Shashi kant khetan, JHUNJHUNU V. ACIT, JHUNJHUNU

ITA 918/JPR/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99324 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 27-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY MALIK JCIT DHK
• Keywords: Rejection of books of accounts; Depreciation; Opportunity of being heard; Corroborative evidences; Non compliance; Notional interest
• Section: 143(3); 142(1); 131; 144

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 VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA -@ ITA NO. 918/JP/2013 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2010-11. SHASHI KANT KHETAN, M/S S.K. KHETAN, H-3, INDRA NAGAR, JHUNJHUNU. CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE- JHUNJHUNU. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AEHPK 0657 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI VIJAY GOYAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI AJAY MALIK (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11/09/2015. MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 24/09/2015. VKNS'K@ ORDER PER T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 05/09/2013 OF THE LEARNED C.I.T.(A)-III, JAIPUR FOR A.Y. 2010-11. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD CIT(A), CENTRAL ERRED IN CONFIRMING THE ADDITION OF RS. 38,60,745/- OUT OF TOTAL ADDITION O F RS. 2 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT 40,21,610/- MADE BY A.O. BY MAKING DISALLOWANCE OUT OF TOTAL CONTRACT EXPENSES OF RS. 13,40,53,661/- BY REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE AND WITHOUT PROVIDING THE REASONABLE OPPORTUNITY OF BEIN G HEARD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) CENTRAL, ERRED IN CONFIRMING THE ADDITION OF RS. 17,48,663/- MADE BY A.O. BY DISALLOWING INTEREST AND BANK CHARGES. 2. FIRST GROUND OF THE ASSESSEES APPEAL IS AGAINST CONFIRMING THE ADDITION OF RS. 38,60,745/- OUT OF TOTAL ADDITION O F RS. 40,21,610/- ON ACCOUNT OF DISALLOWANCE OF CONTRACT EXPENSES. THE AS SESSEE IS A CONTRACTOR. HE FILED HIS RETURN ON 05/10/2010 DECLA RING TOTAL INCOME OF RS. 72,88,200/-. THE CASE WAS SCRUTINIZED U/S 143(3) READ WITH SECTION 144 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS NON-COOPERATI VE NOT ONLY IN FURNISHING THE REQUISITE DETAIL BUT ALSO PRODUCING THE BOOKS OF ACCOUNT AND ALSO ALL SUPPORTING EVIDENCES FOR VERIFICATION. IN COMPLIANCE TO THE FIRST NOTICE ISSUED U/S 143(2) OF THE ACT ON 23/09/ 2011 WHEREBY THE DATE OF COMPLIANCE WAS FIXED FOR 30/09/2011, NOBODY WAS ATTENDED NOR ANY WRITTEN REPLY WAS FILED NOR ANY APPLICATION FOR ADJOURNMENT WAS FILED. IN RESPONSE TO THE NOTICE U/S 142(1) ALONGWIT H DETAILED 3 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT QUESTIONNAIRE ON 07/2/2012 WHEREBY THE DATE OF COMP LIANCE WAS FIXED FOR 16/2/2012, NO BODY ATTENDED NOR ANY WRITTEN REPL Y WAS FILED NOR ANY APPLICATION FOR ADJOURNMENT WAS FILED, THEREFORE , THE LD ASSESSING OFFICER ISSUED A LETTER FOR NON-COMPLIANCE ON 14/5/ 2012 WHEREBY IT WAS DULY POINTED OUT TO THE ASSESSEE THAT THE DETAILS A ND DOCUMENTS INCLUDING BOOKS OF ACCOUNT AND OTHER EVIDENCE CALLE D VIDE NOTICE U/S 142(1) DATED 07/2/2012 HAD NOT BEEN PRODUCED. AN OP PORTUNITY WAS GRANTED TO SUBMIT THE DETAILS AND PRODUCED THE BOOK S OF ACCOUNT ON 05/6/2012. IN COMPLIANCE THEREOF, A LETTER REQUESTI NG ADJOURNMENT WAS FILED ON 04/6/2012. AGAIN THE CASE WAS REFIXED FOR 1 2/6/2012. ON THIS DATE ALSO HE HAS NOT ATTENDED THE HEARING AND NO DE TAILS WERE FURNISHED AND NO APPLICATION OF ADJOURNMENT WAS FILE D. THEREAFTER NUMBER OF NOTICES ISSUED BUT THE ASSESSEES ATTITUD E WAS NON- COOPERATIVE WITH THE ASSESSING OFFICER. THE ASSESSEE S C.A. SHRI M.S. DHANKAR APPEARED ON 24/08/2012 BEFORE THE ASSESSING OFFICER BUT WITHOUT THE BOOKS OF ACCOUNT AND BILLS OF PURCHASE A ND EXPENSES FOR VERIFICATION. HE WAS AGAIN REQUESTED TO MAKE REGULAR COMPLIANCE TO COMPLETE THE ASSESSMENT. ON 24/8/2012, THE AR OF TH E ASSESSEE FILED WRITTEN SUBMISSIONS WITH REGARD TO SHOW CAUSE NOTICE I SSUED ON 4 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT 31/7/2012 WHEREIN IT WAS SUBMITTED THAT ON GIVEN DATE I.E. 07/2/2012 THE LD ASSESSING OFFICER WAS NOT IN THE OFFICE AND O N 17/08/2012 THE LD ASSESSING OFFICER WAS AGAIN WITH THE CHIEF COMMISSION ER OF INCOME TAX DURING VISIT OF JHUNJHUNU CIRCLE. AS PER ASSESSING OFFICER SUBMISSION, THERE WAS NON COMPLIANCE OF THE NOTICE ISSUED U/S 14 2(1) OF THE ACT, THEREFORE, HE REQUESTED TO DROP THE PENALTY PROCEED INGS BUT REPLY OF THE ASSESSEE WAS FOUND TO THE ASSESSING OFFICER BASE LESS AND PERVERSE. HE FURTHER HELD THAT EVEN AFTER LAPSE OF ALMOST 11 MONTHS FROM THE DATE OF ISSUE OF FIRST NOTICE U/S 143(2) AND AFTER THE LAPSE OF ALMOST 6 MONTHS FROM THE DATE OF ISSUE OF THE NOTICE U/S 142 (1) WITH DETAILED QUESTIONNAIRE EVEN THE BASIC REQUIREMENT OF FURNISH ING THE COMPUTATION OF INCOME AND TAX AUDIT REPORT WITH AUDITED BALANCE SHEET AND P&L ACCOUNT, HAD NOT BEEN FULFILLED. EVEN WHILE CONSIDER ING THE FACT THAT THE ASSESSING OFFICER WAS NOT PRESENT IN THE OFFICE ON O NE OCCASION AND WAS BUSY WITH SOME OTHER OFFICIAL WORK, THE DETAILS CALL ED FOR VIDE QUESTIONNAIRE ANNEXED TO THE NOTICE U/S 142(1) DATE D 07/02/2012 COULD STILL HAVE BEEN FILED. THE PRESENT OF THE INSPECTOR AND DAK RECEIPT COUNTER WAS SUFFICIENT ENOUGH IF THE ASSESSEE TRULY INTENDED TO FURNISH THE DETAILS. INSPITE OF THIS FACT, THE ASSESSEE CHO SE NOT TO FURNISH THE 5 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT DETAILS. EVEN WHILE SUBMITTING THE REPLY TO THE SHOW CAUSE NOTICE, NO DETAILS WHATSOEVER WERE FURNISHED. IT IS CLEAR FROM T HIS FACT THAT THE ASSESSEE WAS MERELY USING ONE PRETEXT OR THE OTHER F OR COMPLYING TO THE REQUIREMENTS OF THE ASSESSMENT PROCEEDINGS. THE AR OF THE ASSESSEE ONCE AGAIN ASKED TO FURNISH THE DETAILS ON THE NEXT DATE OF HEARING FIXED FOR 10/09/2012. ON 10/09/2012 SHRI MA NY DHANKAR, C.A. ATTENDED ON BEHALF OF THE ASSESSEE. IN THIS REGARD THE NOTINGS MADE ON THE ORDERSHEET ON 10/09/2012 ARE REPRODUCED VERBATI M AS UNDER:- SH. MANU DHANKAR, C.A. AND SON OF THE AR SHRI M.S. DHANKAR, C.A. ATTENDS ONCE AGAIN WITHOUT THE BOOKS O F ACCOUNTS. SH. MANU DHANKAR, CA IS ONCE AGAIN MADE AWARE OF THE FACT ON RECORD THAT THE BOOKS OF ACCOUN TS, BILLS OF PURCHASES AND BILLS OF EXPENSES IN ORIGINA L HAVE BEEN REPEATEDLY REQUIRED TO BE PRODUCED FOR VERIFIC ATION, FIRST BY WAY OF NOTICE U/S 142(1) DATED 07/02/2012, THAN BY WAY OF SPECIFIED NOTICE U/S 142(1) DATED 01/08/20 12 AND LASTLY BY WAY OF ORDER SHEET ENTRY DATED 24/08/2W012. HE IS ALSO APPRAISED OF THE FACT THAT E VEN THE COPY OF THE AUDIT REPORT HAS NOT BEEN FURNISHE D TILL DATE DESPITE SPECIFIC REQUIREMENT IN THE NOTICE U/S 142(1) DATED 07/02/2012 AT SR. NO. 3 OF THE QUESTIONNAIRE. SH. MANU DHANKAR, CA SUBMITS THAT BOOKS OF ACCOUNTS SHA LL 6 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT BE PRODUCED AT THE TIME OF NEXT HEARING. COPY OF TH E AUDIT REPORT IS SUBMITTED WHICH IS PLACED ON RECORD. A WRITTEN REPLY CONTAINING CERTAIN INFORMATION IN RESP ECT OF DETAILS CALLED FOR IN THE QUESTIONNAIRE DATED 07/02 /2012 IS SUBMITTED WHICH IS PLACED ON RECORD. CASE IS ADJOURN ED FOR HEARING ON 03/10/2012 AT 3.00 P.M. HE FURTHER OBSERVED THAT ON THE APPOINTED DATE OF C OMPLIANCE I.E. 03/10/2012, THE ASSESSEE FAILED TO FURNISH ANY WRIT TEN SUBMISSION OR PRODUCE BOOKS OF ACCOUNT AS REQUIRED. THEREFORE, ANO THER NOTICE U/S 142(1) DATED 09/10/2012 WAS ISSUED FIXING THE DATE O F COMPLIANCE ON 30/10/2012 WHEREIN IT WAS SPECIFICALLY REQUIRED TO F URNISH REPLY OF NOTICE U/S 142(1) DATED 07/02/2012 ALONGWITH BOOKS O F ACCOUNT AND DOCUMENTS AS REQUIRED VIDE NOTICE U/S 142(1) DATED 01/08/2012. IN RESPONSE TO THE SAME, SH. MANU DHANKAR, CA ATTENDED AND AGAIN FILED ADJOURNMENT APPLICATION FOR THE REASON THAT THE AR OF THE ASSESSEE SH. M.S. DHANKAR, C.A. WAS APPEARING BEFORE THE COMMISSI ONER OF SERVICE TAX, JAIPUR IN THE CASE OF M/S RAJENDRA SINGH BHAMBO O ON THE RESPECTIVE DATE AND REQUESTED TO ADJOURN THE HEARIN G FOR NEXT DATE. ON THE SAME APPLICATION THROUGH NOTING IT WAS MADE AWAR E TO SH. MANU DHANKAR, CA THAT: THE REASONS GIVING FOR SEEKING A DJOURNMENT ARE NOT FOUND CONVINCING BECAUSE THE WRITTEN SUBMISSION WITH DETAILS AND 7 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT INFORMATION COULD HAVE BEEN FURNISHED EVEN IN THE A BSENCE OF THE AR SH. MANU DHANKAR CA APPEARING ON BEHALF OF THE ASSE SSEE IS MADE AWARE OF THE EARLIER NON COMPLIANCE AND REPEATED ADJ OURNMENTS. HOWEVER, IN VIEW OF THE REQUEST MADE THE CASE IS ADJ OURNED AND RE- FIXED FOR HEARING ON 20/11/2012 AT 2:15 P.M. ON 20/11/2012 NONE ATTENDED NOR ANY WRITTEN SUBMIS SIONS FILED BY THE ASSESSEE. THEREFORE, ONCE AGAIN NOTICE U/S 1 42(1) DATED 29/11/2012 WAS ISSUED FIXING THE DATE OF COMPLIANCE ON 04/12/2012 WHICH WAS ALSO REMAIN UNCOMPLIED BY THE ASSESSEE FOR THE REASON BEST KNOWN TO HIM. THE LD ASSESSING OFFICER HELD THAT THE ASSESSEES INTENTION WAS NOT MAKING DUE COMPLIANCE IN THE ASSES SMENT PROCEEDINGS AT HAND. HE FURTHER HELD THAT RETURN OF INCOME FILED BY THE ASSESSEE AS WELL AS THE COPY OF TAX AUDIT REPORT ACC OMPANIED WITH BALANCE SHEET AND P&L ARE NOT FULLY SUPPORTED BY TH E BOOKS OF ACCOUNT AND EVIDENCES IN THE FORM OF BILLS, VOUCHERS AND OT HER RELEVANT EVIDENCES. AS REGARDS THE BOOKS OF ACCOUNT, THE ELA BORATE DISCUSSION MADE IN THE ASSESSMENT ORDER THAT THE BOOKS OF ACCO UNT AND OTHER RELEVANT EVIDENCES HAD NOT BEEN PRODUCED FOR VERIFI CATION. NONE OF THE ACTIONS OF THE ASSESSEE DURING THE COURSE OF ASSESS MENT PROCEEDINGS 8 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT GIVE ANY REASON TO FORM AN OPINION THAT THE PROPER BOOKS OF ACCOUNT HAVE BEEN MAINTAINED AND SUCH BOOKS OF ACCOUNT ARE DULY AND ADEQUATELY SUPPORTED BY THE BILLS OF PURCHASES, BIL LS OF VARIOUS EXPENSES DEBITED TO THE CONTRACT EXPENSES ACCOUNT A ND BILLS OR VOUCHERS PERTAINING TO THE VARIOUS EXPENSES TO THE P&L ACCOUNT. THEREFORE, THE PROVISIONS OF SECTION 145(3) ARE CLEA RLY AND SQUARELY APPLICABLE IN THE INSTANT CASE. ACCORDINGLY HE REJE CTED THE BOOK RESULT OF THE ASSESSEE. 2.1 AFTER REJECTING BOOK U/S 145(3) OF THE ACT, THE LD ASSESSING OFFICER HAS TO ESTIMATE THE INCOME OF THE ASSESSEE U/S 144 OF THE ACT ON THE PAST HISTORY OF THE CASE BUT PAST HISTORY OF THE ASSESSEES CASE IS NOT TO BE CONSIDERED AN APPROPRIATE METHOD FOR FINA LIZING THE ASSESSMENT BECAUSE THE FIGURE DISCLOSED IN THE P&L ACCOUNT AND BALANCE SHEET ARE ALSO NOT RELIABLE. BY MERE FILING OF RETURN ALONGWITH COPY OF BALANCE SHEET AND P&L ACCOUNT IS NOT SUFFIC IENT TO PROVE THE TRANSACTION CORRECT AND COMPLETE. THE STATUTE IS PRO VIDED SCRUTINY OF THE CASE U/S 143(3) OF THE ACT. IT IS FURTHER HELD THAT EVEN IN PAST, THE ASSESSEES GP AND NP HAD BEEN ACCEPTED BY THE DEPAR TMENT, THE ASSESSEE IS NOT ABSOLVE FOR MAINTAINING BOOKS OF AC COUNT UNDER THE LAW 9 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT AND ALSO SCRUTINIZE THE CASE U/S 143(3) OF THE ACT. THE ASSESSEE HAS SHOWN MARGINAL INCREASE IN GP RATE AND NP RATE COMPA RED TO EARLIER YEAR. HOWEVER, SUCH FACTS BY ITSELF CANNOT RENDER TH E ASSESSMENT PROCEEDINGS MEANINGLESS. THEREFORE, EACH OF THE REL EVANT CONTENTS OF THE RETURN OF INCOME, THE BALANCE SHEET AND THE P&L ACCOUNT ARE HEREBY CONSIDERED SEPARATELY FOR THE PURPOSE OF EST IMATING THE TRUE AND CORRECT INCOME OF THE ASSESSEE. THE LD ASSESSING OFFICER COMPARED THE TOTAL CONTRACT RECEIPTS FROM 26AS AND FOUND DIS CREPANCY OF RS. 15,000/-, WHICH WAS SEPARATELY ADDED IN THE INCOME OF THE ASSESSEE. THE ASSESSEE HAD SHOWN TOTAL CONTRACT RECEIPTS OF RS. 14,71,70,861/- IN THE P&L ACCOUNT. A SUM OF RS. 17,48,663/- HAD BEEN DEBITED UNDER THE HEAD BANK CHARGES AND INTEREST NO ANY SEPARATE D ETAILS FURNISHED BY THE ASSESSEE IN THIS RESPECT SHOWING DETAIL OF INTER EST PAID TO THE PARTICULAR BANK/FINANCIAL INSTITUTION. THE SAID EXP ENSES WERE MADE ON BORROWINGS FROM BANK WITH AMOUNTED TO RS. 1,72,60,615 /-. THE LD ASSESSING OFFICER EXAMINED THE INTEREST BEARING BOR ROWINGS UTILIZED FOR THE BUSINESS PURPOSES OR NOT. HE FOUND THAT OUT OF TOTAL BORROWINGS, THE ASSESSEE UTILIZED RS. 1,54,71,217/- FOR ACQUIRI NG OF VARIOUS PLOTS OF LAND, WHICH HAS BEEN TABULATED ON PAGE 9 OF THE ASSE SSMENT ORDER AND 10 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT HELD THAT ENTIRE INTEREST BEARING BORROWING HAD BEEN UTILIZED FOR NON- BUSINESS ASSETS. THE ASSESSEE IS A CONTRACTOR, HE N EVER WAS DEALING IN THE BUSINESS OF TRADING OF LAND. THE ASSESSEE HAS CR EDIT BALANCE IN CAPITAL ACCOUNT AT RS. 2,81,21,267/-. THE ASSESSEE AGAINST THIS CAPITAL HAD APPLIED IN FIXED ASSETS AMOUNTING TO RS. 5,35,2 8,344/-. AFTER REDUCING THE APPLICATION FOR NON BUSINESS ASSETS TH ERE FROM THE CORRECT APPLICATION IN FIXED ASSETS FOR THE PURPOSE OF BUS INESS AMOUNTING TO RS. 3,80,57,127/-. IN ADDITION TO THIS, THE CURRENT ASSETS INVESTED IN VARIOUS BANKS AND FINANCIAL INSTITUTES AMOUNTING T O RS. 3,99,47,378/-. IN THIS MANNER, THE TOTAL APPLICATION IN BUSINESS A SSETS FAR EXCEEDS THE ASSESSEES OWN CAPITAL. THE ACQUISITION OF PERSONAL ASSETS WHICH ARE NON BUSINESS IN NATURE AND AMOUNT TO RS. 1,54,71,21 7/- WAS THUS CLEARLY MADE FROM THE INTEREST BEARING BORROWED FUND S OF RS. 1,72,60,615/-. BESIDES THIS, THE ASSESSEE HAS ALSO ADVANCED A SUM OF RS. 44,78,927/- TO A FAMILY MEMBER SMT. BABITA KHA ITAN AND ANOTHER SUM OF RS. 6,83,512/- HAS BEEN ADVANCED TO M/S VAIS HALI STONE CRUSHER. DURING THE YEAR UNDER CONSIDERATION, NO IN COME, EITHER IN THE FORM OF INTEREST OR OTHERWISE HAS BEEN RECEIVED FROM THESE TWO SOURCES. HENCE, THE TOTAL ADVANCES MADE TO THESE TW O ENTITIES 11 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT AMOUNTING TO RS. 51,62,439/- IS HEREBY HELD TO BE F OR NON BUSINESS PURPOSES. THIS FACT DOES NOT LEAVE ANY DOUBT AS TO THE CONCLUSION THAT THE ENTIRE NON BUSINESS ASSETS HAVE BEEN ACQUIRED O UT OF INTEREST BEARING BORROWED FUNDS ON WHICH INTEREST AMOUNTING TO RS. 17,48,663/- HAS BEEN DEBITED TO THE P&L ACCOUNT. ACCORDINGLY HE DISALLOWED THE INTEREST DEBITED IN THE P&L ACCOUNT AT RS. 17,48,66 3/-. THE LD ASSESSING OFFICER ASKED TO FURNISH DETAIL OF CONTRACT EXPENSE S DEBITED AT RS. 13,40,53,661/- VIDE LETTER DATED 07/2/2012. THE ASS ESSEE SUBMITTED REPLY VIDE LETTER DATED 10/09/2012 WHEREIN IT WAS SUB MITTED THAT CONTRACT EXPENSES DEBITED IN SINGLE HEAD CONTRACT EXPENSES AND IT IS NOT POSSIBLE TO BIFURCATE IN DIFFERENT HEADS OF EXP ENSES. THE LD ASSESSING OFFICER HELD THAT THE ASSESSEE HAS DELIBE RATELY CHOSEN NOT TO FURNISH THE SPECIFIC DETAILS CALLED FOR AND GIVEN A VAGUE AND UNACCEPTABLE EXCUSE FOR NOT FURNISHING THE DETAILS. THE ASSESSEE HAS DEBITED CONTRACT EXPENSES AT RS. 13.4 CRORES AS AGA INST TOTAL CONTRACT RECEIPTS OF RS. 14.71 CRORES, WHICH CONSTITUTES TO 9 1.09% OF THE CROSS RECEIPTS. THE LD ASSESSING OFFICER FOUND THESE PERCE NTAGE OF EXPENSES NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE BUSINES S PURPOSES IN ABSENCE OF REQUIRED DETAILS AND EVIDENCES AND BURDE N OF PROOF LIES ON 12 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT THE ASSESSEE AS HE CLAIMED CORRECT AND GENUINE EXPE NSES. THE ASSESSEE HAD NOT FURNISHED DETAILS IN HEADWISE AND M ONTHWISE AS REQUIRED BY HIM. IT IS NOT ASCERTAINABLE TO HIM THA T WHAT MATERIAL PURCHASED AND CONSUMED AND WHAT WAS THE COMPONENT OF LABOUR CHARGES IN CONTRACT BUSINESS. THESE DETAILS WOULD HAV E ALSO INDICATED WHETHER ABNORMAL AND FICTITIOUS PURCHASES AND EXPENS ES HAD BEEN DEBITED DURING LAST CLOSING MONTH OF THE FINANCIAL YEAR. HOWEVER, IT IS STILL REMAINED AN UNDENIABLE FACT THAT THE ASSESSEE MUST HAVE INCURRED VARIOUS EXPENSES TO EXECUTE THE CONTRACT WORK. IN AB SENCE BOOKS OF ACCOUNT AND VOUCHERS, THE BOOK RESULT CANNOT BE ACC EPTED AND ARE NOT VERIFIABLE. HE CONSIDERED PROPORTION OF THE CONTRAC T EXPENSES AT 91.09% EXCESSIVE. THEREFORE, HE DISALLOWED 3% OF THE TOTAL CONTRACT EXPENSES OF RS. 13,40,53,661/- AND MADE DISALLOWANCE OF RS. 40,21,610/- IN THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WH O HAD ALLOWED THE APPEAL PARTLY BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT, FINDINGS OF THE A.O. AS ALSO OTHER RELEVANT FACTS R ELATING TO THIS GROUND. IT MAY BE NOTED THAT THE APPELLANT HAS OBJECTED 13 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT TO THE REJECTION OF BOOKS OF ACCOUNTS AND ADDITION OF RS. 40,21,610/- OUT OF CONTRACT EXPENSES BY CLAIMING TH AT THE APPELLANT HAS ATTENDED THE PROCEEDINGS PRODUCED BOO KS OF ACCOUNTS AND THAT SUCH REJECTION OF BOOKS OF ACCOUN TS AND MAKING OF SUCH ADDITION WAS WITHOUT ANY BASIS. THE A.O S CASE IS THAT THE PROCEEDINGS WERE FIXED FOR HEARING ON DIFFERENT DATES AND THAT VERY SPECIFIC QUERY WAS RAI SED REGARDING BIFURCATING THE CONSOLIDATED AMOUNT OF CO NTRACT EXPENSES AND FURNISHING OF MONTH WISE STATEMENT OF DIFFERENT HEADS IN CONTRACT EXPENSES. AS PER A.O. T HE APPELLANT NEVER PRODUCED BOOKS OF ACCOUNTS AS ALSO THAT THE COMPLETE DETAIL OF CONTRACT EXPENSES VIZ A VIZ EXPE NSES INCURRED UNDER DIFFERENT HEADS WAS NOT FURNISHED. TH EREFORE THE A.O. CAME TO THE CONCLUSION THAT THE CONTRACT E XPENSES AMOUNTING TO RS. 13.40 CRORES APPROXIMATELY AND WHI CH WERE ABOUT 91.09% OF THE TOTAL RECEIPTS WERE NOT SUBJ ECT TO PROPER VERIFICATION. THE A.O. ACCORDINGLY DISALLOWED 3% OF SUCH CONTRACT RECEIPT LEADING TO ADDITION OF RS. 40 ,21,610/-. ON THE OTHER HAND THE APPELLANT CASE IS THAT PROCEE DINGS WERE ATTENDED ON SPECIFIC DATES WITH REGULAR BOOKS OF ACCOUNTS AND THAT ON THOSE SPECIFIC DATES THE A.O. WAS NOT AVAILABLE. IT IS ALSO CLAIMED THAT THE APPELLANT HA S MAINTAINED CONSTANT N.P. AND G.P. RATE AND THAT EVE N WHEN THE CASE WRITTEN SUBMISSIONS COMPLETED UNDER SCRUTIN Y ASSESSMENT IN THE PAST THE INCOME WAS ASSESSED @ 5 TO 6% SUBJECT TO CLAIM OF DEPRECIATION INTEREST PAYMENT A ND 14 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT REMUNERATION TO THE PARTNERS. IT IS ALSO CONTENDED THAT BEFORE DISALLOWING 3% OF CONTRACT EXPENSES THE A.O. HAS NOT GIVEN ANY PROPER OPPORTUNITY OF BEING HEARD OR ANY SHOW CAUSE NOTICE. ON CAREFUL CONSIDERATION OF RELEVANT FACTS IT MAY BE NOTED THAT THE A.O. HAS FIXED THE PROCEEDING S ON DIFFERENT DATES AS MENTIONED IN THE CHART ON PAGE N O. 3 AND THOUGH THE ATTENDANCE OF THE APPELLANT ON SOME OF T HE PROCEEDINGS MAY NOT BE DISPUTED BY THE FACT REMAINS THAT THE APPELLANT NEITHER PRODUCED THE REGULAR BOOKS OF ACCOUNTS FOR EXAMINATION NOR FURNISHED SPECIFIC DET AIL IN RESPECT OF DIFFERENT HEADS OF CONTRACT EXPENSES AMO UNTING TO RS. 13.40 CRORES. IT MAY BE NOTED THAT SUCH SPECIFI C QUERY FOR FURNISHING OF BIFURCATED ACCOUNT OF CONTRACT EX PENSES UNDER DIFFERENT HEADS WAS MADE BY THE A.O. VIDE NOTI CE U/S 142(1) DATED 07/02/2012 AND WHICH WAS REPEATEDLY REQUESTED FOR ON THE SUBSEQUENT DATES OF HEARING BU T THE APPELLANT NEVER COMPLIED WITH SUCH SPECIFIC REQUIREM ENT RAISED BY THE A.O. IT MAY BE NOTED THAT IN THE CONT RACT ACCOUNT OF M/S S.K. KHETAN THE APPELLANT HAS CLAIME D CONTRACT EXPENSES IN A CONSOLIDATED MANNER FOR RS. 13.40 CRORES APPROXIMATELY AND FOR MAKING PROPER VERIFICA TION OF SUCH EXPENSES THE A.O. HAS RIGHTLY REQUIRED THE ASS ESSEE TO FURNISH BIFURCATED DETAILS OF SUCH EXPENSES BY WAY O F EACH HEAD AS ALSO MONTH WISE EXPENSES OF EACH HEAD OF EXPENSES. HOWEVER, AS MENTIONED ABOVE THE APPELLANT FOR THE REASONS BEST KNOWN TO HIM NEVER FURNISHED SUCH D ETAILS 15 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT BEFORE THE A.O.. IN THIS BACKGROUND IT CAN BE SAID WITH CERTAINTY THAT THE CLAIM OF THE APPELLANT IN RESPEC T OF CONTRACT EXPENSES AMOUNTING TO RS. 13.40 CRORES WAS NOT SUBJECT TO PROPER VERIFICATION AND THEREFORE THE BO OKS OF ACCOUNTS OF THE APPELLANT CANNOT CONSIDER TO BE COR RECT OR COMPLETE AND THEREFORE THE A.O. HAS RIGHTLY REJECTE D THE BOOKS OF ACCOUNTS AND MADE THE ASSESSMENT IN THE MA NNER PROVIDED U/S 144 OF IT ACT. THEREFORE THE ACTION OF THE A.O. IN REJECTION OF BOOKS OF ACCOUNTS AND APPLYING PROV ISIONS OF 145(3) OF IT ACT IS CONFIRMED. AS REGARDS ESTIMATION OF PROFIT, AFTER INVOKING TH E PROVISIONS OF SEC. 145(3) OF IT ACT, IT MAY BE STATE D THAT IT IS SETTLED LAW THAT EVEN AFTER INVOKING THE PROVISIONS OF SEC. 145(3), THE A.O. IS NOT EMPOWERED TO ASSESS THE INCO ME AT WHATEVER FIGURES HE WANTS AND THE A.O. IS SUPPOSED TO MAKE AN HONEST ESTIMATION EITHER BASED ON THE PAST HISTO RY OF THE APPELLANTS OWN CASE OR ON THE BASIS OF ANY COMPARAB LE CASE. THE PAST RESULTS MAY ALSO INDICATE THAT THE CL AIM OF THE EXPENSES SHOULD ALSO BE BROADLY SIMILAR TO THE PAST YEARS AND IF THERE ARE WIDE VARIATIONS THEN THERE SHOULD B E SPECIFIC REASONS FOR THE SAME. FOR SUCH PROPOSITION RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS:- (I) M/S BRIJBHUSHAN LAL PRADHUMAN KUMAR VS. CIT 115 ITR 524. (II) SHREE SHANKAR KHANDSARI SUGAR MILLS VS. CIT 193 ITR 669. 16 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT (III) CIT VS DR. A.P. BAHEL 2 DTR 387 (RAJ.) (IV) CIT VS. SURESH MARBLES PVT. LTD. 18 DTR 118 (RAJ .) (V) SHRI RAM JHANWAR VS. ITO (2005) 98 TTJ 639 (ITAT JODHPUR). (VI) AJAY GOYAL VS. ITO 99 TTJ, ITAT, JODHPUR. (VII) ITO VS. GIRISH M. MEHTA (2006) 153 TAXMAN. IT MAY BE MENTIONED THAT DURING ASSESSMENT PROCEEDI NGS THE A.O. HAS SPECIFICALLY REQUIRED TO JUSTIFY THE C LAIM OF THE CONTRACT EXPENSES AND PRIMA FACIE SUCH EXPENSES WERE NOT SUBJECT TO PROPER VERIFICATION. THE APPELLANT CASE I S THAT THE GP/NP OF THE ASSESSEE IS BROADLY CONSISTENT AND THA T THE SAME A.O. HAS COMPLETED THE ASSESSMENT FOR A.Y. 200 9-10 BY MAKING LUMP SUM ADDITION OF RS. 5 LAC. IN THIS C ONNECTION IT MAY BE STATED THAT THE FACTS OF THE EARLIER ASSE SSMENT YEARS WERE DIFFERENT WITH THE FACTS OF THE ASSESSMENT YEARS UNDER CONSIDERATION INASMUCH AS IN THE YEAR UNDER CONSIDERATION THE BOOKS OF ACCOUNT AND PARTICULARLY THE CONTRACT EXPENSES WERE NOT SUBJECT TO PROPER VERIFI CATION. IN THIS BACKGROUND IT MAY BE STATED THAT DURING THE AS SESSMENT PROCEEDINGS THE APPELLANT WAS REQUIRED TO FURNISH TH E DETAILS OF CONTRACT EXPENSES IN RESPECT OF EARLIER TWO ASSES SMENT YEARS VIZ A VIZ ITS COMPARISON WITH THE TOTAL TURNOV ER AND THE APPELLANT FURNISHED SUCH DETAILS AS UNDER:- 17 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT ASSTT. YEAR TOTAL TURNOVER CONTRACT EXP. PERCENTAGE 2008-09 119.86 104.17 86.90 2009-10 279.88 250.20 89.54 2010-11 147.17 134.05 91.09 IT MAY BE NOTED THAT THERE AS INCREASE OF 2% IN CON TRACT EXPENSES AND EVEN DURING THE APPELLATE PROCEEDINGS NO PROPER EXPLANATION IS GIVEN IN RESPECT OF SUCH INCR EASE. IT MAY ALSO BE NOTED THAT EVEN IN ASSESSMENT YEAR 2009 -10 WHEN THE CASE WAS COMPLETED UNDER SCRUTINY THE CONTRA CT EXPENSES WERE AT 89.54% OF THE TOTAL TURNOVER AND EV EN THAN THE A.O. HAS MADE ADDITION OF RS. 5 LACS. KEEP ING IN VIEW THE APPELLANT OWN PREVIOUS CLAIM OF CONTRACT EXP ENSES, SUCH EXPENSES TO THE EXTENT OF 88.21% (BEING AVERAG E OF EARLIER TWO YEARS) IS CONSIDERED TO BE FARE AND REAS ONABLE AND ACCORDINGLY 2.88% OF TOTAL CONTRACT EXPENSES AM OUNTING TO RS. 1,34,05,361/- ARE DISALLOWED. THIS WILL MAKE DISALLOWANCE/ADDITION OF RS. 38,60,745/- AS AGAINST DISALLOWANCE OF RS. 40,21,610/- MADE BY THE A.O. THE APPELLANT ACCORDINGLY GETS RELIEF OF RS. 1,60,865/- . THE GROUND OF APPEAL IS PARTLY ALLOWED. 4. NOW THE ASSESSEE IS APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE LD A.O. HAS REJECTED THE BOO KS OF ACCOUNTS OF THE ASSESSEE AND INVOKED PROVISIONS OF SECTION 145( 3) OF THE ACT AND 18 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING SE CTION 144 OF THE ACT. THE REJECTION OF BOOKS OF ACCOUNT DOES NOT GIVE UNFETTERED POWER TO ASSESS THE INCOME OF A PERSON. SECTION 144 OF IN COME TAX ACT PROVIDES BEST JUDGMENT ASSESSMENT, IT SHOULD BE A F AIR INCOME BY CONSIDERING THE RESULTS OF INQUIRIES CONDUCTED BY H IM, PAST HISTORY OF THE ASSESSEE AND COMPARATIVE CASES. BOTH THE LOWER AUTHORITIES HAVE NOT CONSIDERED THE PAST HISTORY OF THE CASE AND NO COMPARATIVE CASE WAS APPLIED FOR IN SUPPORT OF HIS ESTIMATION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD CIT(A). THE LD A.O. H AD DISALLOWED 3% OF CONTRACT EXPENSES WITHOUT ANY BASIS. HE HAD NOT G IVEN ANY LOGIC OR SUPPORTING MATERIAL TO JUSTIFY DISALLOWANCE OF 3% OU T OF TOTAL CONTRACT EXPENSES. THE LD CIT (A) ALSO ALLOWED PART RELIEF BY C ONSIDERING THE SIMPLE AVERAGE OF EARLIER TWO YEARS OF CONTRACT EXPE NSES AND HELD THAT 88.21% OF TOTAL CONTRACT RECEIPTS AS REASONABLE CON TRACT EXPENSES. THE INFLATION IN COST @ 2.31% WAS ACCEPTED BY THE ASSESSI NG OFFICER FOR A.Y. 2009-10 BUT ESTIMATION FOR A.Y. 2010-11 IS WITH OUT CONSIDERING THE INFLATION IN COST. IN A.Y. 2008-09, THE PERCENTAGE OF CONTRACT EXPENSES TO TOTAL RECEIPT WAS 86.90%. IN A.Y. 2009-10, THE LD ASSESSING OFFICER MADE AD HOC ADDITION OF RS. 5 LACS AGAINST THE CONT RACT EXPENSES, 19 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT WHICH GIVES THE CONTRACT PERCENTAGE OF TOTAL RECEIPT AT 89.21%. IT MEANS THE LD ASSESSING OFFICER HAD ACCEPTED THE INF LATION @ 2.31%. HE FURTHER ARGUED THAT COST OF INFLATION INDEX ALSO IN CREASED FROM PRECEDING YEAR TO THE YEAR UNDER CONSIDERATION. IF THIS INFLA TION IS APPLIED ON THE CONTRACT RECEIPTS, THE PERCENTAGE OF CONTRACT EXPEN SES ON CONTRACT RECEIPT WOULD BE 91.09%. THE DIFFERENCE IN A.Y. 2010 -11 AND COMPARED TO A.Y. 2009-10 WAS ONLY 1.55% AS AGAINST THE DIFFER ENCE OF 2.31% IN A.Y. 2009-10 IN COMPARISON TO A.Y. 2008-09. THEREFOR E, THESE DIFFERENCES DESERVED TO BE ACCEPTED, NO DISALLOWANCE ON ACCOUNT OF CONTRACT EXPENSES SHOULD BE MADE. HE FURTHER RELIED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS BHAWAN VA PATH NIRMAN (BOHRA) & CO (NO. 1) 258 ITR 431 AND ARGUED T HAT PAST HISTORY OF THE ASSESSEES CASE IS THE BEST GUIDING FACTOR T O DECIDE THE ASSESSEES INCOME U/S 144 OF THE ACT. HE FURTHER AR GUED THAT IT IS NOT NECESSARY TO MAKE ADDITION BY THE ASSESSING OFFICER EVEN BOOKS OF ACCOUNT HAD BEEN HELD REJECTABLE U/S 145(3) OF THE ACT AS HELD IN THE CASE OF CIT VS GOTAN LIME KHANIJ UDHOG (2002) 256 I TR 243 (RAJ). THE ASSESSEE IS CARRYING OUT CONTRACT WORK AT VARIOUS SI TES AND DUE TO LOCAL FACTORS THE COST CANNOT REMAIN SAME. LOCAL AVAILABI LITY OF MATERIAL, 20 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT LABOUR AND TRANSPORTATION COST AFFECTS THE TOTAL CO NTRACT COST. THE LOWER AUTHORITIES HAVE NOT CONSIDERED THIS ASPECT WHILE ES TIMATING THE TOTAL CONTRACT EXPENSES. THE LOWER AUTHORITIES HAD NOT CON SIDERED THIS ASPECT WHILE ESTIMATING THE TOTAL CONTRACT EXPENSES. THERE WA S NO COMPARISON MADE BY THE LOWER AUTHORITIES IN ESTIMATING THE INCO ME. THE ASSESSEE HAS DISCLOSED NET PROFIT @ 5.02% ON GROSS TURNOVER O F RS. 14.71 CRORES. HE FURTHER RELIED ON THE DECISION IN THE CASE OF CO MMISSIONER OF INCOME TAX VS. TARGET CONSTRUCTION CO. LTD. (2015) 231 TAXM AN 0055 (ALL), WHEREIN THE ASSESSEE COMPANY WAS ENGAGED IN THE CONST RUCTION OF THE ROADS ETC. THE ASSESSING OFFICER REJECTED THE BOOKS U/S 145(3) IN THAT CASE AND ASSESSED THE INCOME BY APPLYING N.P. RATE @ 10%, WHICH WAS CONFIRMED BY THE LD CIT(A), BUT THE HONBLE ITAT REST RICTED THIS ADDITION @ 5% N.P. RATE. THE HONBLE ALLAHABAD HIGH COURT HAS UPHELD THE DECISION OF ITAT BY HOLDING THAT THE ESTIMATION IS M ATTER OF PURE FACTS. THE ASSESSEE ALSO HAS COMPLETED THIS WORK THROUGH SUB -CONTRACTOR MORE THAN RS. 1.22 CRORES, ON WHICH THE PROFIT MARG IN IS SHARED BY THE ASSESSEE AS WELL AS SUB-CONTRACTOR AND ASSESSEE EAR NED LESSER MARGIN OF PROFIT IN SUB-CONTRACT BUSINESS. HE FURTHER ARGU ED THAT THE ASSESSEES BOOKS ARE ACCOUNTED, IT SHOULD BE ACCEPTED AS SUCH. THE AUDITOR HAD 21 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT EXAMINED THE BOOKS OF ACCOUNT ON THE BASIS OF SUPPO RTING BILLS AND VOUCHERS AND NOT MADE ANY QUALIFICATION IN THEIR AU DIT REPORT AND HAD REPORTED THAT THE PROFIT AND LOSS ACCOUNT GIVE A TR UE AND FAIR VIEW OF THE PROFIT OF THE ASSESSEE FOR WHICH HE RELIED ON T HE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF ADDL. CIT VS JAI ENG INEERING WORKS LTD. (1978) 113 ITR 389, 391-2 (DEL). THE ASSESSEE ON RE QUIRED DATE, ATTENDED THE ASSESSMENT PROCEEDINGS WITH BOOKS OF A CCOUNT BUT THE ASSESSING OFFICER WAS NOT AVAILABLE IN THE OFFICE. TH E BOOKS OF ACCOUNT WERE PRODUCED EVEN IN ABSENCE OF ASSESSING OFFICER A ND THE SAME WERE ALSO PRODUCED BEFORE THE INSPECTOR FOR EXAMINATION. THE ASSESSING OFFICER IS EMPOWERED TO ISSUE SUMMONS TO THE ASSESSE E U/S 131 AND ALSO CAN IMPOSE PENALTY U/S 271(1)(B) OF THE ACT, WH ICH HAS NOT BEEN INITIATED BY HIM. THEREFORE, HE PRAYED TO DELETE THE ADDITION. 5. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORTE D THE ORDER OF THE LD CIT(A) AND ARGUED THAT THE ASSESSEES ATTITU DE WAS NOT COOPERATIVE. HE HAS NOT PRODUCED THE BOOKS OF ACCOU NT BEFORE THE ASSESSING OFFICER ON FIXED DATE. IT IS A FACT THAT THE LD ASSESSING OFFICER HAD GIVEN NUMBER OF OPPORTUNITIES TO THE ASSESSEE B UT REQUIRED DETAILS WERE NOT SUBMITTED BEFORE HIM. EVEN THE ASSESSEE HAD NOT PRODUCED 22 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT BOOKS OF ACCOUNT BEFORE THE LD CIT(A). THEREFORE HE P RAYED TO CONFIRM THE ORDER OF THE LD CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE AS SESSEE HAS SHOWN TOTAL TURNOVER DURING THE YEAR AT RS. 14.71 CRORES ON WHICH NET PROFIT HAS BEEN SHOWN @ 5.02%, WHICH WAS RS. 27.98 CRORES AND NET PROFIT RATE @ 5.77% IN IMMEDIATE PRECEDING YEAR. THE ASSESSE E CLAIMED THAT HE PRODUCED THE BOOKS OF ACCOUNT BUT THE ASSESSING OFFICER WAS NOT AVAILABLE IN THE OFFICE BUT BOOKS WERE EXAMINED BY T HE INSPECTOR ON BEHALF OF THE ASSESSING OFFICER. THE LD ASSESSING OF FICER APPLIED SECTION 145(3) AND REJECTED THE BOOK RESULT ON THE GROUND T HAT REQUIRED DETAILS OF CONTRACT EXPENSE WERE NOT SUBMITTED BEFORE HIM. TH EREFORE, WE CONFIRM THE ORDER OF REJECTION U/S 145(3), WHICH HAS NOT BEEN CHALLENGED BY THE ASSESSEE. HOWEVER, ESTIMATE MADE B Y THE LD ASSESSING OFFICER AND CONFIRMED BY THE LD CIT(A) IS HIGHER SIDE, WHICH WOULD GIVE NET PROFIT RATE OF 12.84% BEFORE DEPRECIA TION, WHICH IS NOT POSSIBLE IN CONTRACT BUSINESS. IT IS ALSO FACT THAT REQUIRED DETAILS OF CONTRACT EXPENSES WERE NOT SUBMITTED BEFORE THE ASS ESSING OFFICER AND NET PROFIT HAS DECLINED FOR WHICH THE ASSESSEE EXPLA INED THAT PRICE HAS 23 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT GONE UP. HE ALSO REFERRED THE COST OF INFLATION IND EX FOR THIS PURPOSE, WHICH SUPPORTS THE ASSESSEES CLAIM. THE LOWER AUTHORI TIES ALSO HAVE NOT COMPARED THE CASE WITH OTHER ASSESSEES FOR ESTI MATING THE NP RATE, THEREFORE, IN THE INTEREST OF JUSTICE, WE APPLY N.P. RATE @ 5.1% ON TURNOVER OF RS. 14,71,70,861/- AND REMAINING ADDITI ON IS DELETED. THE ASSESSING OFFICER IS DIRECTED TO CALCULATE THE INCO ME AS PER THE ABOVE FINDING. 7. IN SECOND GROUND OF APPEAL, THE ASSESSEE ALSO CH ALLENGED THE ADDITION MADE BY THE ASSESSING OFFICER AT RS. 17,4 8,663/- ON ACCOUNT OF INTEREST AND BANK CHARGES BEFORE THE LD CIT(A), W HO HAD CONFIRMED THE ADDITION BY OBSERVING AS UNDER:- 6.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT, FINDINGS OF THE A.O. HAS ALSO OTHER RELE VANT FACTS RELATING TO THIS GROUND. IT MAY BE NOTED THAT THE APPELLANT HAS CLAIMED EXPENSES ON ACCOUNT OF BANK CHARGES/INTEREST PAYMENT AMOUNTING TO RS. 17,48,663 /-. THE TOTAL BORROWING OF THE APPELLANT ON WHICH SUCH INTEREST HAS BEEN PAID IS ARRIVED AT RS. 1,72,60,61 5/-. THE A.O.S CASE IS THAT THE APPELLANT WAS INVESTED IN NON-BUSINESS PERSONAL ASSETS FOR RS. 1,54,71,217/- AS ALSO THAT INTEREST FREE ADVANCES OF RS. 44,78,927/- AND RS. 6,83,512/- WERE MADE TO SMT. BABITA KHETAN AND 24 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT M/S VAISHALI STONE CRUSHERS AND THAT SUCH INVESTMEN T WAS NOT FOR ANY BUSINESS USE AS ALSO THAT INTEREST BEARING BORROWED FUNDS WERE USED FOR SUCH INVESTMENTS . IN SUPPORT OF SUCH FINDING THE A.O. HAS MENTIONED T HAT THE CAPITAL ACCOUNT OF THE ASSESSEE REVEALED BALANC E OF RS. 2.81 CRORES APPROXIMATELY AGAINST WHICH THE TOTA L APPLICATION OF FUND IN THE FIXED ASSETS AMOUNTED TO RS. 5.35 CRORES APPROXIMATELY AND AFTER EXCLUDING THE F UNDS IN NON-BUSINESS ASSETS THE CORRECT APPLICATION IN F IXED ASSETS FOR BUSINESS PURPOSES WAS ARRIVED AT 3.99 CRO RES APPROXIMATELY. THEREFORE, AS PER A.O. AS AGAINST AVAILABLE OWN CAPITAL OF THE APPELLANT AMOUNTING TO RS. 2.81 CRORES, THE DEPLOYMENT OF CAPITAL IN THE BUSIN ESS USE STOOD AT RS. 3.00 CRORES AND THE REMAINING INVESTMENTS INCLUDING ON PERSONAL ASSETS AND ADVANCEMENT OF INTEREST FREE LOAN WAS OUT OF INTERES T BEARING BORROWED FUND. THE A.O. HAS ACCORDINGLY HELD THAT THE INTEREST BEARING BORROWED FUND AMOUNTING TO RS. 1.72 CRORES WERE NOT USED FOR BUSINESS PURPOSES AND THAT THE SAME WERE USED FOR ACQUIRING PERSONAL ASSET S ETC. ACCORDINGLY, INTEREST PAID AMOUNTING TO RS. 17,48,663/- WAS DISALLOWED. ON THE OTHER HAND THE APPELLANT CASE IS THAT ALL SUCH PERSONAL ASSETS AMO UNTING TO RS. 1.54 CRORES WERE PURCHASED FROM THE BUSINESS PROFITS AND NOT FROM INTEREST BEARING BORROWED FUNDS . THE APPELLANT HAS ALSO FURNISHED INDIVIDUAL BALANCE 25 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT SHEET OF SH. S.K. KHETAN AND ACCORDING TO SUCH BALA NCE SHEET SUCH PERSONAL ASSETS WERE ACQUIRED OUT OF HIS OWN CAPITAL. AS REGARDS THE ADVANCING OF INTEREST FREE LOANS TO SMT. BABITA KHETAN AND M/S VAISHALI STONE CRUSHE RS THE APPELLANT HAS NOT FURNISHED ANY SPECIFIC EXPLAN ATION OR JURISDICTION. ON CAREFUL CONSIDERATION OF ALL RE LEVANT FACTS IT MAY BE NOTED THAT THE APPELLANT HAS NOT BE EN ABLE TO POINT OUT ANY SPECIFIC MISTAKE IN THE FINDI NG OF THE A.O. IN RESPECT OF SUCH ADDITION. THOUGH THE APPELLANT HAS FURNISHED INDIVIDUAL BALANCE SHEET OF SH. S.K. KHETAN BUT IT IS NOT KNOWN AS TO ON WHAT BASIS S UCH BALANCE SHEET HAS BEEN PREPARED. THE AUDITED BALANCE SHEET OF M/S S.K. KHETAN AS ON 31/03/2010 REVEALS CAPITAL ACCOUNT BALANCE OF RS. 2.81 CRORES AS ALSO INVESTMENT IN CURRENT ASSETS/BANK/FINANCIAL INSTITU TES FOR RS. 3.99 CRORES AND THESE FACTS ITSELF INDICATED TH AT THE DEPLOYMENT OF FUND IN THE BUSINESS WAS FAR EXCEEDING THE FUNDS AVAILABLE IN OWN CAPITAL. THE FACT REMAINS THAT THE ASSESSEE HAS INCURRED INTEREST LIABILITY AMOUNT ING TO RS. 17,48,663/- AND IF SUCH PERSONAL ASSETS AMOUNTI NG TO RS. 1.54 CRORES WOULD NOT HAVE BEEN PURCHASED AND INTEREST FREE ADVANCES AMOUNTING TO RS. 51,00,000/- APPROXIMATELY WOULD NOT HAVE BEEN ADVANCED FROM THE INTEREST BEARING BORROWED FUNDS THEN SUCH MONEY WOULD HAVE BEEN AVAILABLE TO THE ASSESSEE FOR ITS BUSINES S PURPOSES AND TO THAT EXTENT IT MAY NOT HAVE BEEN 26 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT NECESSARY TO BORROW FROM THE BANKS OR TO CONTINUE T HE BORROWINGS FROM THE BANK. FOR SUCH FINDINGS RELIANCE IS PLACED ON THE DECISION OF HONBLE ALLAHABAD HIGH CO URT IN THE CASE OF CIT VS. H.R. SUGAR FACTORY PVT. LTD. (1991) 187 ITR 363. ACCORDINGLY IT IS HELD THAT THE INTEREST/BANK CHARGES AMOUNTING TO RS. 17,48,663/- WAS NOT INCURRED FOR BUSINESS PURPOSES AND THE A.O. HAS RIGHTLY DISALLOWED SUCH EXPENSES. THE ADDITION MADE BY THE A.O. IS ACCORDINGLY CONFIRMED. 8. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE LD AO HAS REPRODUCE D THE CHART OF INVESTMENT IN PLOTS ETC AMOUNTING TO RS. 1,54,71,21 7/- AT PG 9 OF HIS ORDER. AS PER THIS CHART THE FRESH INVESTMENT IN TH ESE ASSETS WERE OF RS. 17,25,000/- DURING THE YEAR AND INVESTMENT OF RS. 1 ,37,46,217 ( 15471217-1725000) IS COMING FROM PREVIOUS YEAR. FUR THER THE LD AO MENTIONED THAT THE ASSESSEE HAS ALSO ADVANCED A SUM OF RS.44,78,927/- TO A FAMILY MEMBER AND ANOTHER SUM O F RS.6,83,512/- TO VAISHALI STONE CRUSHER, ON WHICH THE ASSESSEE HA S NOT EARNED ANY INCOME. THUS, THE TOTAL INVESTMENT IN NON BUSINESS A SSETS COMES TO RS. 15471217+4478927+683512= RS. 2,06,33,656/-. THE CAPI TAL OF THE ASSESSEE WAS 2,37,41,241/- AS ON 31/03/2009 AND RS. 2,81,21,267.44 27 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT AS ON 31-03-2010. (PB PG 24). NO INTEREST IS PAYABL E ON SUCH CAPITAL AND THEREFORE, INTEREST FREE FUNDS WAS MUCH MORE THA N THE INVESTMENT IN NON INCOME BEARING INVESTMENTS. THEREFORE, NO DIS ALLOWANCE ON ACCOUNT OF INTEREST PAID CAN BE MADE. HE FURTHER SU BMITTED THAT THE LOWER AUTHORITIES HAVE CONSIDERED THAT THE CAPITAL O F THE ASSESSEE HAS UTILIZED IN BUSINESS ASSETS AND BORROWED FUNDS WERE U TILIZED IN NON BUSINESS ASSETS. HONBLE ITAT JAIPUR BENCH HAS CONSI DERED THIS ASPECT IN THE CASE OF ACIT VS RAM KISHNA VERMA AND HELD THA T WHEN THERE ARE MIXED FUNDS THEN NON-INTEREST BEARING FUNDS ARE TO BE CONSIDERED AS UTILIZED FOR NON INTEREST BEARING FUNDS. THE LD CIT (A) HELD THAT IF THE INVESTMENT IN PLOTS AND INTEREST FREE ADVANCES WOULD HAVE NOT BEEN MADE BY THE ASSESSEE THEN SUCH MONEY WOULD HAVE BEEN AVAILABLE FOR BUSINESS AND TO THAT EXTENT IT MAY NOT HAVE BEEN NE CESSARY TO BORROW THE FUNDS FROM BANK. HE PLACED RELIANCE ON THE FOLL OWING CASE LAWS:- (I) CIT VS. SHOORJI VALLABHDAS & CO. (1962) 46 ITR 1 44 (SC). (II) ASSISTANT COMMISSIONER OF INCOME TAX VS. RAM K ISHAN VERMA ITAT, JAIPUR 'B BENCH ITA NO. 589/JP/2011; AS ST. YR. 2006-07 ORDER DATED 31ST OCTOBER, 2011 (2011) 30 CCH 0561 JAIPUR TRIB (2012) 143 TTJ 0001 (UO). (III) SATISH KATTA VS. ASSISTANT COMMISSIONER OF I NCOME TAX ITAT, JAIPUR 'A BENCH ITA NOS. 508 & 509/JP/2007 & 370/JP/2008; ASST. YRS. 2002-03 TO 2004-05 ORDER 28 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT DATED 31ST JULY, 2008 (2008) 27 CCH 0580 JAIPUR TRIB (2008) 13 DTR 0237. (IV) COMMISSIONER OF INCOME TAX VS. VIJAY SOLVEX LT D. (2015) 113 DTR 0382 (RAJ). (V) CIT VS. MOTOR SALES LTD. (2008) 304 ITR 123 (ALL AHABAD). HE FURTHER ARGUED THAT DURING THE YEAR UNDER CONSID ERATION, THE CASH INVESTMENT IN PLOT/LAND WAS ONLY RS. 17.25 LACS ONLY AND REMAINING WAS COMING FROM PREVIOUS YEAR. THE PREVIOUS YEAR I.E. A. Y. 2009-10 WAS COMPLETED BY THE ASSESSING OFFICER U/S 143(3) OF TH E ACT AND NO SUCH DISALLOWANCE WAS MADE BY HIM. THE LD ASSESSING OFFICER HAS NOT ESTABLISHED THE NEXUS BETWEEN THE INVESTMENT MADE AN D INTEREST BEARING BORROWING MADE BY THE ASSESSEE. THE BURDEN LI ES ON THE REVENUE TO PROVE THAT INTEREST BEARING FUND WERE UTI LIZED FOR NON BUSINESS PURPOSES OR GIVEN TO THE SISTER CONCERN WIT HOUT ANY INTEREST. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS INVESTED IN VARIOUS BANKS AND FINANCIAL INSTITUTIONS AMOUNTING TO RS. 3,99,47 ,378/-. THE ASSESSEE HAS SHOWN INTEREST INCOME OF RS. 27,92,287/- AND PAI D INTEREST AT RS. 17,48,663/-. THE NET RESULT IN INTEREST INCOME WAS MO RE THAN INTEREST PAYMENT AND NET RESULT IS INCOME OF RS. 10,43,624/- . THE LD ASSESSING OFFICER HAD DISALLOWED THE INTEREST EXPENSES WITHOUT CONSIDERING THE INTEREST INCOME OF THE ASSESSEE. HAD THE NETTING OF THE INTEREST WAS 29 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT DONE BY THE ASSESSING OFFICER THAN THERE COULD NOT BE ANY DISALLOWANCE ON ACCOUNT OF INTEREST. THE LD CIT(A) MISPLACED THE R ELIANCE ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF CIT VS HR SUGAR FACTORY PVT. LTD (1991) 187 ITR 363 AND CONFIRMED TH E ADDITION OF RS. 17,48,663/-. THE FACTS OF THIS CASE ARE TOTALLY DIF FERENT. IN THE ASSESSEES CASE THE INTEREST FREE CAPITAL WAS AVAILA BLE FOR WITHDRAWALS. THE ASSESSEE HAS SHOWN HUGE PROFIT IN PAST. THERE IS N O RESTRICTION IN THE WITHDRAWAL OF CAPITAL IN CASE OF PROPRIETORY CONC ERN. HE PLACED RELIANCE ON THE DECISION IN THE CASE OF COMMISSIONE R OF INCOME TAX VS. VIJAY SOLVEX LTD. (2015) 113 DTR 0382 (RAJ) WHEREIN I T HAS BEEN HELD THAT IF THE ASSESSEES CAPITAL IS MORE THAN INTERES T FREE ADVANCES MADE BY IT THAN THERE WAS NO QUESTION OF ANY DISALLOWANCE OF NOTIONAL INTEREST ON LOAN TAKEN BY IT. THEREFORE, HE PRAYED T O DELETE THE ADDITION. 9. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORTE D THE ORDER OF THE LD CIT(A) AND ARGUED THAT THE ASSESSEE HAS INVESTED RS. 1.55 CRORES IN IMMOVABLE PROPERTIES INCLUDING AGRICULTURAL LAND AN D ALSO HAD INTEREST BEARING BORROWING FROM THE BANKS ON WHICH SUBSTANTIAL INTEREST HAS BEEN PAID. THE INTEREST BEARING FUNDS HAD BEEN UTILI SED IN THESE ASSETS 30 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT BY THE ASSESSEE. THEREFORE, INTEREST TO THAT EXTENT IS RIGHTLY CONFIRMED BY THE LD CIT(A). 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. DURIN G THE YEAR, THE ASSESSEE HAD MADE ADDITIONAL INVESTMENT AT RS. 17.2 5 LACS, REMAINING INVESTMENT IN LAND AND PLOTS OF MORE THAN RS. 1.37 CRORES WAS COMING FROM THE PREVIOUS YEAR. THE LD ASSESSING OFFICER HAS NOT DISALLOWED EVEN IN SCRUTINY ASSESSMENT MADE IN A.Y. 2009-10. TH E CASE LAW RELIED UPON BY THE LD AR IN THE CASE OF GANESH CHAWALA VS. INCOME TAX OFFICER ITA NO. 762/JP/2007, ORDER DATED 16TH MAY, 2008 (2008) 9 DTR 0162 IS SQUARELY APPLICABLE WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE HAVING PURCHASED PROPERTIES IN THE PRECEDING YEARS OUT OF INTEREST-FREE FUNDS, NO DISALLOWANCE OF INTEREST HAVING BEEN MADE IN THOSE YEARS AND THERE BEING NO MATERIAL ON RECORD TO SHOW THAT LOANS RAISED FOR BUSINESS PURPOSES WERE UTILISED IN PURCHASING PROPER TIES IN PERSONAL NAME OF THE ASSESSEE AND THEREFORE, AO WAS NOT JUSTI FIED IN DISALLOWING INTEREST THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTICAL TO THE CASE OF GANESH CHAWALA VS. INCOME TAX OFFICER (SUPRA) . THERE WAS ALSO FACT THAT NETTING OF INTEREST IS POSITIVE, THE REFORE, NO DISALLOWANCE 31 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT CAN BE MADE BY THE ASSESSING OFFICER WITHOUT ESTABLI SHING THE DIRECT NEXUS WITH INTEREST BEARING BORROWINGS TO IMMOVABLE P ROPERTIES PURCHASED. THE ASSESSEES CAPITAL WAS RS. 2,81,21,267 /- IS MORE THAN INVESTMENT MADE IN IMMOVABLE PROPERTY AT RS. 1,54,7 1,217/-, THEREFORE, THE LD CIT(A) WAS NOT RIGHT IN CONFIRMING THE ADDITION ON ACCOUNT OF INTEREST AT RS. 17,48,663/-. ACCORDINGLY , WE REVERSE THE ORDER OF THE LD CIT(A) AND ALLOWED THE ASSESSEES APP EAL ON THIS GROUND. 11. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/09/2015. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:-24 TH /09/2015 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHASHI KANT KHETAN, JHUNJHUNU. 2. IZR;FKHZ @ THE RESPONDENT- THE ACIT, CIRCLE- JHUNJHUNU. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 32 ITA NO. 918/JP/2013 SHASHIKANT KHETAN VS. ACIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO.918/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR