESTIMATED PROFIT AT 8% TO WHICH ALSO THERE HAS NOT BEEN ANY CREDIBLE OBJECTIO N BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS. HOWEVER THE AR OF THE APPELLANT HAS POINTED OUT THAT ENTIRE AMOUNT OF MATERIAL SALES HAVE BEEN REDUCED FROM THE GROSS PROFIT WHICH MEANT THAT THE ENTIRE SALES WERE REPRESENTATIVE OF GROSS PROFIT AND THERE WAS NO COST OF MATERIALS SOLD. IT IS SEEN THA T THE ASSESSEE HAD PRODUCED HOT MIX MATERIAL FROM ITS PLA NT FOR ITS CONTRACT WORK AND THE EXCESS PRODUCTION WAS ALSO SO LD TO OUTSIDE PARTIES LEADING TO TURNOVER OF RS.43,06,319 /- ON THIS ACCOUNT. IT IS NOT POSSIBLE THAT THERE WOULD BE NO C OST OF GOODS PRODUCED/SOLD AS DONE BY THE ASSESSING OFFICER AND T HE CLAIM OF THE APPELLANT IN THIS REGARD IS PERFECTLY LOGICA L SINCE THE BOOKS OF ACCOUNTS HAD BEEN REJECTED AND HAVE BEEN C ONFIRMED ACCORDINGLY, THEREFORE THE APPLICATION OF GROSS PRO FIT RATE OF 8% ON THE HOT MIX MATERIALS SOLD WOULD BE RIGHT COU RSE OF ACTION UNDER THE CIRCUMSTANCES. IT MEANS ONLY AN AM OUNT OF RS.3,44,505/- SHOULD HAVE BEEN TAKEN OUT OF GROSS P ROFIT IN 4 ORDER TO HAVE AN IDEA ABOUT THE GROSS PROFIT SHOWN BY THE ASSESSEE ON ITS NORMAL CONTRACT RECEIPTS. THE GROSS PROFIT SO WORKED OUT COMES TO 3.86% WHICH COMPARES FAVOURABLY WITH THE WORKING DONE BY THE ASSESSING OFFICER. THERE I S NO REASON WHY THE COST OF MATERIAL PRODUCED BY THE ASS ESSEE FOR SELLING THE HOT MIX SHOULD BE TREATED AS PROFIT ITSELF. THEREFORE, THE ADDITION OF RS. 39,61,815/- IS DIREC TED TO BE DELETED. 4. THE LD. DR RELIED UPON ORDER OF THE ASSESSING OF FICER, ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE REI TERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW. 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVE NUE. THE LD. CIT(APPEALS) FOUND THAT ASSESSEE HAD PRODUCED H OT MIX MATERIAL FROM ITS PLANT FOR ITS CONTRACT WORK AND T HE EXCESS PRODUCTION WAS SOLD TO OUTSIDE PARTIES LEADING TO T URNOVER OF RS. 43,06,319/- ON THIS ACCOUNT. THIS FINDING O F FACT RECORDED BY LD. CIT(APPEALS) HAVE NOT BEEN REBUTTED THROUGH ANY MATERIAL OR EVIDENCE ON RECORD. IT, TH EREFORE, STANDS ESTABLISHED THAT AMOUNT OF RS. 43,06,319/- W AS THE TURNOVER AND AS SUCH LD. CIT(APPEALS) WAS JUSTIFIED IN HOLDING THAT IT WAS NOT POSSIBLE THAT THERE WOULD B E NO COST OF GOODS PRODUCED/SOLD AS DONE BY THE ASSESSING OFF ICER. IT IS WELL SETTLED LAW THAT THE TURNOVER OF THE ASS ESSEE COULD NOT REPRESENT THE PROFIT OF THE ASSESSEE. IN THE TURNOVER OF THE ASSESSEE, ONLY PART AMOUNT IS REPRE SENTED AS INCOME OF THE ASSESSEE. THE COST OF THE MATERIA L SOLD SHOULD HAVE BEEN DEDUCTED FROM THE TURNOVER IN ORDE R TO 5 ARRIVE AT THE PROFIT OF THE ASSESSEE. THE LD. CIT( APPEALS), THEREFORE, ON THE TOTAL TURNOVER OF RS. 43,05,319/- OF HOT MIX MATERIAL CORRECTLY DIRECTED TO APPLY PROFIT RAT E FOR THE PURPOSE OF MAKING ADDITION, THEREFORE, REST OF THE ADDITION OF RS. 39,61,815/- WAS RIGHTLY DELETED. THERE IS N O ERROR IN THE ORDER OF THE LD. CIT(APPEALS). THE DEPARTMENTA L APPEAL, THEREFORE, STANDS DISMISSED. 6. IN THE RESULT, DEPARTMENTAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (RANO JAIN) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED 7 TH OCT., 2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD