ACIT, Jaipur V. SHRI BHANWARLAL JANGID, Jaipur

ITA 984/JPR/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78118 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-04-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 09-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Unexplained expenditure; Depreciation
• Section: 44AD; 40A(3); 244A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO.984 /JP/2011 ASSESSMENT YEARS : 2008-09 PAN : ABFPJ 7492 P THE ACIT VS. SHRI BHANWARLAL JANGID CIRCLE- 7, JAIPUR WATIKA, TEHSIL SANGANER, JA IPUR (APPELLANT) (RESPONDENT) C.O. NO.1/JP/2012 (ARISING OUT OF ITA NO.984 /JP/2011) ASSESSMENT YEARS : 2008-09 SHRI BHANWARLAL JANGID VS. THE ACIT WATIKA, TEHSIL SANGANER, JAIPUR CIRCLE- 7, JAI PUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI D.C. SHARMA ASSESSEE BY : SHRI SIDDHARTH RANKA DATE OF HEARING: 22-07-2014 DATE OF PRONOUNCEMENT: 25-07-2014 ORDER PER R.P. TOLANI, JM THE REVENUE HAS FILED AN APPEAL AGAINST ORDER OF THE LD. CIT(A)-III, JAIPUR DATED 02-08-2011 FOR THE ASSESSMENT YEAR 20 08-09 AND THE ASSESSEE HAS FILED THE CROSS OBJECTION. 2. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER:- (I) THE LD. CIT(A) HAS PASSED A PERVERSE ORDER BY ACCEPTING THE ASSESSEE'S EXPLANATION IN RESPECT OF PAYMENTS, SHOWN BY THE CHEUQES, ON RECONCILIATION O F BANK ACCOUNTS, WERE FOUND TO BE ACTUALLY MADE BY CA SH. 2 (II) THE LD. CIT(A) HAS PASSED A PERVERSE ORDER BY OVERLOOKING THE FACTS THAT THE BILLS/ VOUCHERS FOR EXPENSES AND PURCHASES WERE NOT PRODUCED AND /OR WERE SELF M ADE AND LACKED AUTHENTICITY/VERACITY, AS EVEN ADMITTED BY THE ASSESSEE. (III) THE LD. CIT(A) HAS PASSED A PERVERSE ORDER IN PLACING RELIANCE ON THE DECISION OF ITAT IN THE CAS E OF M/S. CHOUDHARY BROTHERS EVEN WHEN THE FACTS AND CIRCUMSTANCES IN CASE OF ASSESSEE WERE SUBSTANTIAL LY DIFFERENT. (IV) THE CIT (A) HAS PASSED A PERVERSE ORDER BY ADOPTING THE NET PROFIT RATE OF 6.5% EVEN WHEN IT W AS SHOWN AT 7.8% IN THE EARLIER YEAR. (V) THE CIT (A) HAS THUS ERRED IN FACTS AND IN LAW IN RESTRICTING THE DISALLOWANCE OUT OF PURCHASE EXPEND ITURE, LABOUR & WAGES, VEHICLE, DIESEL, PETROL TOTALING RS . 47,19,811/- TO THE ADDITION OF RS. 4,95,287/- ONLY. 3. THE GROUNDS RAISED BY THE ASSESSEE IN HIS C.O. ARE AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) GROSSLY ERRED IN APPLYING NET PROFIT RATE OF 6.5% AND IN SUSTAINING AN ADDITION OF RS. 4,95,287/- WHEN RESULTS DECLARED BY THE ASSESSEE AR E QUITE FAIR AND REASONABLE AND THERE IS NO JUSTIFICATION F OR SUSTAINING OF ANY ADDITION BY THE LD. LOWER AUTHORI TIES. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) GROSSLY ERRED IN SUSTAINING DISALLOWANCE OUT OF DEPRECIATION AT RS. 14,281/- AN D RESTRICTING IT @ 20% WHEN THERE IS NO JUSTIFICATION FOR ANY DISALLOWANCE. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) GROSSLY ERRED IN WITHDRAWING I NTEREST U/S 244A AND THE LD. CIT(A) GROSSLY ERRED IN NOT DE CIDING THE SAID GROUND. 3 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CONTRACTOR OF PUBLIC HEATH & ENGINEERING DEPARTMENT (FOR SHORT P HED) AND HE IS ENGAGED IN DRILLING OF TUBE WELL WORK. DURING THE C OURSE OF HEARING, THE ASSESSEE COULD PRODUCE THE CASH BOOK, LEDGER AND J OURNAL BUT COULD NOT FURNISH OTHER RECORDS OF ACCOUNTS ON THE PLEA THAT THE ACCOUNTANT SHRI PAWAN TAMBI WHO WAS WELL VERSED WITH THE ACCOUNTS HAD LE FT THE SERVICES OF THE ASSESSEE. THE AO REJECTED THE BOOK RESULT OF THE AS SESSEE U/S 145(3) OF THE ACT WHICH IS NOT CONTESTED BY THE ASSESSEE. THE AO PROCEEDED TO DISALLOW THE EXPENDITURES WHICH ACCORDING TO HIM WAS NOT EXP LAINED BY THE ASSESSEE AND COMPUTED THE INCOME OF THE ASSESSEE AS UNDER:- TOTAL INCOME DECLARED BY THE ASSESSEE 7,93,36 0/- ADD: - 1. DISALLOWANCE OF UNEXPLAINED EXPENDITURE 23,55,0 00/- 2. DISALLOWANCE OUT OF PURCHASES MADE 10,06,877/- 3. DISALLOWANCE OUT OF LABOUR & WAGES 3,89,382/ - 4. DISALLOWANCE OUT OF VEHICLES 2,89,381/- 5. DISALLOWANCE OUT OF DEPRECIATION 23,802/- 6. DISALLOWANCE OUT OF DIESEL & PETROL EXPENSES 6 ,79,171/- 7. ADDITION U/S 40A(3) 1,00,000/- TOTAL INCOME 56,36,973/- 5. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL W HEREIN THE LD. CIT(A) UPHELD THE REJECTION OF BOOKS OF ACCOUNT. THE LD. C IT(A) FURTHER HELD THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THE NEXT VA LID QUESTIONS REMAINS ABOUT THE ESTIMATION OF INCOME OF THE ASSESSEE IN THE FACTS AND 4 CIRCUMSTANCES OF THE CASE. IT WAS OBSERVED THAT THE BOOKS OF ACCOUNT WERE NOT TRACEABLE. THEREFORE, THE ASSESSEE COULD NOT EX PLAIN THE EXPENDITURES UNDER DIFFERENT HEADS. IN THESE CIRCUMSTANCES, THE FAIR COURSE WHICH OUGHT TO HAVE BEEN ADOPTED BY THE AO WAS TO MAKE A COMPOSITE ADDITION IN RESPECT OF NET PROFIT ONLY. FOR THIS PROPOSITION, THE LD. C IT(A) RELIED ON ITAT JUDGEMENT OF ANOTHER CIVIL CONTRACTOR I.E. SHRI CHO UDHARY AND BROTHERS (ITA NO. 1177/JP/2010 FOR A.Y. 2007-08 DATED 31-05-2011) IN WHICH 10% ADHOC DISALLOWANCE IN RESPECT OF DIFFERENT EXPENDI TURES WAS MADE. THE ITAT DID NOT APPROVE THE HEADEWISE ADHOC DISALLOWAN CE AND DIRECTED THE AO TO APPLY THE NET PROFIT RATE OF 11.5%. THE LD. C IT(A) FURTHER RELIED ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CA SE OF M/S. INANI MARBLES, 175 TAXMAN 56 TO THE EFFECT THAT IN CASE THE BOOKS OF ACCOUNT ARE REJECTED, THE BEST COURSE OF ACTION AVAILABLE TO THE AO WAS T O ESTIMATE THE INCOME ON THE BASIS OF THE PAST HISTORY OF THE ASSESSEE AS RE LIABLE GUIDELINES. THE LD. CIT(A) FURTHER HELD THAT IN PRECEDING YEAR THE ASSE SSEE HAD OFFERED NET PROFIT RATE OF 7.87% ON TOTAL TURNOVER OF RS. 59.72 LACS AS AGAINST 4% IN THE PRESENT YEAR ON TURNOVER OF RS. 1.98 CRORES. THE L D. CIT(A) IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE APPLIED NET PRO FIT RATE OF 6.5% AS ESTIMATED NET PROFIT RATE, THEREBY RETAINING THE AD DITION OF RS. 4,95,287/-. 5 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) BOTH TH E PARTIES ARE IN APPEAL BEFORE US. 7. THE ASSESSEE HAS AGITATED ANOTHER GROUND OF DISA LLOWANCE OF DEPRECIATION OF RS. 14,281/- RESTRICTING THE DEPREC IATION TO 20%. 8. THE LD. DR RELIED ON THE ORDER OF THE AO AND CON TENDS THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THE AO HAS TO MAKE A N ESTIMATE TO BEST OF HIS JUDGEMENT. THE ESTIMATE ARRIVED AT BY THE AO GENERA LLY CANNOT BE INTERFERED WITH UNLESS IT IS ARBITRARY, UN-SCIENTIFIC AND UNRE ASONABLE. 9. APROPOS TUBE WELL EXPENSES, THE ASSESSEE'S CONTE NTION IS THAT THE PAYMENTS HAVE BEEN MADE BY CHEQUES BUT IT WAS FOUND TO BE NOT CORRECT INASMUCH AS THE ASSESSEE HAD ISSUED CHEQUES IN SELF NAME AND WITHDRAWN THE MONEY OF RS. 23,55,000/- IN CASH AND MADE TUBE WELL EXPENSES IN CASH WHICH WERE NOT VERIFIABLE. THEREFORE, THIS ADDITION WAS BASED ON PROPER APPRECIATION. SIMILAR DISALLOWANCES OUT OF VARIOUS OTHER DISALLOWANCES ARE MADE ON THE BASIS OF PROPER ESTIMATION. THE AO HAS ADOPTED THE SCIENTIFIC METHOD TO THE BEST OF HIS JUDGEMENT. THE LD. CIT(A) SHOULD NOT INTERFERE WITH THIS ESTIMATES WITHOUT GIVING PROPER JUSTIFICA TION. IT IS PLEADED THAT THE LD. CIT(A) WITHOUT GIVING COGENT REASONS TO DEMONST RATE THAT THE ADDITIONS MADE BY THE AO IN ANY MANNER WERE ARBITRARY AND UNJ USTIFIED AND HE HAS GIVEN RELIEF TO THE ASSESSEE BY ENTIRELY CHANGING T HE METHOD OF ESTIMATION. 6 THE LD. COUNSEL FOR THE ASSESSEE REFERS TO THE WRIT TEN SUBMISSION BY MENTIONING THE FIGURES OF GROSS RECEIPTS, INCREASE / DECREASE OF INCREMENT THEREOF, NET PROFIT AND INCREASE AND DECREASE THERE OF AND NET PROFIT RATIO. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDS THAT THE ADDITION SO MADE HAS LED TO NET PROFIT RATE OF 28.39% AS AGAINST 4% DECL ARED BY THE ASSESSEE AND IS UNHEARD OFF IN THE LINE OF BUSINESS AS THAT OF T HE ASSESSEE. IN THE SHOW- CAUSE NOTICE ISSUED TO THE ASSESSEE BY THE AO, THE NET PROFIT RATE WAS PROPOSED TO BE ENHANCED TO 8% U/S 44AD OF THE ACT, HOWEVER RATE STANDS ENHANCED TO 28.39%. THE LD. COUNSEL FOR THE ASSESSE E THUS CONTENDS THAT THE ORDER OF THE LD. CIT(A) LEADS TO EXCESSIVE NET PROF IT WHICH IS BEYOND EVEN SECTION 44AD OF THE ACT PROPOSED BY THE AO. RELIANC E IS PLACED BY VARIOUS CASE LAWS AS UNDER:- 1. KANSARA BEARING (P) LTD. VS. ACIT, 270 ITR 235 (RA J.) 2. CIT VS. INANI MARBLES (P) LTD., 175 TAXMAN 56 (RAJ. ) 3. SURINDER KUMAR CHARANJIT KUMAR VS. CIT , 282 ITR 78 (RAJ). 4. NAVNEET R JHANWAR VS. ITO, 1 SOT 541 (ITAT JAIPUR BENCH). 5. H.S. BUILDERS VS. ITO, 86 TAXMAN 214 (MAG.), JAIPUR BENCH. 6. DEVENDRA GUPTA, (ITA NO. 1035/JP/2006 , JAIPUR BEN CH) 7. AJAY GOYAL VS. ITO , 10 SOT 4 (JODHPUR BENCH) 7 8. MADAN LAL VS. ITO, 9 SOT 1 (JODHPUR BENCH) 9. JUPITER TEXTILE VS. ITO, 77 TTJ 735 (JODHPUR BENCH) 10. RAMBILAS MATHOURA LAB & CO. VS. ITO, 1 SOT 61 (JODHPUR ) 11. ITO VS. SAMSONS & CO., 148 TAXMAN 21 (ITAT AMRITSAR) 12. MITTAL CONSTRUCTIN VS. ITO, 88 TAXMAN 195 (ITAT AMRITSAR) 13. GUPTA CONSTRUCTION CO. VS. ACIT, 4 SOT 190 (ITAT ALLAHABAD) 14. BATHNDA TRUCK OPERATOR UNION VS. ITO (ITAT AMRITSAR ). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IF THE CONTENTION NO 2.3 OF T HE WRITTEN SUBMISSION OF THE ASSESSEE FOR APPLYING NET PROFIT RATE 8% IS ADO PTED TO THE TURNOVER OF RS. 1,98,51,452/- THEN IN THAT CASE THE APPLICATION OF NET PROFIT RATE 8% WILL RESULT INTO AN INCOME OF RS. 11,88,116/-. THE ASSES SEE HAS DECLARED THE INCOME AT RS. 7,93,360/- RESULTING INTO AN ADDITION OF ABOUT RS. 7.95 LACS WHEREAS THE LD. CIT(A) HAS RETAINED THE ADDITION TO RS. 4,95,287/-. IN OUR CONSIDERED VIEW THE ARGUMENTS OF THE LD. COUNSEL FO R THE ASSESSEE IS MISPLACED. IF WE ADOPT THE ALTERNATE PLEA OF THE AS SESSEE THEN IN THAT CASE THE ADDITION WILL RESULT INTO RS. 7.94 LACS WHICH AMOUN T TO ENHANCEMENT OF 8 INCOME. THUS IN OUR CONSIDERED VIEW, THE LD. CIT(A) HAS ADOPTED A REASONABLE METHOD INASMUCH AS THE CASH WITHDRAWALS ARE ADDED TO THE INCOME AND 10% ADHOC DISALLOWANCE HAS BEEN MADE AGA INST PURCHASES. THE DISALLOWANCE OF TUBE WELL EXPENSES TO THE TUNE OF 5 0% HAS BEEN MADE OUT OF WAGES AND OTHER ADDITIONS. THUS THE APPROACH OF THE AO FOR ESTIMATION OF INCOME HAS BEEN ON PICK AND CHOOSE BASIS. THE LD. C IT(A) HAS RIGHTLY APPLIED THE DECISION OF ITAT JAIPUR BENCH IN THE CA SE OF CHOUDHARY AND BROTHERS (SUPRA). IN THAT CASE ALSO, THE NET PROFIT RATE AT 11.5% WAS ADOPTED. THUS THE LD. CIT(A) HAS TAKEN A VERY REASONABLE APP ROACH IN GOING BEYOND 8% NET PROFIT AND ESTIMATED NET PROFIT RATE AT 6.5% AND THUS RETAINING THE ADDITION OF RS. 4,95,287/-. HENCE, IN VIEW THEREOF, WE FIND THE ORDER OF THE LD. CIT(A) AS REASONABLE AND JUSTIFIED AND NO INTER FERENCE IS CALLED FOR IN THE ESTIMATE MADE BY HIM AS BOTH THE PARTIES COULD NOT DEMONSTRATE THAT THE ESTIMATES AS RETAINED BY THE LD. CIT(A) IS EITHER A RBITRARY OR UNREASONABLE. 11. COMING TO SECOND GROUND OF THE C.O. OF THE ASSE SSEE REGARDING PARTIAL DISALLOWANCE, THE ASSESSEE IS A PROPRIETOR AND PERS ONAL USAGE OF JEEP AND CAR EXPENSES CANNOT BE RULED OUT. THEREFORE, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS ALSO UPHELD. 12. THE GROUND NO. 3 OF THE REGARDING WITHDRAWING I NTEREST U/S 244A OF THE ACT IS CONSEQUENTIAL IN NATURE. 9 13. IN THE RESULT, THE APPEAL OF THE REVENUE AND C .O. OF THE ASSESSEE ARE DISMISSED. THE ORDER PRONOUNCED IN OPEN COURT ON 25H JULY, 2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 25 TH JULY, 2014 *MISHRA COPY FORWARDED TO:- 1. THE ACIT, CIRCLE- 7, JAIPUR 2. SHRI BHANWARLAL JANGID, JAIPUR 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR 5..THE LD. DR 6.THE GUARD FILE (IT NO.984/JP/2011) BY ORDER AR ITAT, JAIPUR 10 11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO.984 /JP/2011 ASSESSMENT YEARS : 2008-09 PAN : ABFPJ 7492 P THE ACIT VS. SHRI BHANWARLAL JANGID CIRCLE- 7, JAIPUR WATIKA, TEHSIL SANGANER, JA IPUR (APPELLANT) (RESPONDENT) C.O. NO.1/JP/2012 (ARISING OUT OF ITA NO.984 /JP/2011) ASSESSMENT YEARS : 2008-09 SHRI BHANWARLAL JANGID VS. THE ACIT WATIKA, TEHSIL SANGANER, JAIPUR CIRCLE- 7, JAI PUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI D.C. SHARMA ASSESSEE BY : SHRI SIDDHARTH RANKA DATE OF HEARING: 22-07-2014 DATE OF PRONOUNCEMENT: 25-07-2014 ORDER PER R.P. TOLANI, JM THE REVENUE HAS FILED AN APPEAL AGAINST ORDER OF THE LD. CIT(A)-III, JAIPUR DATED 02-08-2011 FOR THE ASSESSMENT YEAR 20 08-09 AND THE ASSESSEE HAS FILED THE CROSS OBJECTION. 2. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER:- (I) THE LD. CIT(A) HAS PASSED A PERVERSE ORDER BY ACCEPTING THE ASSESSEE'S EXPLANATION IN RESPECT OF PAYMENTS, SHOWN BY THE CHEUQES, ON RECONCILIATION O F BANK ACCOUNTS, WERE FOUND TO BE ACTUALLY MADE BY CA SH. 12 (II) THE LD. CIT(A) HAS PASSED A PERVERSE ORDER BY OVERLOOKING THE FACTS THAT THE BILLS/ VOUCHERS FOR EXPENSES AND PURCHASES WERE NOT PRODUCED AND /OR WERE SELF M ADE AND LACKED AUTHENTICITY/VERACITY, AS EVEN ADMITTED BY THE ASSESSEE. (III) THE LD. CIT(A) HAS PASSED A PERVERSE ORDER IN PLACING RELIANCE ON THE DECISION OF ITAT IN THE CAS E OF M/S. CHOUDHARY BROTHERS EVEN WHEN THE FACTS AND CIRCUMSTANCES IN CASE OF ASSESSEE WERE SUBSTANTIAL LY DIFFERENT. (IV) THE CIT (A) HAS PASSED A PERVERSE ORDER BY ADOPTING THE NET PROFIT RATE OF 6.5% EVEN WHEN IT W AS SHOWN AT 7.8% IN THE EARLIER YEAR. (V) THE CIT (A) HAS THUS ERRED IN FACTS AND IN LAW IN RESTRICTING THE DISALLOWANCE OUT OF PURCHASE EXPEND ITURE, LABOUR & WAGES, VEHICLE, DIESEL, PETROL TOTALING RS . 47,19,811/- TO THE ADDITION OF RS. 4,95,287/- ONLY. 3. THE GROUNDS RAISED BY THE ASSESSEE IN HIS C.O. ARE AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) GROSSLY ERRED IN APPLYING NET PROFIT RATE OF 6.5% AND IN SUSTAINING AN ADDITION OF RS. 4,95,287/- WHEN RESULTS DECLARED BY THE ASSESSEE AR E QUITE FAIR AND REASONABLE AND THERE IS NO JUSTIFICATION F OR SUSTAINING OF ANY ADDITION BY THE LD. LOWER AUTHORI TIES. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) GROSSLY ERRED IN SUSTAINING DISALLOWANCE OUT OF DEPRECIATION AT RS. 14,281/- AN D RESTRICTING IT @ 20% WHEN THERE IS NO JUSTIFICATION FOR ANY DISALLOWANCE. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) GROSSLY ERRED IN WITHDRAWING I NTEREST U/S 244A AND THE LD. CIT(A) GROSSLY ERRED IN NOT DE CIDING THE SAID GROUND. 13 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CONTRACTOR OF PUBLIC HEATH & ENGINEERING DEPARTMENT (FOR SHORT P HED) AND HE IS ENGAGED IN DRILLING OF TUBE WELL WORK. DURING THE C OURSE OF HEARING, THE ASSESSEE COULD PRODUCE THE CASH BOOK, LEDGER AND J OURNAL BUT COULD NOT FURNISH OTHER RECORDS OF ACCOUNTS ON THE PLEA THAT THE ACCOUNTANT SHRI PAWAN TAMBI WHO WAS WELL VERSED WITH THE ACCOUNTS HAD LE FT THE SERVICES OF THE ASSESSEE. THE AO REJECTED THE BOOK RESULT OF THE AS SESSEE U/S 145(3) OF THE ACT WHICH IS NOT CONTESTED BY THE ASSESSEE. THE AO PROCEEDED TO DISALLOW THE EXPENDITURES WHICH ACCORDING TO HIM WAS NOT EXP LAINED BY THE ASSESSEE AND COMPUTED THE INCOME OF THE ASSESSEE AS UNDER:- TOTAL INCOME DECLARED BY THE ASSESSEE 7,93,36 0/- ADD: - 1. DISALLOWANCE OF UNEXPLAINED EXPENDITURE 23,55,0 00/- 2. DISALLOWANCE OUT OF PURCHASES MADE 10,06,877/- 3. DISALLOWANCE OUT OF LABOUR & WAGES 3,89,382/ - 4. DISALLOWANCE OUT OF VEHICLES 2,89,381/- 5. DISALLOWANCE OUT OF DEPRECIATION 23,802/- 6. DISALLOWANCE OUT OF DIESEL & PETROL EXPENSES 6 ,79,171/- 7. ADDITION U/S 40A(3) 1,00,000/- TOTAL INCOME 56,36,973/- 5. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL W HEREIN THE LD. CIT(A) UPHELD THE REJECTION OF BOOKS OF ACCOUNT. THE LD. C IT(A) FURTHER HELD THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THE NEXT VA LID QUESTIONS REMAINS ABOUT THE ESTIMATION OF INCOME OF THE ASSESSEE IN THE FACTS AND 14 CIRCUMSTANCES OF THE CASE. IT WAS OBSERVED THAT THE BOOKS OF ACCOUNT WERE NOT TRACEABLE. THEREFORE, THE ASSESSEE COULD NOT EX PLAIN THE EXPENDITURES UNDER DIFFERENT HEADS. IN THESE CIRCUMSTANCES, THE FAIR COURSE WHICH OUGHT TO HAVE BEEN ADOPTED BY THE AO WAS TO MAKE A COMPOSITE ADDITION IN RESPECT OF NET PROFIT ONLY. FOR THIS PROPOSITION, THE LD. C IT(A) RELIED ON ITAT JUDGEMENT OF ANOTHER CIVIL CONTRACTOR I.E. SHRI CHO UDHARY AND BROTHERS (ITA NO. 1177/JP/2010 FOR A.Y. 2007-08 DATED 31-05-2011) IN WHICH 10% ADHOC DISALLOWANCE IN RESPECT OF DIFFERENT EXPENDI TURES WAS MADE. THE ITAT DID NOT APPROVE THE HEADEWISE ADHOC DISALLOWAN CE AND DIRECTED THE AO TO APPLY THE NET PROFIT RATE OF 11.5%. THE LD. C IT(A) FURTHER RELIED ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CA SE OF M/S. INANI MARBLES, 175 TAXMAN 56 TO THE EFFECT THAT IN CASE THE BOOKS OF ACCOUNT ARE REJECTED, THE BEST COURSE OF ACTION AVAILABLE TO THE AO WAS T O ESTIMATE THE INCOME ON THE BASIS OF THE PAST HISTORY OF THE ASSESSEE AS RE LIABLE GUIDELINES. THE LD. CIT(A) FURTHER HELD THAT IN PRECEDING YEAR THE ASSE SSEE HAD OFFERED NET PROFIT RATE OF 7.87% ON TOTAL TURNOVER OF RS. 59.72 LACS AS AGAINST 4% IN THE PRESENT YEAR ON TURNOVER OF RS. 1.98 CRORES. THE L D. CIT(A) IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE APPLIED NET PRO FIT RATE OF 6.5% AS ESTIMATED NET PROFIT RATE, THEREBY RETAINING THE AD DITION OF RS. 4,95,287/-. 15 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) BOTH TH E PARTIES ARE IN APPEAL BEFORE US. 7. THE ASSESSEE HAS AGITATED ANOTHER GROUND OF DISA LLOWANCE OF DEPRECIATION OF RS. 14,281/- RESTRICTING THE DEPREC IATION TO 20%. 8. THE LD. DR RELIED ON THE ORDER OF THE AO AND CON TENDS THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THE AO HAS TO MAKE A N ESTIMATE TO BEST OF HIS JUDGEMENT. THE ESTIMATE ARRIVED AT BY THE AO GENERA LLY CANNOT BE INTERFERED WITH UNLESS IT IS ARBITRARY, UN-SCIENTIFIC AND UNRE ASONABLE. 9. APROPOS TUBE WELL EXPENSES, THE ASSESSEE'S CONTE NTION IS THAT THE PAYMENTS HAVE BEEN MADE BY CHEQUES BUT IT WAS FOUND TO BE NOT CORRECT INASMUCH AS THE ASSESSEE HAD ISSUED CHEQUES IN SELF NAME AND WITHDRAWN THE MONEY OF RS. 23,55,000/- IN CASH AND MADE TUBE WELL EXPENSES IN CASH WHICH WERE NOT VERIFIABLE. THEREFORE, THIS ADDITION WAS BASED ON PROPER APPRECIATION. SIMILAR DISALLOWANCES OUT OF VARIOUS OTHER DISALLOWANCES ARE MADE ON THE BASIS OF PROPER ESTIMATION. THE AO HAS ADOPTED THE SCIENTIFIC METHOD TO THE BEST OF HIS JUDGEMENT. THE LD. CIT(A) SHOULD NOT INTERFERE WITH THIS ESTIMATES WITHOUT GIVING PROPER JUSTIFICA TION. IT IS PLEADED THAT THE LD. CIT(A) WITHOUT GIVING COGENT REASONS TO DEMONST RATE THAT THE ADDITIONS MADE BY THE AO IN ANY MANNER WERE ARBITRARY AND UNJ USTIFIED AND HE HAS GIVEN RELIEF TO THE ASSESSEE BY ENTIRELY CHANGING T HE METHOD OF ESTIMATION. 16 THE LD. COUNSEL FOR THE ASSESSEE REFERS TO THE WRIT TEN SUBMISSION BY MENTIONING THE FIGURES OF GROSS RECEIPTS, INCREASE / DECREASE OF INCREMENT THEREOF, NET PROFIT AND INCREASE AND DECREASE THERE OF AND NET PROFIT RATIO. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDS THAT THE ADDITION SO MADE HAS LED TO NET PROFIT RATE OF 28.39% AS AGAINST 4% DECL ARED BY THE ASSESSEE AND IS UNHEARD OFF IN THE LINE OF BUSINESS AS THAT OF T HE ASSESSEE. IN THE SHOW- CAUSE NOTICE ISSUED TO THE ASSESSEE BY THE AO, THE NET PROFIT RATE WAS PROPOSED TO BE ENHANCED TO 8% U/S 44AD OF THE ACT, HOWEVER RATE STANDS ENHANCED TO 28.39%. THE LD. COUNSEL FOR THE ASSESSE E THUS CONTENDS THAT THE ORDER OF THE LD. CIT(A) LEADS TO EXCESSIVE NET PROF IT WHICH IS BEYOND EVEN SECTION 44AD OF THE ACT PROPOSED BY THE AO. RELIANC E IS PLACED BY VARIOUS CASE LAWS AS UNDER:- 15. KANSARA BEARING (P) LTD. VS. ACIT, 270 ITR 235 (RA J.) 16. CIT VS. INANI MARBLES (P) LTD., 175 TAXMAN 56 (RAJ. ) 17. SURINDER KUMAR CHARANJIT KUMAR VS. CIT , 282 ITR 78 (RAJ). 18. NAVNEET R JHANWAR VS. ITO, 1 SOT 541 (ITAT JAIPUR BENCH). 19. H.S. BUILDERS VS. ITO, 86 TAXMAN 214 (MAG.), JAIPUR BENCH. 20. DEVENDRA GUPTA, (ITA NO. 1035/JP/2006 , JAIPUR BEN CH) 21. AJAY GOYAL VS. ITO , 10 SOT 4 (JODHPUR BENCH) 17 22. MADAN LAL VS. ITO, 9 SOT 1 (JODHPUR BENCH) 23. JUPITER TEXTILE VS. ITO, 77 TTJ 735 (JODHPUR BENCH) 24. RAMBILAS MATHOURA LAB & CO. VS. ITO, 1 SOT 61 (JODHPUR ) 25. ITO VS. SAMSONS & CO., 148 TAXMAN 21 (ITAT AMRITSAR) 26. MITTAL CONSTRUCTIN VS. ITO, 88 TAXMAN 195 (ITAT AMRITSAR) 27. GUPTA CONSTRUCTION CO. VS. ACIT, 4 SOT 190 (ITAT ALLAHABAD) 28. BATHNDA TRUCK OPERATOR UNION VS. ITO (ITAT AMRITSAR ). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IF THE CONTENTION NO 2.3 OF T HE WRITTEN SUBMISSION OF THE ASSESSEE FOR APPLYING NET PROFIT RATE 8% IS ADO PTED TO THE TURNOVER OF RS. 1,98,51,452/- THEN IN THAT CASE THE APPLICATION OF NET PROFIT RATE 8% WILL RESULT INTO AN INCOME OF RS. 11,88,116/-. THE ASSES SEE HAS DECLARED THE INCOME AT RS. 7,93,360/- RESULTING INTO AN ADDITION OF ABOUT RS. 7.95 LACS WHEREAS THE LD. CIT(A) HAS RETAINED THE ADDITION TO RS. 4,95,287/-. IN OUR CONSIDERED VIEW THE ARGUMENTS OF THE LD. COUNSEL FO R THE ASSESSEE IS MISPLACED. IF WE ADOPT THE ALTERNATE PLEA OF THE AS SESSEE THEN IN THAT CASE THE ADDITION WILL RESULT INTO RS. 7.94 LACS WHICH AMOUN T TO ENHANCEMENT OF 18 INCOME. THUS IN OUR CONSIDERED VIEW, THE LD. CIT(A) HAS ADOPTED A REASONABLE METHOD INASMUCH AS THE CASH WITHDRAWALS ARE ADDED TO THE INCOME AND 10% ADHOC DISALLOWANCE HAS BEEN MADE AGA INST PURCHASES. THE DISALLOWANCE OF TUBE WELL EXPENSES TO THE TUNE OF 5 0% HAS BEEN MADE OUT OF WAGES AND OTHER ADDITIONS. THUS THE APPROACH OF THE AO FOR ESTIMATION OF INCOME HAS BEEN ON PICK AND CHOOSE BASIS. THE LD. C IT(A) HAS RIGHTLY APPLIED THE DECISION OF ITAT JAIPUR BENCH IN THE CA SE OF CHOUDHARY AND BROTHERS (SUPRA). IN THAT CASE ALSO, THE NET PROFIT RATE AT 11.5% WAS ADOPTED. THUS THE LD. CIT(A) HAS TAKEN A VERY REASONABLE APP ROACH IN GOING BEYOND 8% NET PROFIT AND ESTIMATED NET PROFIT RATE AT 6.5% AND THUS RETAINING THE ADDITION OF RS. 4,95,287/-. HENCE, IN VIEW THEREOF, WE FIND THE ORDER OF THE LD. CIT(A) AS REASONABLE AND JUSTIFIED AND NO INTER FERENCE IS CALLED FOR IN THE ESTIMATE MADE BY HIM AS BOTH THE PARTIES COULD NOT DEMONSTRATE THAT THE ESTIMATES AS RETAINED BY THE LD. CIT(A) IS EITHER A RBITRARY OR UNREASONABLE. 11. COMING TO SECOND GROUND OF THE C.O. OF THE ASSE SSEE REGARDING PARTIAL DISALLOWANCE, THE ASSESSEE IS A PROPRIETOR AND PERS ONAL USAGE OF JEEP AND CAR EXPENSES CANNOT BE RULED OUT. THEREFORE, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS ALSO UPHELD. 12. THE GROUND NO. 3 OF THE REGARDING WITHDRAWING I NTEREST U/S 244A OF THE ACT IS CONSEQUENTIAL IN NATURE. 19 13. IN THE RESULT, THE APPEAL OF THE REVENUE AND C .O. OF THE ASSESSEE ARE DISMISSED. THE ORDER PRONOUNCED IN OPEN COURT ON 25H JULY, 2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 25 TH JULY, 2014 *MISHRA COPY FORWARDED TO:- 1. THE ACIT, CIRCLE- 7, JAIPUR 2. SHRI BHANWARLAL JANGID, JAIPUR 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR 5..THE LD. DR 6.THE GUARD FILE (IT NO.984/JP/2011) BY ORDER AR ITAT, JAIPUR 20 21 22 23