M/s. Naresh Construction Company, Hapur V. ITO, Hapur

ITA 959/DEL/2015

• Counselvise Citation: 95920114 RSA 2015
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 20-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 16-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YATENDRA SINGH
• Assessee Lawyers: AJ AI KR AREN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC -2, NEW DELHI BEFORE SH. N. K. SAINI, AM ITA NO. 959/DEL./2015 : A SSTT. YEAR : 2010-11 NARESH CONSTRUCTION COMPANY C/O. R.K.BANSAL, ADV. 16, JAWAHARGANJ HAPUR VS ITO WARD - 1 HAPUR (APPELLANT) (RESPONDENT) PAN NO. AABFN2125Q APPELLANT BY : SH. AJ AI KR. AREN, ADV. RESPONDENT BY : SH. YATENDR A SINGH, SR. DR DATE OF HEARING : 22.07.2015 DATE OF PRONOUNCEMENT :14.08.2015 ORDER PER N.K. SAINI, A.M. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 08.01.2015 OF THE LD. CIT(A)-, GHAZIABAD. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPE AL :- 1. BOTH THE AUTHORITIES BELOW ARE NOT JUST IFIED IN MAKING ASSESSMENT @ 14.90% OF THE NET PROFIT BY THE ASSESSING OFFICER AND 8% ON ESTIMATED BASIS BY THE LEARNED COMMISSIONER OF INCOME TAX. INSTEAD OF DECLARED NET PROFIT @ 5.08% BY THE ASSESSEE. 2. IT IS PRAYED TO ALLOW THE APPEAL AND OBLIGE. ITA NO.959/DEL/2015 2 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE IS A CIVIL CONTRACTOR AND E-FILED THE RETURN OF INCOME ON 14.10.2010 DECL ARING AN INCOME OF RS. 41,815/-. LATER ON, THE CASE WAS SELECTED FO R SCRUTINY. THE AO NOTICED THAT THE ASSESSEE HAD DISCLOSED NET PROFIT RATE @ 3.18% AND OBSERVED THAT VOUCHERS WERE NOT PRODUCED FOR THE P URCHASES OF RS. 61,15,318/- AND LABOUR CHARGES OF RS. 30,28,100/-. THE AO DISALLOWED 10% OF THE ABOVE EXPENSES AND MADE THE A DDITION OF RS. 9,14,314/-. THE AO ALSO NOTICED THAT THE ASSESSEE D ESPITE OF HAVING 8 PARTNERS CLAIMED SALARY FOR 2 MANAGERS AND 2 MUNSHI S. HE ALLOWED SALARY OF 1 MANAGER AND 1 MUNSHIS AND DISALLOWED TH E SALARY OF OTHER MANAGER AND MUNSHI AMOUNTING TO RS. 1,80,000/-. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTE R TO THE LD. CIT(A) AND FURNISHED THE WRITTEN SUBMISSION WHICH IS INCOR PORATED IN PARA 4 OF THE IMPUGNED ORDER. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD SHOWN NET PROFIT RATE OF 5.08% FROM WHICH REMUNERAT ION AND INTEREST TO THE PARTNERS HAD BEEN DEDUCTED AND IF THE ADDITI ONS MADE BY THE AO ARE ADDED TO THE NET PROFIT SHOWN BY THE ASSESSE E IT GAVE THE NET PROFIT RATE OF 14.90% WHICH WAS EXCESSIVE WHEN COMP ARED TO THE HISTORICAL NET PROFIT OF THE ASSESSEE AT 5.50%. THE LD. CIT(A) OBSERVED THAT IT WAS UNCONTROVERTED FACT THAT THE E XPENSES OF ASSESSEE WERE NOT VERIFIABLE THEREFORE, THE ESTIMATION OF NE T PROFIT RATE WAS TO BE MADE. THE LD. CIT(A) APPLIED NET PROFIT RATE OF 8% BY CONSIDERING ITA NO.959/DEL/2015 3 IT FAIR AND REASONABLE. ACCORDINGLY ADDITION OF RS. 3,42,806/- WAS SUSTAINED. BEING AGGRIEVED THE ASSESSEE IS IN APPEA L. 5. DURING THE COURSE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND FURTHER SUBMITTED THAT THE NET PROFIT RATE ESTIMATE D BY THE LD. CIT(A) @ 8% WAS HIGHLY EXCESSIVE PARTICULARLY WHEN THE NET PROFIT RATE AT 5.5% WAS ACCEPTED IN THE IMMEDIATELY PRECEDING YEAR . IN HIS RIVAL SUBMISSION, THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO. 6. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE EXPENS ES SHOWN BY THE ASSESSEE WERE NOT FULLY VERIFIABLE, THEREFORE, THE INCOME WAS TO BE ESTIMATED. HOWEVER, THE LD. CIT(A) APPLIED THE NET PROFIT RATE OF 8% WITHOUT ANY BASIS EVEN HE HAD NOT CONSIDERED THE PA ST HISTORY OF THE ASSESSEE, ALTHOUGH HE HIMSELF ADMITTED THAT IN THE PRECEDING YEAR THE NET PROFIT RATE SHOWN BY THE ASSESSEE, WAS 5.50%. 7. IN MY OPINION, THE ADDITION SUSTAINED BY THE LD. CIT(A) IS HIGHLY EXCESSIVE. I , THEREFORE, BY CONSIDERING TH E PAST HISTORY OF THE ASSESEE DEEM IT APPROPRIATE THAT A NET PROFIT RATE OF 6% INSTEAD OF 5.08% DECLARED BY THE ASSESSEE WOULD BE FAIR AND RE ASONABLE TO COVER UP THE LIVERAGE OF REVENUE, IF ANY, DUE TO NON-VERI FIABILITY OF THE EXPENSES. ACCORDINGLY THE AO IS DIRECTED TO ESTIMA TE THE INCOME OF ITA NO.959/DEL/2015 4 THE ASSESSEE BY APPLYING THE N.P. RATE OF 6% INSTEA D OF 5.08% SHOWN BY THE ASSESSEE AND 8% APPLIED BY THE LD. CIT(A). IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. (ORDER PRONOUNCED IN THE COURT ON14/08/2015). SD/- (N. K. SAINI) ACCOUNT ANT MEMBER DATED: 14 / 08/2015 *B.RUKHAIYAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITA NO.959/DEL/2015 5 DATE INITIAL 1. DRAFT DICTATED ON 8.07.2015 2. DRAFT PLACED BEFORE AUTHOR 8.07.2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.