SHRI RAJEEV MISHRA, Kota V. ADD. CIT, Kota

ITA 924/JPR/2011

• Counselvise Citation: 92423114 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 02-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: B B MAHESHWARI
• Keywords: Depreciation; Opportunity of being heard
• Section: 144

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 924/JP/2011 ASSTT. YEAR- 2007-08 PAN NO. ACSPM 7904 R SHRI RAJEEV MISHRA, THE ADDL.C.I.T., 443-B, R.K. PURAM, VRS. RANGE-1, KOTA. KOTA (RAJASTHAN) (APPELLANT) (RESPONDENT) ASSESSEE BY :- SHRI B.B. MAHESHWARI. DEPARTMENT BY :- SHRI D.C. SHARMA. DATE OF HEARING : 17/07/2014 DATE OF PRONOUNCEMENT : 25/07/2014 O R D E R PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30/08/2011 OF THE LEARNED C.I.T., AJMER FOR THE A.Y. 2007-08. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- (1) THAT THE LEARNED CIT(A) GROSSLY ERRED ON LAW IN U PHOLDING THE ORDER OF A.O. IN RELATION TO APPLICATION OF SEC. 14 5(3) THEREBY REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. (2) THAT THE LEARNED CIT(A) GROSSLY ERRED IN ESTIMAT ING THE INCOME @ 8% (NET) WITHOUT CONSIDERING/DEDUCTING THE REMUNERAT ION OF PARTNERS & DEPRECIATION & FACTS LIABLE FOR REDUCTIO N OF PROFIT, THUS THE TAXABLE INCOME ARRIVED AT RS. 8528690/- IN PLAC E OF RS. 6197290/- DECLARED BY THE APPELLANT AND THEREBY SUS TAINED THE ADDITION OF RS. 2331400/-. THE HONBLE ITAT IN THE CASE OF ASSESSEE ITSELF FOR THE A.Y. 2006- 07 DECIDED THE N.P. RATE @ 8% SUBJECT TO DEPRECIATIO N AND 2 REMUNERATION TO PARTNERS, WHEREAS THE LEARNED CIT(A) HELD 8% N.P. WHICH IS NOT SYNONYMOUS TO THE ORDER OF THE HON BLE ITAT. THE HONBLE ITAT IN APPEAL NO. 654/JP/2010 DECIDED T O APPLY N.P. 8% SUBJECT TO DEPRECIATION & REMUNERATION TO P ARTNERS. THE LEARNED CIT(A) OBSERVED THAT THE FACTS ARE SAME WHER EAS THERE ARE CHANGES IN FACTS TO THE EXTENT THAT SOME WORK IS GIVEN ON SUB CONTRACT DURING THIS YEAR. 3. THE APPELLANT CRAVES LEAVE TO ADD ALTER AND AMEND THE GROUNDS OF APPEAL. 2. THE FIRST GROUND OF APPEAL IS AGAINST REJECTING T HE BOOK RESULT U/S 145(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT), WHICH HAS NOT BEEN PRESSED BY THE LEARNED A.R., THEREFORE, THE SA ME IS DISMISSED AS NOT PRESSED. 3. THE SECOND GROUND OF APPEAL IS AGAINST ESTIMATING THE NET PROFIT RATE @ 8% IN CONTRACT BUSINESS AND ALLOWING DEPRECIATION ON IT. AS PER ITATS ORDER IN ASSESSEES OWN CASE FOR A.Y. 2006-07. THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF CONTRACTOR. THE LEARNED A SSESSING OFFICER NOTICED VARIOUS DEFECTS IN THE BOOKS OF ACCOUNT AS NO WORK I N PROGRESS HAS SHOWN. THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE BUT NO REPLY WAS SUBMITTED ON NOT HAVING ANY WORKING IN PROGRESS. THE ASSESSEE DID NOT MAINTAIN THE CONSUMPTION REGISTER, STOCK REGISTER AND ANY PRIMARY EVIDENCE OF PURCHASE OF MATERIAL. FURTHER I T HAS BEEN HELD THAT THE ASSESSEE HAS SHOWN OUTSTANDING PAYMENTS AT RS. 2 CR ORES AGAINST TOTAL CONTRACT RECEIPTS OF RS. 10,66,08,629, WHICH IS NEA R ABOUT 20% OF THE TOTAL 3 CONTRACT. THE MAJOR PAYMENTS WERE MADE FOR LABOUR/WAGE S IN MUSTER ROLL IN CASH. THE LABOUR PAYMENT IS NOT SUBJECT TO VERIFICAT ION, HAS NO COMPLETE ADDRESS OF THE LABOURS TO WHOM PAYMENTS HAVE BEEN MA DE, IS AVAILABLE IN THE MUSTER ROLL AND DATE OF PAYMENT IS ALSO NOT MENTION ED. THE ASSESSEE MADE PAYMENT IN THE FORM OF SALARY/WAGES TO FOLLOWING PERS ONS: I) PRAKASH CHAND RS. 22,23,652/- II) RAJEEV AHUJA RS. 2334223/- III) KAILASH AGARWAL RS. 1217026/- IV) MANOJ KUMAR RS. 515035/- V) VIPUL KUMAR GUPTA RS. 1643889 /-. THE LEARNED ASSESSING OFFICER ASKED TO GIVE DETAILS OF PAYMENT MADE TO THE ABOVE PERSON, WHICH HAS NOT BEEN SUBMITTED TO THE AS SESSING OFFICER. FURTHER AS NO SITE WISE DETAILS WAS MAINTAINED. THE VERACITY OF THE SAME COULD NOT BE VERIFIED. THE LEARNED ASSESSING OFFICER IN ABSENCE O F REQUIRED DETAIL INFORMATION, HAS NOT FOUND GENUINENESS OF THE EXPEN SES AS VERIFIABLE. THE LEARNED ASSESSING OFFICER FURTHER ASKED TO SUPPLY C OPY OF AGREEMENTS MADE WITH THE SUB CONTRACTOR (LABOUR SUPPLIER) AS LISTED BELOW: I) AAKASH CONSTRUCTIONS RS. 22,23,652/- II) RAJEEV AHUJA, CONTACTOR RS. 23,60,975/- III) KAILASH AGARWAL RS. 12,30,975/- IV) SANJAY GUPTA RS.8,25,700/-, V) MANOJ KUMAR RS. 5,20,940/- VI) VIPUL KUMAR GUPTA RS. 16,62,730/- THE LEARNED ASSESSING OFFICER FURTHER HELD THAT THER E IS NO AGREEMENT WITH THE SUB CONTRACTOR. THE ASSESSEE HAS TAKEN INTO SUB CONT RACT FROM M/S SHIV SHAKTI ENTERPRISES, JAIPUR, BUT ON VERIFICATION OF AGREEME NT, IT WAS FOUND TO THE 4 ASSESSING OFFICER THAT NO MENTIONED WORK TO BE EXECU TED, THAT THE ASSESSEE WOULD GET IN PERFORMANCE OF CONTRACT. THERE IS NO TIM E LIMIT FOR COMPLETION OF CONTRACT. THUS, HOW AND ON WHAT TERMS AND CONDITION S, THE SUB CONTRACTORS HAVE WORKED FOR THE ASSESSEE, CANNOT BE EXAMINED AND VERIFIED. THE LEARNED ASSESSING OFFICER ALSO RECORDED DEFECTS UNDER THE H EAD TRAVELLING EXPENSES, TRANSPORTATION AND INTEREST EXPENSE. AFTER RELYING UPON THE VARIOUS CASE LAWS BY THE LEARNED ASSESSING OFFICER, HE REJECTED THE B OOK RESULT U/S 145(3) AND ESTIMATED INCOME U/S 144 OF THE ACT BY CONSIDERING THE RULING OF VARIOUS COURTS ON BEST JUDGMENT ASSESSMENTS. FINALLY, HE DE CIDED NET PROFIT RATE @ 10% AND ALLOWED DEPRECIATION AND NO INTEREST IS ALLO WED BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAS ADVANCE D INTEREST FREE LOAN TO 8 PERSONS, WHICH IS APPARENTLY NOT RELATED TO HIS BUSI NESS ACTIVITY. THEREFORE, HE DISALLOWED INTEREST TO THE EXTENT PAYABLE ON THE ADV ANCED MONEY AS THE MONEY HAS NOT BEEN USED FOR THE BUSINESS PURPOSES. 4. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT, WHO H AS ALLOWED THE APPEAL PARTIALLY BY OBSERVING AS UNDER:- I HAVE GONE THROUGH THE ORDER OF THE ASSESSING OF FICER, ASSESSEES SUBMISSION, ORDER OF CIT(A) FOR ASSESSMENT YEAR 2006 -07 AND ORDER OF ITAT FOR ASSESSMENT YEAR 2006-07. THE FACTS OF THE CASE ARE ALMOST IDENTICAL TO ASSES SMENT YEAR 2006-07. IN ASSESSMENT YEAR 2006-07 THE CIT(A) AS WELL AS HON BLE ITAT HAS UPHELD THE REJECTION OF BOOKS OF ACCOUNT AND APPLIE D N.P. RATE OF 8%. 5 ACCORDINGLY, I HOLD THAT SECTION 145(3) OF THE INCO ME TAX ACT, 1961 WAS CORRECTLY INVOKED BUT IN THE FACTS AND CIRCUMSTANCE S OF THE CASE AS N.P. RATE OF 8%, WOULD BE APPROPRIATE. THE ASSESSING OFFIC ER IS DIRECTED TO MODIFY HIS ORDER TO THIS EXTENT. THIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED A.R. VEHEMENTLY ACCEPTED THAT BOOK RE SULT RIGHTLY REJECTED BY THE LEARNED ASSESSING OFFICER. HOWEVER, NET PROFI T RATE IS HIGHER COMPARED TO PAST HISTORY OF THE CASE AS IN PAST ALL CONTRACT S WERE EXECUTED BY THE ASSESSEE. NEITHER HE WORKED AS A SUB CONTRACTOR NOR ASSIGNED ANY WORK TO SUB CONTRACTOR BUT DURING THE YEAR, HE HAD EXECUTED THE SUB CONTRACT. HE HAS NOT ONLY RECEIVED WORK ON SUB CONTRACT BASIS BUT ALSO AS SIGNED SOME WORK TO THE SUB CONTRACTOR TO BE EXECUTED. THEREFORE, MARGIN OF PROFIT IS LESS COMPARED TO PRECEDING YEAR. ACCORDINGLY, HE REQUESTED TO CONFIR M THE NET PROFIT RATE @ 7% IN PLACE OF CONFIRMATION BY THE HONBLE ITAT @ 8% IN A.Y. 2006-07 AND ALLOWED THE DEPRECIATION AND INTEREST. 6. AT THE OUTSET, THE LEARNED D.R. SUPPORTED THE OR DER OF THE LOWER AUTHORITY. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LEARNED ASSES SING OFFICER RECORDED THAT THERE WAS SUB CONTRACT AGREEMENT BETWEEN THE ASSESSEE AND SHIV SHAKTI ENTERPRISES, JAIPUR BUT THE TERMS AND CONDITIONS ME NTIONED IN THE AGREEMENT NOT SPECIFIC IN RESPECT OF THE WORK EXECUTED AND NET PROFIT SHARED BY THE 6 CONTRACTOR AND CONTRACTEE. THERE IS NO TIME LIMIT FO R COMPLETION OF THE WORK IN THAT AGREEMENT. IN CASE OF PRESENT SUB CONTRACTOR ( LABOUR SUPPLIER), THERE IS NO AGREEMENT WITH THEM. HOWEVER, THE APPELLANT HAS SH OWN PAYMENT TO SUB CONTRACTOR MORE THAN RS. 88.24 LACS TO THEM. THE GEN UINENESS OF THE VARIOUS PAYMENTS HAS BEEN DOUBTED BY THE LEARNED ASSESSING OFFICER UNDER THE VARIOUS HEADS. THEREFORE, CONSIDERING THE PAST HISTO RY AND COORDINATE BENCH DECISION IN A.Y. 2006-07, WE CONFIRM THE ORDER OF TH E LEARNED CIT(A). 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/07/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 25 TH JULY, 2014 * RANJAN COPY FORWARDED TO :- 1. SHRI RAJEEV MISHRA, KOTA. 2. THE ADDL. CIT, RANGE-2 KOTA. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 924/JP/2011) BY ORDER, AR ITAT JAIPUR.