Raitani Engineering Works (p) Ltd, Guwahati V. Joint Commissioner of Income Tax, Range-3, Guwahati

ITA 85/GTY/2014

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2037 (ITAT-GUWAHATI)
• Duration Of Justice: 5 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 01-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RABINDRO SINGH
• Keywords: Depreciation; Business expenditure; TDS
• Section: 145; 143(3); 40(a)(ia)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI BENCH, GUWAHATI BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 85 / GAU / 2014 ASSESSMENT YEAR :2010-11 RAITANI ENGINEERING WORKS (P) LTD., RAILWAY COLONY, PAN BAZAR, GUWAHATI- 781001 [ PAN NO.AAACR 6691 K ] V/S . JCUT, RANGE-3, AAYAKAR BHAWAN, G.S. ROAD, CHRISTAN BASTI, GUWAHATI- 781005 /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI SOMNATH GHOSH, ADVOCATE /BY RESPONDENT SHRI RABINDRO SINGH, JCIT, DR /DATE OF HEARING 02-07-2019 /DATE OF PRONOUNCEMENT 06-09-2019 / O R D E R PER BENCH:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2010-11 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-GUWAHATIS ORD ER DATED 19.02.2014 PASSED IN CASE NO.GUWA-60/2013-14, INVOLVING PROCEE DINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT). HEARD BOTH THE PARTIES. THE ASSESSEES DETAILED PAP ER BOOK RUNNING INTO 132 PAGES COMPRISING OF VARIOUS DOCUMENTS, THE ASSESSING OFFICERS NOTICE DURING SCRUTINY, CASH BOOK OF ASSE SSEES HEAD OFFICE, COMPUTATION, FINANCIAL STATEMENTS; STANDS PERUSED. 2. THE ASSESSEES FORMER SUBSTANTIVE GROUND CHALLEN GES CORRECTNESS OF THE LOWER AUTHORITIES ACTION DISALLOWING VARIOUS P AYMENTS OF RS.8,02,64,780/- CLAIMED AS BUSINESS EXPENDITURE. BOTH THE LEARNED L OWER AUTHORITIES ARE OF THE ITA NO.85/GAU/2014 A.Y. 2010-11 RAITANI ENGINEERING WORKS (P) LTD. VS. JCIT, RG-3 , GAU PAGE 2 VIEW THAT THE ASSESSEE COULD NOT PROVE BY WAY OF CO GENT EVIDENCE AS TO WHAT MANNER IT HAD MADE THE IMPUGNED PAYMENT FOR WHICH T HE SUMS IN QUESTION HAD BEEN WITHDRAWN IN LAST THREE DAYS OF THE RELEVA NT. THE ASSESSEES DETAILED PAPER BOOK ALSO FAILS TO THROW LIGHT ON THE ISSUE. LEARNED AUTHORIZED REPRESENTATIVE FILES A COPY OF THIS TRIBUNALS DECI SION IN ITA NO.446/GAU/2013 DECIDED ON 24.05.2017 IN ASSESSEE CASE ITSELF FOR P RECEDING ASSESSMENT YEAR 2009-10 REJECTING ITS BOOKS THEREBY TREATING NET PR OFIT @ 4% VIDE FOLLOWING DETAILED DISCUSSION:- 2. THE SOLE ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION UNDER THE HEAD CO NTRACT WORKS AMOUNTING TO RS.2,86,70,423/-. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN CARRYING ON THE BUSINESS OF CONTRACT WORK WITH THE RAILWAYS. PWD ETC. ACCORDING TO THE AO, THE ASS ESSEE HAS SHOWN GROSS CONTRACT RECEIPTS FOR THE YEAR AT RS.47,78,40,398/- . THE ASSESSEE HAS RECOGNIZED THE REVENUE ON PROJECT COMPLETION METHOD AND DISCLOSED A NET PROFIT OF RS.1,80,68,995/- WITHOUT CONSIDERING THE DEPRECIATION AS PER INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT ) WHICH IN TERMS OF PERCENTAGE, COMES TO ONLY 3.78% OF THE GROSS CONTRA CT RECEIPTS. THE NET PROFIT WAS SHOWN AT RS.63,08,204/- WHICH COMES TO ONLY 3.7 8% OF THE GROSS CONTRACT RECEIPTS. THE NET PROFIT WAS SHOWN AT RS.6 3,08,204/- WHICH COMES TO ONLY 1.32% OF THE GROSS CONTRACT RECEIPTS AFTER CON SIDERING THE DEPRECIATION AS PER I.T. RULES. ACCORDING TO THE AO, THE NET PROFIT AS SHOWN BY THE ASSESSEE APPEARS TO BE VERY LOW CONSIDERING THE NATURE OF WO RKS CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. ACCOR DING TO AO, THE NET PROFIT AS SHOWN BY THE ASSESSEE APPEARS TO BE VERY LOW CON SIDERING THE NATURE OF WORKS CARRIED OUT BY THE ASSESSEE DURING THE YEAR U NDER CONSIDERATION. ACCORDING TO AO, IN THE P&L ACCOUNT THE ASSESSEE HA S DEBITED 41,37,88,690/- ON ACCOUNT OF CONTRACT EXPENSES INC URRED DURING THE YEAR, WHICH CONSISTS OF MATERIAL PURCHASES, LABOUR EXPENS ES MACHINERY EXPENSES AND CARRIAGE EXPENSES OF RS.18,09,07,572/-, 14,37,2 6,401/-, 4,31,54,286/- AND 4,60,00,429/- RESPECTIVELY. HE ALSO OBSERVED TH AT THE LABOUR EXPENSES OF RS.14,37,26,401/- WERE PAID BY WAY OF SELF-MADE VOU CHERS AND HENCE, THE SAID EXPENSES ARE NOT VERIFIABLE. THEREFORE, HE REJ ECTED THE BOOK RESULT AND INVOKED THE PROVISION OF SECTION 145 OF THE ACT AND SO ESTIMATED THE NET PROFIT AT RS.2,86,70,423/- @ 6% OF THE TOTAL TURNOVER I.E. RS.47,78,40,398/- OVER AND ABOVE 3.78% OF NET PROFIT ALREADY DISCLOSED BY THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL CIT(A), WHO WAS PLEASED TO CONFIRM THE ACTION OF AO. AGGRIEVED, ASSESSEE IS BEFORE US. 5. WE HAVE HEARER RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE US THE LD. COUNSEL CONTENDS THAT THE AO HAS MADE THE ESTIMATION WITHOUT BRINING ANY COMPARABLE INSTANCES AND RESULTS FROM WHICH THE ESTIMATION WAS DRAWN. ACCORDING TO HIM, THE ASS ESSEES NET PROFIT RESULTS WERE NOT MORE THAN 4.67% AND THE AVERAGE COMES TO 3 .84% AFTER DEPRECIATION. ACCORDING TO LD. COUNSEL, THE ESTIMAT ION MADE WITHOUT ANY ITA NO.85/GAU/2014 A.Y. 2010-11 RAITANI ENGINEERING WORKS (P) LTD. VS. JCIT, RG-3 , GAU PAGE 3 MATERIAL CANNOT STAND THE SCRUTINY OF LAW AND HAS T O BE DELETED. WE REPRODUCE BELOW THE EARLIER RESULTS OF THE ASSESSEE: ASSESSMENT YEAR CONTRACT RECEIPT PROFIT (BEFORE DEPRECIATION) @ OF PROFIT (BEFORE DEPRECIATION) PROFIT (AFTER DEPRECIATION) % PROFIT (AFTER DEPRECIATION) 2005-06 280,633,404.00 15,652,623.99 5.58% 12,340,453.99 4.40% 2006-07 284,,321,576.00 11,674,234.66 4.11% 7,691,499.66 2.71% 2007-08 496,857,461.50 24,062.691.75 4.84% 18,081,957.75 3.64% 2008-09 518,468,470.00 32,722,320.76 6.31% 24,196,722.76 4.67% 2009-10 477,840,398.00 29,317,514.27 6.14% 18,068,995.27 3.78% FROM A PERUSAL OF THE ABOVE, WE NOTE THAT FOR AY 20 08-09 THE ASSESSEE HAS MADE MAXIMUM NET PROFIT OF 4.67% AND THE LOWEST WAS IN AY 2006-07 OF 2.71%. WE NOTE THAT THE ASSESSEE COULD NOT PRODUCE VOUCHERS TO THE SATISFACTION OF THE AO FOR CLAIMING CERTAIN EXPENSE S BASED ON THAT THE BOOKS OF ACCOUNT WERE REJECTED BY THE AO. HOWEVER, WE NOT E THAT THE AO HAS NOT BROUGHT IN ANY COMPARABLE CASES TO JUSTIFY 6% ADDIT ION MADE ON THE ASSESSEE OVER AND ABOVE THE RETURNED INCOME OF THE ASSESSEE. WE TAKE NOTE THAT THE ASSESSEE IS A GOVT. CONTRACTOR AND HAS SHOWN GROSS CONTRACT RECEIPT FOR THE YEAR TO THE TUNE OF RS.47,78,40,398/-. WHICH IS 6.1 4% PROFIT BEFORE DEPRECIATION AND 3.78% AFTER DEPRECIATION IS ALLOWE D. WE ALSO NOTE THAT THE AO WHILE COMPLETING THE ASSESSMENT DETERMINED THE NET PROFIT OF RS.2,86,70,423/- AT 6% OF TURNOVER WITHOUT REDUCING THE NET PROFIT OF RS.63,08,204/- ALREADY RETURNED BY THE ASSESSEE. TH EREBY DETERMINING THE EFFECTIVE NET PROFIT AT 8.78% WHICH IN OUR CONSIDER ED OPINION IS HIGH BECAUSE THE AO HAS NOT BROUGHT ANY COMPARABLE CASES TO JUST IFY SUCH AN ESTIMATION. THEREFORE, TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES AND THE EARLIER RESULTS OF THE ASSESSEE AS (SUPRA) AND THE AVERAGE THEREON COMES TO 3.84% SO, WE ARE OF THE CONSIDERED OPINION THAT A N ET PROFIT OF 4% WOULD BE JUST AND REASONABLE TO MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. THIS CLINCHING FACTUAL POSITION HAS GONE UNREBUTTED FROM REVENUES SIDE. WE THEREFORE HOLD THAT THE ASSESSEES BOOKS CLAIMING T HE IMPUGNED EXPENDITURE OF 8,02,64,780/- ALSO DESERVE TO BE REJECTED ON THIS C OUNT ALONE FOR LACK OF SUPPORTIVE COGENT EVIDENCE. FACED WITH THIS SITUATI ON WE DEEM IT APPROPRIATE TO ESTIMATE THE ASSESSEES NET PROFIT ON ITS TURNOV ER FROM CONFIRMATION RECEIPTS OF 61,34,50,121/- @ 5.10% THAN THAT ALREADY DECLARED @ 4.55% OF 279,26,482/- AS PER ASSESSMENT ORDER DATED 30.03.20 13. IT IS MADE CLEAR THAT WE ARE VERY MUCH OPINION OF ASSESSEES FLUCTUA TING NET PROFIT RESULT FROM 4.40% TO 2.71% SINCE ASSESSMENT YEAR(S) 2005-06 ONW ARDS AS PER THE LEARNED CO-ORDINATE BENCHS DECISION. OUR INSTANT E STIMATION SHALL ALSO BE NOT TREATED AS A PRECEDENT IN ANY OTHER ASSESSMENT YEAR ON THE SAME IS MADE TO ITA NO.85/GAU/2014 A.Y. 2010-11 RAITANI ENGINEERING WORKS (P) LTD. VS. JCIT, RG-3 , GAU PAGE 4 AVOID AN INSTANCE OF ABSURD PROFIT RESULTS AS WELL AS A CONSEQUENCE TO THE IMPUGNED DISALLOWANCE OF 8,02,64,780/-. NECESSARY COMPUTATION TO FOLLOW. 3. THE ASSESSEES LATTER SUBSTANTIVE GROUND CHALLEN GES CORRECTNESS OF SEC. 40(A)(IA) DISALLOWANCE ON ACCOUNT OF NON-DEDUCTION OF TDS OF 6,74,760/-. AFTER VEHEMENTLY ARGUING FOR SOMETIME AGAINST THE I MPUGNED DISALLOWANCE, LEARNED COUNSEL SUBMITS THAT THIS ASSESSEE NO MORE WISHES TO PRESS FOR INSTANT GRIEVANCE KEEPING IN MIND SMALLNESS OF THE AMOUNT WITH A RIDER THAT SAME IS NOT TREATED AS PRECEDENT IN ANY OTHER ASSES SMENT YEAR. WE THEREFORE DECLINE THE LATTER SUBSTANTIVE GROUND AS NOT PRESSE D IN ABOVE TERMS. 4. THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN ABOV E TERMS. ORDER PRONOUNCED IN ACCORDANCE WITH RYLE 34(3) OF THE ITAT RULES BY PUTTING ON NOTICE BOARD ON 06/09/2019 SD/- SD/- ( #) (%& #) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) GUWAHATI, *DKP '- 06 / 09 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-RAITANI ENGING. WORKS(P) LTD., RAILWAY C OLONY, PAN BAZAR, GUWAHATI-781001 2. /RESPONDENT-JCIT, RANGE-3, AAYAKAR BHAWAN, G.S.ROAD , CHRISTAN BASTI, GUWAHATI-78100 5 3. 2 3 8 / CONCERNED CIT GUWAHATI 4. 3- / CIT (A) GUWAHATI 5. ; &&2, 2, 8 / DR, ITAT, GUWAHATI 6. A / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY (ON TOUR) 2,