M/S SINGHAL BUILDER CONTRACTOR, Jaipur V. ACIT, BHARATPUR

ITA 904/JPR/2012

• Counselvise Citation: 90423114 RSA 2012
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 04-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: AKASH JAIN
• Keywords: Depreciation; Corroborative evidences
• Section: 143(3); 244A; 234B; 144; 2

Judgement Text

1 ITA 904(2)-12 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH : JAIPUR. BEFORE SHRI B.R. JAIN AND SHRI KUL BHARAT ITA NO. 904/JP/2012 ASSESSMENT YEAR : 2009-10. M/S. SINGHAL BUILDERS CONTRACTOR, VS. THE DCIT, CI RCLE, A-98, RANJEET NAGAR, BHARATPUR. BHARATPUR. ITA NO. 896/JP/2012 ASSTT. YEAR : 2009-10. THE DCIT, CIRCLE, VS. M/S. SINGHAL BUILDERS CONT RACTOR, BHARATPUR. A-98, RANJEET NAGAR, BHARATPUR. (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI AKASH JAIN DEPARTMENT BY : SHRI D.C. SHARMA DATE OF HEARING : 19.08.2013. DATE OF PRONOUNCEMENT : 20.08.2013. ORDER PER BENCH : THESE CROSS APPEALS ARISE FROM THE ORDER DATED 05. 09.2012 OF LD. CIT (A), ALWAR. GROUNDS RAISED IN RESPECTIVE APPEALS ARE REPRODUCED AS UNDER :- ITA NO. 904/JP/2012 : 1. THE IMPUGNED ADDITIONS AND DISALLOWANCES MADE IN THE ORDER U/S 143(3) OF THE ACT DATED 23.12.2011 ARE BAD IN LAW AND ON FACT S OF THE CASE, FOR WANT OF JURISDICTION AND VARIOUS OTHER REASONS AND HENCE THE SAME KINDLY BE DELETED. 2.1. RS. 22,52,211/- : THE LD. CIT (A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE APPLICATION OF SEC. 145( 3) OF THE ACT. THE 2 PROVISION SO INVOKED AND CONFIRMED BY THE LD. CIT ( A) BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS, THE SAME MAY KINDL Y BE QUASHED. CONSEQUENTLY THE TRADING ADDITION OF RS. 22,52,211/ - MAY KINDLY BE DELETED IN FULL. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE 2.2. THE LD. CIT (A) FURTHER ERRED IN LAW AS WELL A S ON THE FACTS OF THE CASE IN APPLYING THE GP RATE OF 11.10% AS AGAINST 10.06% DE CLARED BY THE ASSESSEE AND 12.50% (WRONGLY CALCULATED @ 12.55) AP PLIED BY THE A.O. THE GP RATE SO APPLIED AND ADDITION SO MADE BY THE A.O. AND PARTLY SUSTAINED BY THE CIT (A) IS TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS ON THE RECORD AND HENCE THE ADDITION MAY KIND LY BE DELETED IN FULL. 3. RS. 22,52,211/- : THE LD. CIT (A) ERRED IN LAW A S WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS. 22,52,21 1/- BY APPLYING NP RATE OF 11.10%. THE ADDITION SO MADE AND CONFIRMED BEING TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS KINDLY BE DELETED I N FULL. 4. RS. 2,69,527/- : THE LD. CIT (A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN DISALLOWING BANK GUARANTEE CHARGES AMOUNTIN G TO RS. 2,69,527/- PAID TO BANKS. THE DISALLOWANCE SO MADE AND CONFIRM ED BEING TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS KINDLY BE DELETED IN FULL. 5. RS. 1,40,647/- : THE LD. CIT (A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN DISALLOWING BANK COMMISSION AMOUNTING TO RS . 1,40,647/- PAID TO BANKS. THE DISALLOWANCE SO MADE AND CONFIRMED BEING TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS KINDLY BE DELETED I N FULL. 6. RS. 2,25,000/- : THE LD. CIT (A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN DISALLOWING INTEREST PAID ON LOANS AMOUNTIN G TO RS. 2,25,000/- TO THE OTHER PARTIES. THE DISALLOWANCE SO MADE AND CON FIRMED BEING TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS KINDLY BE DELETED IN FULL. 7. RS. 3,43,665/- : THE LD. CIT (A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN DISALLOWING INTEREST ON MACHINERY LOAN AMOU NTING TO RS. 3,42,665/- PAID TO BANKS AND OTHER FINANCIAL INSTIT UTIONS. THE DISALLOWANCE SO MADE AND CONFIRMED BEING TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS KINDLY BE DELETED IN FULL. 8. RS. 38,12,369/- : THE LD. CIT (A) ERRED IN LAW A S WELL AS ON THE FACTS OF THE CASE IN NOT VERY CLEARLY AND SPECIFICALLY ALLOW ING A SEPARATE DEDUCTION ON ACCOUNT OF SALES T4AX PAYMENT WHEREAS THE REFUND RECEIVED ARE BEING SHOWN AS INCOME IN THE PROFIT & LOSS ACCOUNT. THERE FORE, THE DEDUCTION FOR SALES TAX KINDLY BE ALLOWED AS SEPARATE DEDUCTION. 3 9. THE LD. A.O. ERRED IN LAW AS WELL AS ON THE FACT S OF THE CASE IN CHARGING INTEREST U/S 234A, 234B & 234C AND 234D AND WITHDRA W INTEREST U/S 244A OF THE ACT. THE APPELLANT TOTALLY DENIES IT LIABIL ITY OF CHARGING OF ANY SUCH INTEREST. THE INTEREST, SO CHARGED, BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS, KINDLY BE DELETED IN FULL. ITA NO. 896/JP/2012 : THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) , ALWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN RESTRICT ING THE G.P. RATE TO 11.1% INSTEAD OF 12.5% AS APPLIED BY THE ASSESSING OFFICE R, WITHOUT APPRECIATING THE FACTS OF THE CASE AND DISCREPANCIES POINTED OUT BY THE A.O. 2. BRIEFLY THE FACTS ARE THAT THE ASSESSEE IS A CIV IL CONTRACTOR AND DERIVES INCOME FROM CONTRACT WORK, INTEREST ON DEPOSITS WITH BANKS, NSC INTEREST ETC. THE ASSESSEE HAS DECLARED GROSS PROFIT OF RS. 2,19,01,033/- ON CONTR ACT RECEIPTS OF RS. 21,75,96,791/- WHICH INCLUDED SUB LET WORK OF RS. 35,41,108/-. THE GROSS PROFIT YIELDED IS 10.06% AND NET PROFIT DISCLOSED IS 5.46%. ON EXAMINATION OF BOOKS OF ACCOUNT, THE ASSESSING OFFICER NOTICED SEVERAL DISCREPANCIES AS UNDER :- 1. NO STOCK REGISTER IS MAINTAINED. 2. FOR EXPENSES ON A/C OF LABOUR, BAJRI, GITTI AMOU NTING, NO BILLS VOUCHERS AVAILABLE. 3. SITE-WISE DETAILS ARE NOT MAINTAINED. 4. EXPENSES FOR SALARY AND LABOUR NOT FULLY VOUCHED FOR. NO SALARY REGISTER MAINTAINED. 5. TELEPHONE, CAR RUNNING & MAINTENANCE EXPENSES FO R WHICH PERSONAL ELEMENT IS NOT ASCERTAINABLE. 6. CAR RUNNING & MAINTENANCE NOT FULLY VOUCHED. 7. BOOKS OF ACCOUNT WRITTEN ON WEEKLY BASIS ON THE BASIS OF REPORT OF SITE MUNIM. NO PROPER DOCUMENTS IN FORM OF SITE REG ISTER MAINTAINED. 4 8. NO VOUCHERS FOR TRACTOR & EQUIPMENT REPAIRS. 9. NO SUPPORTING PRIMARY DOCUMENTS FOR GITTI KUTT AI, GITTI BICHAI. 10. NO VOUCHERS FOR MITTI DALAI. 11. NO VOUCHERS FOR MORRAM KUTTAI AND DALAI. 12. CONSUMPTION OF DIESEL AND LOG BOOK ITS UTILIZAT ION IS NOT MAINTAINED. 13. CONSUMPTION OF CEMENT AND HOW IT HAS BEEN UTILI ZED IS NOT MAINTAINED. THERE IS NO ISSUE REGISTER IN RESPECT O F RAW MATERIAL. 14. SIMILARLY, IN RESPECT OF BITUMEN NO ISSUE REGIS TER AND MAINTAINED AND THERE IS NO DETAILS AS TO HOW, IT HAS BEEN UTIL IZED. 15. NO DETAILS OF SUBLET WORK RECEIPTS AND EXPENSES WERE PRODUCED WITH SUPPORTING EVIDENCES. AFTER CONSIDERING ASSESSEES REPLY, THE ASSESSING O FFICER RECORDED A FINDING THAT IN VIEW OF DEFECTS, THE CORRECT PROFITS IN THIS CASE CANNOT BE DEDUCED. HE, THEREFORE, REJECTED THE BOOKS OF ACCOUNT BY APPLICATION OF PROVISIONS OF SE CTION 145(3) OF THE ACT AND CONSIDERING THE FACTS AND CIRCUMSTANCES AS WELL AS PAST HISTORY OF THE CASE CONSIDERED IT FAIR AND REASONABLE TO APPLY A NET PROFIT RATE OF 1 2.5% ON GROSS CONTRACT RECEIPTS WITHOUT ANY DISTINCTION BETWEEN GOVERNMENT CONTRACT RECEIPT S AND SUB CONTRACT RECEIPTS SUBJECT TO ALLOWING DEDUCTION FOR DEPRECIATION, REMUNERATION, INTEREST TO PARTNERS, INTEREST PAID TO BANKS AND OTHER FINANCIAL INSTITUTIONS AND THUS COM PLETED THE ASSESSMENT AT AN INCOME OF RS. 1,86,95,740/- AS AGAINST RS. 1,18,79,750/-. 3. THE LD. CIT (A) CONSIDERING ASSESSEES SUBMISSIO NS UPHELD THE REJECTION OF BOOKS OF ACCOUNT. HE, HOWEVER, TAKING NOTE OF THE FACT TH AT THERE IS A NOMINAL DECLINE IN PROFIT AND INCREASE IN TURNOVER OF THE ASSESSEE CONSIDERED IT REASONABLE TO APPLY NET PROFIT RATE OF 5 11.1% BEING AVERAGE OF THE NET PROFIT FOR ASSESSMEN T YEAR 2007-08 AND 2008-09 AND SUSTAINED THE ADDITION AT RS. 22,52,211/-. 4. THE ASSESSEES COUNSEL ASSAILING THE IMPUGNED OR DER, CONTENDS THAT THE ASSESSING OFFICER HAS OVER REACHED FINDINGS IN POINTING OUT D EFECTS. THE ASSESSEES REPLY ON THE DEFECTS HAS NOT BEEN EXAMINED NOR ANY FINDING THERE AFTER AS TO WHAT REMAINED DEFECTIVE HAS BEEN STATED IN THE ASSESSMENT ORDER. THE LD. C IT (A) CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT WITHOUT ANY JUST AND REASONABLE CA USE. EVEN OTHERWISE, IF THE BOOKS OF ACCOUNT ARE REJECTED FOR TECHNICAL PURPOSES, IT IS NOT NECESSARY TO ESTIMATE INCOME IN THE MANNER AS PROVIDED IN SECTION 144 OF THE ACT. THIS HAS BEEN SO HELD BY HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. GOTAN LIME KHANIZ UDYOG, 256 ITR 243 (RAJ.). THE HON'BLE RAJASTHAN HIGH COURT IN ANOTHER CASE IN THE CASE OF MALANI RAM JIVAN JAGANNATH (2007) 207 CTR 19 (RAJ.) HAS HELD THAT THE GROSS PR OFIT DECLARED NEED NOT BE DISTURBED WHEN THE PURCHASES AND SALES ARE DULY VOUCHED AND V ALUE OF OPENING STOCK AND CLOSING STOCK IS AVAILABLE. IN THE PRESENT CASE IN APPEAL, THE ASSESSING OFFICER HAS NOT MADE HONEST ESTIMATION OF INCOME BY KEEPING IN VIEW THE MATERIAL AVAILABLE ON RECORD, PAST HISTORY OF THE CASE, LOCAL KNOWLEDGE AND REPUTE OF THE ASSESSEE. THE ASSESSMENT MADE IS ARBITRARY, CAPRICIOUS AND RESTED ON WILD ESTIMATION . THIS IS NOT PERMITTED IN THE EYES OF LAW AS HAS BEEN HELD BY HON'BLE ALLAHABAD HIGH COUR T IN THE CASE OF JOTH RAM SHER SINGH VS. CIT, 2 ITR 119 (ALL.). 5. IN FACT, THE RESULTS DECLARED BY THE ASSESSEE DU RING THE YEAR UNDER CONSIDERATION WERE REASONABLE IN VIEW OF THE FOLLOWING FACTS :- 6 A.Y. GROSS RECEIPT RATE SHOWN RATE SHOWN BY AO RATE SHOWN BY CIT (A) UPHELD BY ITAT 2003-04 RS.12,16,67,035/- 9.09% 12.50% 12.50% 9.09% 2004-05 RS.15,98,62,600/- 8% 12.50% 11.20% 8% 2005-06 RS. 9,26,20,823/- 10.00% 12.50% 11.20% 10% 2006-07 RS.15,38,39,155/- 10.69% 12.50% 11.27% 11% 2007-08 RS.9,19,57,822/- 11.40% - - - 2008-09 RS.14,40,25,630/- 10.57% 12.50% 11.20% LUMP SUM ADDITION OF RS. 2,50,000/- 2009-10 21,75,96,791/- 10.06% 12.50% 11.10% APPEAL PENDING NP RATE SHOWN IS BEFORE/SUBJECT TO INTEREST TO BANK , INTEREST TO THE PARTNERS AND DEPRECIATION ETC. AS PER CONSISTENT PRACTICE FO LLOWED BY BOTH PARTIES. 6. THE JAIPUR BENCH OF THE TRIBUNAL IN A RECENT CAS E OF MUKESH KUMAR JAIN VS. ITO IN ITA NO. 1023/JP/2011 BY ITS ORDER DATED 29.5.201 3 AUTHORED BY SHRI VIJAY PAL RAO, JUDICIAL MEMBER, COPY PLACED ON RECORD HAS HELD AS UNDER :- IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CAS E, AVERAGE GROSS PROFIT RATE FOR EARLIER YEARS SHALL BE TAKEN AS GROSS PROF IT RATE FOR THE YEAR UNDER CONSIDERATION INSTEAD OF ADOPTING THE HIGHEST GROSS PROFIT RATE AMONGST EARLIER YEARS. THE A.O. IS DIRECTED TO TAKE AVERAGE OF GROSS PROFIT RATE OF EARLIER YEARS WHICH WAS ACCEPTED BY THE REVENUE. 7. THE LD. CIT (A), HOWEVER, TOOK AVERAGE PROFIT RA TE OF 2 YEARS ONLY AND DID NOT ACT FAIRLY IN CONSIDERING NET PROFIT RATE OF PAST SEVER AL YEARS. HAD HE ACTED FAIRLY AND REASONABLY, THE PROFIT RATE DECLARED AT 10.06% BY T HE ASSESSEE COULD NOT HAVE BEEN DISTURBED IN VIEW OF AVERAGE OF SEVERAL YEARS COMIN G TO 10.04%. THIS ERROR, THEREFORE, NEEDS TO BE CORRECTED SO THAT THE INCOME IS ESTIMAT ED CORRECTLY. 8. ON THE OTHER HAND, THE LD. D/R CONTENDS THAT THE ASSESSING OFFICER HAS ACTED FAIRLY AND MADE A CORRECT ESTIMATE OF INCOME HAVING REGARD TO FACTS AND CIRCUMSTANCES OF THE CASE BUT THE LD. CIT (A) RESORTED TO REDUCTION OF NET PROFIT RATE AT 11.01% WHICH IS 7 NEITHER JUSTIFIED NOR CALLED FOR. IT, THEREFORE, H AS BEEN CONTENDED THAT THE APPEAL OF REVENUE BE ALLOWED AND THAT OF ASSESSEE NEEDS TO BE DISMISSED. 9. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECO RD. THE BOOKS OF ACCOUNT OF THE ASSESSEE SUFFERED FROM DEFECTS SUCH AS THE ASSESSEE HAS NOT MAINTAINED ANY STOCK REGISTER AND VOUCHERS FOR VARIOUS EXPENSES INCLUDING THOSE O N SALARY AND LABOUR WERE NOT FOUND FULLY VOUCHED. THERE BEING SUCH DEFECTS, THE CORRE CT PROFIT OF THE ASSESSEE COULD NOT BE ASCERTAINED FROM THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. AS THE ACCOUNTS WERE NOT CORRECT AND COMPLETE, THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE ACCOUNTS BY APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. 10. AFTER HAVING REJECTED THE ACCOUNTS, THE ASSESSI NG OFFICER, HOWEVER, APPLIED A NET PROFIT RATE OF 12.5% ON THE GROSS CONTRACT RECEIPTS INCLUDING THOSE CONTRACTS WHICH WERE SUB LET. THE SAID NET PROFIT RATE OF 12.5% WAS SUBJ ECTED TO FURTHER DEDUCTION OF DEPRECIATION, REMUNERATION, INTEREST TO PARTNERS, I NTEREST PAID TO BANK AND OTHER FINANCIAL INSTITUTIONS. THE LD. CIT (A), HOWEVER, CORRECTED T HIS RATE TO 11.01% BY APPLYING AVERAGE NET PROFIT RATE OF TWO PRECEDING YEARS ONLY I.E. AS SESSMENT YEARS 2007-08 AND 08-09. HE, HOWEVER, DID NOT ACT REASONABLY AS THE PECULIAR FAC TS OF ASSESSEES HISTORY OF PAST SEVERAL YEARS, SUSTENANCE OF ADHOC ADDITION ONLY OF RS. 2.5 0 LACS IN ASSESSEES APPEAL FOR A.Y. 2008-09, INCREASE IN TURNOVER IN ASSESSEES BUSINES S AND THE CONTRACT RECEIPTS BEING FROM GOVERNMENT AS WELL AS ON SUB CONTRACTS WERE NOT APP RECIATED IN RIGHT PERSPECTIVE. THE ASSESSING AUTHORITY AFTER APPLYING A NET PROFIT RAT E, ALLOWED FURTHER DEDUCTION OF INTEREST PAYMENTS TO BANK AND FINANCIAL INSTITUTIONS AND MAD E NO DISTINCTION FOR NOT ALLOWING BANK CHARGES, INTEREST ON LOANS AGAINST FIXED ASSETS OR PAYMENT OF INTEREST ON LOANS TAKEN FROM PRIVATE PARTIES. ON THE PECULIAR FACTS OF THIS CAS E AND CONSIDERING A SIMILAR ORDER IN THE 8 CASE OF MUKESH KUMAR JAIN VS. ITO (SUPRA), WE CONS IDER IT REASONABLE TO APPLY AN AVERAGE PROFIT RATE OF 10.50% SUBJECT TO THE DEDUCT ION FOR DEPRECIATION, REMUNERATION, INTEREST TO PARTNERS, INTEREST PAID TO BANK/OTHER F INANCIAL INSTITUTIONS AND OTHER PARTIES INCLUDING BANK GUARANTEE CHARGES PAID TO BANKS AND COMPUTE THE INCOME AFRESH. IT IS, HOWEVER, CLARIFIED THAT THE AFORESAID DEDUCTION FRO M THE NET PROFIT RATE FOR BANK GUARANTEE CHARGES, BANK COMMISSION, INTEREST PAID O N LOANS TO PERSONS OTHER THAN BANK AND FINANCIAL INSTITUTIONS AS WELL AS INTEREST PAID ON MACHINERY LOAN SHALL BE DEDUCTED PROVIDED THE SAME ARE FOUND INCURRED FOR THE BUSINE SS PURPOSE. 11. THE ASSESSEE HAS NOT PRESSED GROUND NO. 1, 8 AN D 10. THE SAME ARE DISMISSED AS NOT PRESSED. 12. LEVY OF INTEREST IN GROUND NO. 9 BEING CONSEQUE NTIAL, THE ASSESSING OFFICER SHALL GIVE CONSEQUENTIAL EFFECT. 13. GROUND NO. 2.1, 2.2 AND 3 STANDS PARTLY ALLOWED . AS A RESULT THE REVENUES GROUNDS IN APPEAL STAND DISMISSED. 14. GROUND NOS. 4, 5, 6 & 7 STAND REMITTED TO THE A SSESSING OFFICER FOR VERIFICATION OF THE FACTS FOR ALLOWING DEDUCTION IN TERMS OF DIRECT IONS AS CONTAINED IN PARA 10 ABOVE ON THE AVERAGE NET PROFIT RATE OF 10.5% ON ADMITTED CO NTRACT RECEIPTS. 15. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES AND THAT OF REVENUE STANDS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 20.8. 2013. SD/- SD/- ( KUL BHARAT ) ( B. R. JAIN ) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 20/08/2013. 9 D/- COPY FORWARDED TO :- M/S. SINGHAL BUILDERS CONTRACTORS, BHARATPUR. THE ACIT, CIRCLE, BHARATPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 904(2)/JP/2012) BY ORDER, AR ITAT JAIPUR.