SHASHI KANT KHETAN, JHUNJHUNU V. ASSISTANT COMMISSIONER OF INCOME TAX , JHUNJHUNU

ITA 986/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2190 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 13-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH CHAND KULHARI JCIT DHK
• Keywords: Rejection of books of accounts; Depreciation; Question of law
• Section: 142(1); 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 HKKXPAN] YS[KK LNL; ,OA JH DQY HKKJR ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 986/JP/2017 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2013-14 SHASHI KANT KHETAN, PROP.- M/S S.K. KHETAN, H-3, KHETAN SADAN, INDRA NAGAR, JHUNJHUNU. CUKE VS. A.C.I.T., 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 JAGDISH CHAND KULHARI (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 23/01/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 24/01/2018 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATES FR OM THE ORDER OF THE LD. CIT(A)-3, JAIPUR DATED 27/10/2017 FOR THE A. Y. 2013-14. 2. THE RETURN OF INCOME WAS E-FILED ON 30/09/2013 DEC LARING TOTAL INCOME OF RS. 42,78,480/-. THE ASSESSING OFFICER RE JECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE NET PROFIT @ 8% AND MADE A DDITION OF RS. 77,16,268/- ON THE CONTRACT RECEIPTS OF RS. 9,64,53 ,345/-. THE ASSESSING OFFICER ALSO MADE ADDITION OF RS. 41,70,387/- ON TH E GRIT BUSINESS BY ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 2 ESTIMATING NET PROFIT @ 5.5% OF THE TOTAL TURNOVER O F RS. 7,58,25,218/-. THE LD. CIT(A) PARTLY CONFIRMED THE ADDITION. 3. NOW THE ASSESSEE IS IN APPEAL BEFORE THE ITAT BY T AKING FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE REJECTION TH E BOOKS OF ACCOUNT AND APPLICATION OF SECTION 145(3) OF THE I. T. ACT, 1961 MADE BY THE LD. A.O. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE TRADING ADDI TION OF RS.49,19,121/- BY ESTIMATING THE NP RATE OF THE ASS ESSEE AT 5.1% ON THE DECLARED TURNOVER OF RS. 9,64,53,345/- AS AGAINST THE TRADING ADDITION OF RS. 77,16,268/- MADE BY LD A.O. BY ESTIMATING NET PROFIT @ 8% OF THE TOTAL CONTRACT EX PENSES OF RS. 9,64,53,345/-. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A), ERRED IN CONFIRMING ADDITION OF RS. 38,67,086/- BY ESTIMATING THE NP RATE OF GRIT BUSINESS OF ASSES SEE AT 5.1% ON THE DECLARED TURNOVER OF RS. 7,58,25,218/- AS AG AINST THE ESTIMATION OF PROFIT BY LD. A.O. AT 5.5% AND ADDITI ON OF RS. 41,70,387/- MADE BY LD. A.O. 4. IN THE GROUNDS NO. 1 TO 3 OF THE APPEAL, THE ASS ESSEE HAS CHALLENGED THE REJECTION OF BOOKS OF ACCOUNT AND AP PLYING THE PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT) AND CONFIRMING THE TRADING ADDITION OF RS. 16,73,698 + 34,56,257/- TOTALING TO RS. 51,29,955/- BY ESTIMATING THE NET PROFIT @ 5. 1% ON TURNOVER OF RS.9,64,53,345/- ON THE CONTRACT BUSINESS AND OF RS . 7,58,25,218/- ON ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 3 GRIT BUSINESS. THE LD. CIT(A) HAS GIVEN A FINDING THA T THE ASSESSEE IS NOT MAINTAINING STOCK REGISTERS AND ALL THE EXPENSES OF THE ASSESSEE ARE NOT SUPPORTED BY PROPER EXTERNAL VOUCHERS, THEREFORE, T HE RESULT SHOWN BY ASSESSEE IS NOT TRUE AND CORRECT. THE LD. CIT(A) ESTI MATED THE NET PROFIT @ 5.1% ON THE DECLARED TURNOVER AFTER ALLOWING THE DE PRECIATION AND ALL OTHER EXPENSES. THE ASSESSEE DECLARED NET PROFIT AFT ER DEPRECIATION AND INTEREST OF CONTRACT BUSINESS AT RS. 32,45,423/- AN D AFTER ESTIMATION OF NET PROFIT AFTER DEPRECATION AND ALL OTHER EXPENSES , THE LD. CIT(A) ESTIMATED NET PROFIT OF RS. 49,19,121/-, THUS SUSTA INING ADDITION OF RS. 16,73,698/- AS AGAINST ADDITION OF RS. 44,70,845/- MADE BY THE ASSESSING OFFICER ON CONTRACT BUSINESS. THE LD. CIT( A) HAS ALSO APPLIED NET PROFIT @ 5.1% ON THE DECLARED TURNOVER OF GRIT B USINESS AND SUSTAINED THE ADDITION OF RS. 34,56,257/-. 5. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD AR HAS SUBMITTED AS UNDER: A) REGARDING REJECTION OF BOOKS OF ACCOUNTS A) THE LD. AO REJECTED THE BOOKS OF ACCOUNTS FOR TH E FOLLOWING REASONS: - I) NO SEPARATE ACCOUNT OF CONTRACT BUSINESS AND GRI T BUSINESS HAS BEEN MAINTAINED BY THE ASSESSEE. II) DETAIL OF DAY TO DAY EXPENSES AND CONSUMPTION O F MATERIAL ARE NOT MAINTAINED. ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 4 III) ON PERUSAL OF EXPENSES DEBITED IN TRADING & P& L ACCOUNT FOR THE YEAR ENDED ON 31.03.2013, IT IS SEEN THAT ASSESSEE HAS DEBITED MAJOR EXPENSES UNDER THE SINGLE HEAD I.E. CONTRACT EXPENSES AMOUNTING TO RS. 13,02,74,691/-. DURING THE COURSE OF VERIFICATION PROCEEDINGS, IT WAS SEEN THAT CONTRACT EXPENSES PURCHASES WERE NOT FULLY BACKED BY THE VOUCHERS SHO WING THE PROPER EVIDENCES. NO VOUCHERS IN SUPPORT OF EXPENSE S CLAIMED IN P&L ACCOUNT SUCH AS DRILLING & BLASTING, REPAIR & MAINTENANCE WERE FOUND TO BE FULLY MAINTAINED. B) REGARDING DEFECTS POINTED BY LD. AO WE MAY SUBMI T AS UNDER: - I) REGARDING NO SEPARATE ACCOUNT OF CONTRACT BUSINE SS AND GRIT BUSINESS HAS BEEN MAINTAINED BY THE ASSESSEE: - THIS IS NOT DEFECT IN MAINTENANCE IN BOOKS OF ACCOU NTS FOR WHICH BOOKS OF ACCOUNTS CAN BE REJECTED. BOTH THE BUSINES S ACTIVITIES ARE BEING CARRIED OUT BY THE ASSESSEE COMMONLY BY U SING THE COMMON BUSINESS SET UP. ALL THE EXPENSES ARE ALSO C OMMON AND THE BOOKS OF ACCOUNTS ARE ALSO COMMON, THEREFORE IT IS NOT PRACTICALLY POSSIBLE TO PREPARE THE SEPARATE BOOKS OF ACCOUNT FOR BOTH BUSINESSES. IT IS FURTHER RELEVANT TO MENTION HERE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE SUBMITTED THE TENTATIVE PROFIT DISTRIBUTION CHART B ETWEEN GRIT BUSINESS AND CONTRACT BUSINESS. ON THE BASIS OF THI S CHART, THE LD AO HELD THAT THE ASSESSEE HAS SHOWN PROFIT @ 1.06% FROM CONTACT BUSINESS WHICH IS VERY LOW. IN THIS REGARD, WE SUBMIT THAT THIS CHART WAS PREPARED MERELY ON ESTIMATION A ND SAME OF COMMON EXPENSES HAS BEEN TAKEN AS EXPENSES OF CONTR ACT BUSINESS. THIS CHART IS NOT BASED ON VOUCHERS. HOWEVER, THE ASSESSEE IS MAINTAINING COMMON SET OF BOOKS OF ACCOUNTS FOR BOTH THE BUSINESS ACTIVITIES WHERE FRO M THE INCOME AND EXPENSES OF THE ASSESSEE ARE VERIFIABLE IN WHIC H NO DEFECTS HAS BEEN POINTED BY LD. AO, THEREFORE THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE REJECTED ON THIS GROUND. FURTHER IN AY 2011-12 AND AY 2012-13 ALSO THE ASSE SSEE WAS MAINTAINING THE COMMON SET OF BOOKS OF ACCOUNTS FOR BOTH TYPE OF BUSINESS AND THE SAME WAS ACCEPTED BY SAME LD. A O. II) DETAIL OF DAY TO DAY EXPENSES AND CONSUMPTION O F MATERIAL ARE NOT MAINTAINED. ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 5 LOOKING TO THE NATURE OF BUSINESS OF THE ASSESSEE I T IS NOT PRACTICALLY POSSIBLE FOR ASSESSEE TO MAINTAIN STOCK REGISTER OF CONSUMPTION OF MATERIAL. HOWEVER MOST OF THE EXPENS ES ARE SUPPORTED BY BILLS AND PAYMENT MADE THROUGH A/C PAY EE CHEQUE. IN FEW CASES WHERE EXTERNAL BILLS COULD NOT BE OBTAINED THE SAME ARE VERIFIABLE FROM INTERNAL VOUCHERS PREP ARED BY ASSESSEE. WITHOUT PREJUDICE TO ABOVE THIS IS TO SUB MIT THAT EVEN IF STOCK REGISTER IS NOT MAINTAINED THE BOOKS OF AC COUNTS CANNOT BE REJECTED ON THIS GROUND. RELIANCE IS PLACE ON FO LLOWING DECISIONS: - A) ASHOK REFRACTORIES PVT. LTD VS CIT (2005) 279 IT R 457 (CAL) B) AVDESH PRATAP SINGH ABDUL REHMAN & BROS VS CIT ( 1994) 210 ITR 406 (ALL) C) PANDIT BROS VS CIT (1954) 26 ITR 159 (PUN) III) MAJOR EXPENSES DEBITED UNDER THE SINGLE HEAD I .E. CONTRACT EXPENSES THE A.O. HAS STATED IN HIS ORDER THAT ALL THE EXPEN SES HAVE BEEN DEBITED IN SINGLE HEAD CONTRACT EXPENSES BUT THE IN COME TAX ACT DOES NOT PROVIDE ANY PARTICULARS PROCEDURE FOR MAINTENANCE OF BOOKS OF ACCOUNTS. THE ACT PROVIDES METHOD FORM WHICH PROFIT OF BUSINESS ASCERTAINED AND NOT THE PARTICUL AR METHOD OF MAINTAINING BOOKS OF ACCOUNTS AND IN FACT WE HAVE D EBITED ALL THE EXPENSES IN SINGLE HEAD CONTRACT EXPENSES AND O UT AUDITED CONTRACT ACCOUNT ALSO SHOWING ALL THE EXPENSES IN S INGLE HEAD AS WE HAVE STATED ABOVE INCOME TAX ACT DOES NOT PROVID E ANY PARTICULAR METHOD OF MAINTAINING BOOKS OF ACCOUNTS AND THE PROFIT CAN BE ASCERTAINED ON THE BASIS OF TOTAL OF EXPENSES SHOWN IN THE CONTRACT. FURTHER THE NATURE OF CONTRACTOR SHIP BUSINESS IS SOMEWHAT OF UNORGANIZED NATURE. MANY A TIMES A LOT OF SMALL EXP ENDITURE SUCH AS PETTY REPAIRS OF MACHINES, PROCUREMENT OF S MALL GOODS FROM LOCAL MARKET. THE BUSINESS EXPEDIENCY ALSO SOM E TIMES LEADS TO PROCURING OF SOME MATERIAL WITHOUT VOUCHER S BUT THESE ARE OF VERY SMALL AMOUNT AND THAT EVEN DOES NOT MEA N THAT SUCH EXPENDITURE ARE NOT MADE OR BOGUS UNDER THE LI GHT OF ABOVE MENTIONED JUDICIAL PRONOUNCEMENTS. THE COMPARATIVE CONTRACT EXPENSES OF THE ASSESSEE OF SOME YEARS ARE AS UNDER: - ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 6 ASSTT YEAR TOTAL TURNOVER EXP PERCENTAGE OF CONTRACT EXPENSES TO CONTRACT RECEIPTS. 2010-11 14,71,70,861 13,40,53,661 91.09% 2011-12 15,50,02,341 14,00,93,774 90.38% 2012-13 15,62,50,053 13,11,29,241 83.92% 2013-14 15,82,78,563 13,02,74,691 82.31% THUS DURING THE YEAR UNDER CONSIDERATION THE CONT RACT EXPENSES ARE BELOW TO THE CONTACT EXPENSES INCURRED IN PAST YEARS DESPITE TO THE FACTS THAT GROSS RECEIPTS INCR EASED IN COMPARISON TO PREVIOUS YEAR. HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS BHAWAN VA PATH NIRMAN (BOHRA) & CO (NO. 1) 258 ITR 431 HAS HELD THAT THE PAST HISTORY OF THE A SSESSEE IS BEST GUIDING FACTOR. HONBLE ITAT JAIPUR BENCH IN THE CA SE OF M/S ASIAN CONSTRUCTION CO. VS ITO 34 TAXWORLD 89 HAS HE LD THAT THE PAST HISTORY OF ASSESSES CASE IS THE BEST REFLECTOR OF THE TRUE TRADE RESULTS. THUS WHERE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED AND THERE IS NO MATERIAL CHANGE IN THE CIR CUMSTANCES FROM PREVIOUS YEARS THE PAST HISTORY OF THE ASSESSE E SHOULD BE FOLLOW. B) REGARDING ESTIMATION OF PROFIT FROM GRIT BUSINE SS AND BUSINESS OTHER THAN GRIT. I) THE ASSESSEE IS MAINTAINING PROPER BOOKS OF ACCOUNT WHICH WERE AUDITED BY CHARTERED ACCOUNTANT. AFTER EXAMINI NG THE BOOKS OF ACCOUNT, THE AUDITORS GAVE THEIR REPORT CE RTIFIES THE TRUE AND FAIRNESS OF THE PROFIT. THE LD AO HAS EXAM INED THE BOOKS OF ACCOUNT AND NO ANY MATERIAL DISCREPANCY WA S POINTED OUT BY HIM. THEREFORE, THE TRADING RESULTS SHOWN BY BOOKS OF ACCOUNT SHOULD BE ACCEPTED. II) THE ASSESSEE IS MAINTAINING COMMON BOOKS OF ACCOUN TS FOR GRIT BUSINESS AND CONTRACT BUSINESS. ALL THE EXPENSES AR E COMMONLY INCURRED AND THE SAME CANNOT BE SEGREGATED SEPARATE LY AS PER THE BUSINESS. UPON INSISTING BY LD. AO DURING THE C OURSE OF ASSESSMENT PROCEEDINGS ADMITTEDLY THE ASSESSEE SUBM ITTED THE TENTATIVE PROFIT DISTRIBUTION BY DISTRIBUTING THE E XPENSES ON ESTIMATION BASIS BUT THE SAME IS BASED ON GUESS AND ESTIMATION. THE ASSESSEE IS MAINTAINING THE COMMON SET OF BOOKS OF ACCOUNTS, THEREFORE THE TRADING RESULTS OF THE ASSESSEE SHOULD HAVE BEEN COMPUTE COMMONLY AND THIS PRACTICE HAS ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 7 BEEN ADOPTED AND ACCEPTED BY LD. AO IN AY 2011-12 A ND AY 2012-13, THEREFORE THERE IS NO REASON TO CHANGE IN SUCH PRACTICE. IT IS FURTHER RELEVANT TO MENTION HERE TH AT WHILE ESTIMATING THE NP OF THE ASSESSEE OF BOTH BUSINESS THE NP RATE OF 5.10% HAS BEEN APPLIED BY LD CIT(A) C) FURTHER TO ABOVE SUBMISSION THE ASSESSEE SUBMIT THAT : - A) THE LD A.O. HAS REJECTED THE BOOKS OF ACCOUNT S OF THE ASSESSEE AND INVOKED PROVISIONS OF SECTION 145(3) OF INCOME TAX ACT AND ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING SE CTION 144 OF INCOME TAX ACT. THE REJECTION OF BOOKS OF ACCOUN T DOES NOT GIVE UNFETTERED POWER TO ASSESS THE INCOME OF A PER SON. SECTION 144 OF INCOME TAX ACT PROVIDES BEST JUDGMEN T ASSESSMENT MEANING THEREBY THE A.O. IS BOUND TO ASS ESS A FAIR INCOME BY CONSIDERING THE RESULTS OF INQUIRIES COND UCTED BY HIM, PAST HISTORY OF THE ASSESSEE AND COMPARATIVE C ASES. IN THIS CASE THE LD. A.O. HAS NOT TAKEN INTO ACCOUNT PAST H ISTORY OF THE ASSESSEE AND NO ANY COMPARATIVE CASE WAS CITED IN S UPPORT OF THE INCOME ASSESSED BY THE A.O. B) ESTIMATION NOT FAIR AND NOT SUPPORTED BY PAST HISTORY AND COMPARATIVE CASE:- THE LD. CIT(A) ESTIMATED THE NP @ 5.10% ON CONTRACT BUSINESS AND GRIT BUSINESS. THE LD CIT(A) HAS RELIED UPON TH E FINDINGS OF HONBLE ITAT FOR AY 2010-11 ((PB PG 55-70) AND IGNO RED THE FINDINGS OF HONBLE ITAT IN THE CASE OF ASSESSEE FO R AY 2011-12 (PB PG 33-54). THE HONBLE ITAT IN THE CASE OF ASSE SSEE FOR AY 2011-12 FOUND THAT THE DECLARED PROFIT OF THE ASSES SEE IS MORE THAN 8% OF GROSS RECEIPT (SUBJECT TO FURTHER DEDUCT ION ON ACCOUNT OF DEPRECIATION AND INTEREST) AND THEREFORE , DELETED THE ADDITION SUSTAINED BY LD CIT(A). THE FACTS OF THIS CASE ARE SIMILAR TO THE AY 2011-1 2. THE COPY OF ORDER OF ITAT FOR AY 2011-12 IS AT PB PG 33-54. DES PITE OF THIS FACT, THE LD CIT(A) RELIED UPON THE NP RATE OF 5.10 % APPLIED BY HONBLE ITAT IN AY 2010-11. HOWEVER, THE FACTS OF A Y 2013-14 AND AY 2011-12 ARE DIFFERENT THAN AY 2010-11 IN RES PECT TO DEPRECIATION. DUE TO NEW PURCHASE OF PLANT AND MAC HINERY ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 8 THERE IS HUGE INCREASE IN DEPRECIATION. THIS MAY BE SEEN FROM FOLLOWING CHART:- PARTICULARS AY 2010-11 AY 2011-12 AY 2013-14 DIFFER ENCE IN BETWEEN AY 2010-11 & AY 2013-14 DEPRECIATION 58,97,727 82,65,004 85,46,112 26,48,38 5 IF WE COMPARE THE GP OF THE ASSESSEE OF LAST FEW YE ARS IT COMES AS UNDER: - AY TOTAL TURNOVER GROSS PROFIT GP RATE 2013-14 15,82,78,563 1,39,60,383 8.82% 2012-13 15,62,50,053 1,36,71,879 8.75% 2011-12 15,50,02,341 1,27,29,257 8.21% D) NP @ 8% OF GROSS RECEIPTS SUBJECT TO FURTHER DE DUCTION ON ACCOUNT OF DEPRECIATION AND INTEREST WAS HELD BY HONBLE RAJAS THAN HIGH COURT AND ITAT JAIPUR AS REASONABLE. A) CIT VS JAIN CONSTRUCTION CO & OTHERS [2000] (RAJ ) 245 ITR 527 (COPY AT PB PG 78-81) B) ITO VS KUMAWAT CONTRACTORS ITA NO 115/JP/2013 OR DER DATED 09/10/2015 ITAT JAIPUR COPY AT PB 82-88. IN THIS CA SE ESTIMATION OF PROFIT BY APPLYING 6% OF GROSS CONTRACT RECEIPTS SUBJECT TO FURTHER DEDUCTION OF DEPRECIATION, INTEREST AND RE MUNERATION TO PARTNER HELD AS REASONABLE. C) ASSISTANT COMMISSIONER OF INCOME TAX VS. PRABHU DAYAL KANOJIYA ITA NO. 418/JP/2010; ASST. YR. 2007-08 11TH NOVEMBE R, 2010 (2011) 137 TTJ 0004 (UO) : [2011] 8 ITR 45 COPY AT PB 71-75 REJECTION OF BOOKS OF ACCOUNTS - NET PROFIT RATE - HELD THAT: - CIT(A) WAS JUSTIFIED TO THE EXTENT THAT THE NET PRO FIT RATE SHOULD BE ALLOWED SUBJECT TO DEPRECIATION AND INTEREST. SINCE THE NET PROFIT RATE SUBJECT TO DEPRECIATION AND INTEREST IS MORE T HAN 8 PER CENT., THEREFORE, THERE WAS NO CASE OF CONFIRMING THE ADDI TION OF RS. 3 LAKHS. ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 9 D) DCIT CIRCLE-5, JAIPUR VS RISHABH CONSTRUCTION PV T LTD ITA NO 1081/JP/2011 ORDER DATED 30/08/2012 ASSTT YEAR 2008 -2009, OF JAIPUR BENCH (COPY AT PB PG 76-77) WHEREIN THE NP R ATE OF 8% SUBJECT TO DEDUCTION OF DEPRECIATION AND INTEREST W AS HELD AS REASONABLE IN THE CASE OF CIVIL CONTRACTORS. IN ASSESSEES CASE THE NP RATE SUBJECT TO DEDUCTION OF DEPRECIATION AND INTEREST IS 8.09% OF GROSS RECEIPTS WHICH IS MORE T HAN 8% THEREFORE NO FURTHER TRADING SHOULD BE MADE AS HELD IN ABOVE CAS ES BY JAIPUR ITAT. THIS MAY BE SEEN FROM THE FOLLOWING CHART:- PARTICULARS AMOUNT AMOUNT PROFIT SHOWN BY ASSESSEE AS PER P & L A/C PB PG 11 36,56,252 LESS:- PROFIT FROM SALE OF FIXED ASSETS 6,28,379 PROFIT FROM CONTRACT AND GRIT BUSINESS 30,27,873 ADD DEPRECIATION 85,46,112 INTEREST PAID 39,20,689 RECEIVED -15,48,252 NET INTEREST PAID 23,72,437 TOTAL BUSINESS PROFIT BEFORE INTEREST AND DEPRECIATION 1,39,46,422 GROSS RECEIPTS AGAINST CONTRACT 9,64,53,345 GROSS RECEIPTS AGAINST GRIT (AS TAKEN BY AO) 7,58,2 5,218 TOTAL RECEIPTS 17,22,78,563 % OF PROFIT ON GROSS RECEIPTS 8.09% D) NO TRADING ADDITION EVEN BOOKS ARE REJECTED: - E VEN THE BOOKS OF ACCOUNTS ARE REJECTED ON THE BASIS OF DEFECTS POINT ED OUT BY THE LD. AO NO ADDITION DESERVES TO BE MADE. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: I) CIT VS GOTAN LIME KHANIJ UDHOG (2002) 256 ITR 243 ( RAJ). II) J.C.SHARMA VS ITO 33 TAXWORLD 80 ITAT JAIPUR BENCH IN VIEW OF THE ABOVE NO FURTHER TRADING ADDITION DE SERVES TO BE MADE AND THE HUMBLE ASSESSEE PRAYS YOUR HONOR TO DELETE THE ADDI TION OF RS. 51,29,955/- SUSTAINED BY LD CIT(A). ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 10 IN VIEW OF THE ABOVE SUBMISSION, THE HUMBLE ASSESSE E PRAYS YOUR HONOR KINDLY TO ALLOW THE APPEAL FILED BY THE ASSESSEE. 6. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE O RDERS OF THE AUTHORITIES BELOW. 7. THE BENCH HAVE HEARD BOTH THE SIDES ON THESE ISSU ES. ALTHOUGH, THE ASSESSEE HAS MAINTAINING THE BOOKS OF ACCOUNT, WHICH WAS ACCEPTED BY THE ASSESSING OFFICER IN A.Y. 2011-12 & 2012-13, HOWEVER, CONSIDERING THE VARIOUS ASPECTS RECORDED BY THE AUT HORITIES BELOW, THE BENCH ARE OF THE VIEW THAT THE REJECTION OF BOOKS O F ACCOUNT IS JUSTIFIED. HOWEVER, WITH REGARD TO CLAIM OF ESTIMATION OF NET PR OFIT OF BUSINESS OTHER THAN THE GRIT BUSINESS, THE BENCH FIND THAT T HE LD. CIT(A) HAS RELIED ON THE FINDINGS OF THE ITAT IN THE CASE OF A. Y. 2010-11. HOWEVER, IN THE DECISION FOR THE A.Y. 2011-12, THE ITAT HAS F OUND THAT THE DECLARED PROFIT OF THE ASSESSEE WAS MORE THAN 8% OF THE GROSS RECEIPTS SUBJECT TO DEDUCTION ON ACCOUNT OF DEPRECIATION AND INTEREST, THEREFORE, THE ADDITION WAS DELETED. IT IS ALSO ESTABLISHED THA T THE FACTS WITH REGARD TO THE CLAIM OF DEPRECIATION FOR A.Y. 2011-12 AND F OR THE ASSESSMENT YEAR UNDER CONSIDERATION WERE DIFFERENT FROM THE FAC TS OF A.Y. 2010-11, FOR THE REASON THAT THERE IS A HUGE INCREASE IN THE CLAIM OF DEPRECIATION ON ACCOUNT OF PURCHASE OF NEW PLANT AND MACHINERY. I N THE A.Y. 2010- 11, THE CLAIM OF DEPRECIATION WAS 58,97,727/- WHILE I N THE YEAR UNDER ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 11 CONSIDERATION, IT WAS 85,46,112/-. FURTHER THE GROSS PROFIT RATE OF ASSESSEE OF LAST FEW YEARS ARE SUMMARIZED AS UNDER: AY TOTAL TURNOVER GROSS PROFIT GP RATE 2013-14 15,82,78,563 1,39,60,383 8.82% 2012-13 15,62,50,053 1,36,71,879 8.75% 2011-12 15,50,02,341 1,27,29,257 8.21% THUS, THE G.P. RATE FOR THE YEAR UNDER CONSIDERATION WAS BETTER THAN THE EARLIER TWO IMMEDIATE PRECEDING YEARS. THE HONBLE RA JASTHAN HIGH COURT AND THE COORDINATE BENCHES OF THE ITAT, JAIPUR HELD IN THE VARIOUS CASES THAT THE NET PROFIT @ 8% OF GROSS REC EIPTS SUBJECT TO FURTHER DEDUCTION ON ACCOUNT OF DEPRECIATION AND IN TEREST ARE HELD TO BE REASONABLE. SUCH VIEW HAS BEEN HELD BY THE HONBLE R AJASTHAN HIGH COURT IN THE CASE OF CIT VS JAIN CONSTRUCTION CO & O RS. (2000) 245 ITR 527 (RAJ). THE RELEVANT PORTION OF THE HON'BLE HIGH COURTS ORDER IS AS UNDER: THE DIVISION BENCH OF THIS COURT IN CIT V. S.M. BH ATIYA ASSOCIATES (1997) 226 ITR 675 HAS HELD THAT THE FINDING RECORDED BY THE T RIBUNAL ON APPRECIATION OF EVIDENCE AVAILABLE ON RECORD, IS A FINDING OF FACT AND DOES NOT GIVE RISE TO THE QUESTION OF LAW FOR REFERENCE UNDER SECTION 256(2) OF THE ACT, AND THEREBY REJECTED THE APPLICATIONS SEEKING REFERENCE OF SIMI LAR QUESTIONS. IN THE INSTANT CASE, THE TRIBUNAL WHILE ALLOWING TH E APPEAL HAS DIRECTED THE ASSESSING AUTHORITY TO RECOMPUTE THE TOTAL INCOME A S ESTIMATED BY HIM AND ALLOW RELIEF ON ACCOUNT OF PAYMENT OF INTEREST AND CLAIM OF DEPRECIATION. THE FINDING RECORDED BY THE TRIBUNAL IS PURELY A FINDIN G OF FACT, BASED ON PROPER ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 12 APPRECIATION OF MATERIAL ON RECORD AND THE EVIDENCE PRODUCED BY THE ASSESSEE. AS NO QUESTION OF LAW ARISES OUT OF THE O RDER PASSED BY THE TRIBUNAL, WE FIND NO FAULT WITH THE ORDER OF THE TR IBUNAL DECLINING TO REFER THE QUESTION FOR OUR OPINION. CONSEQUENTLY, ALL THE APPLICATIONS FILED UNDER SECT ION 256(2) OF THE ACT FILED BY THE REVENUE ARE HEREBY REJECTED. IN ASSESSEES CASE, THE NET PROFIT RATE SUBJECT TO DEDUCTION OF DEPRECIATION AND INTEREST COMES @8.09% OF THE GROSS RECEIPTS, WHICH IS MORE THAN 8%. THE WORKING OF THE SAME AS UNDER: PARTICULARS AMOUNT AMOUNT PROFIT SHOWN BY ASSESSEE AS PER P & L A/C PB PG 11 36,56,252 LESS:- PROFIT FROM SALE OF FIXED ASSETS 6,28,379 PROFIT FROM CONTRACT AND GRIT BUSINESS 30,27,873 ADD DEPRECIATION 85,46,112 INTEREST PAID 39,20,689 RECEIVED -15,48,252 NET INTEREST PAID 23,72,437 TOTAL BUSINESS PROFIT BEFORE INTEREST AND DEPRECIATION 1,39,46,422 GROSS RECEIPTS AGAINST CONTRACT 9,64,53,345 GROSS RECEIPTS AGAINST GRIT (AS TAKEN BY AO) 7,58,2 5,218 TOTAL RECEIPTS 17,22,78,563 % OF PROFIT ON GROSS RECEIPTS 8.09% IT IS ALSO PERTINENT TO NOTE THAT WHEREVER EVEN BOOK S OF ACCOUNT ARE REJECTED BY THE ASSESSING OFFICER THEN ALSO NO TRAD ING ADDITION IS REQUIRED TO BE MADE AS HELD BY THE HON'BLE RAJASTHA N HIGH COURT IN THE CASE OF CIT VS GOTAN LIME KHANIJ UDHYOG (2002) 256 I TR 243 (RAJ) AND ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 13 J.C. SHARMA VS ITO 33 TAXWORLD 80 ITAT JAIPUR BENCH. IN ASSESSEES OWN CASE FOR THE A.Y. 2011-12, THE COORDINATE BENCH OF THE ITAT, JAIPUR HAS HELD AS UNDER: 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE, THE AO OBSERVED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 14,00,93,774/- TO THE P&L ACC OUNT UNDER THE HEAD CONTRACT FOR WHICH THE AO REQUIRED THE SPECIFI C QUERY WITH REGARD TO SUCH CONTRACT EXPENSES VIDE NOTE U/S 142(1) DATE D 5-09-2013 WHICH WAS REPLIED BY THE ASSESSEE VIDE ITS LETTER DATED 2 4-10-2013. THE AO CONSIDERED THE REPLY OF THE ASSESSEE AND FOUND IRRE LEVANT TO THE QUERIES RAISED IN SHOW CAUSE NOTICE DATED 11-02-2014. THE A O IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAD NOT PRODUCED THE BOOKS OF ACCOUNT, NO DAY TODAY CONSUMPTION OF MATERIAL WAS P RODUCED, NO WORKWISE AND HEADWISE DETAILS OF THE EXPENSE HAS BE EN PRODUCED AND NO EVIDENCE IN THE FORM OF BILLS/ VOUCHERS HAD BEEN PRODUCED. THE AO THUS INVOKED THE PROVISIONS OF SEC 145(3) OF THE AC T. THE AO ALSO OBSERVED THAT THE ASSESSEE ON ITS PART HAD DONE ABS OLUTELY NOTHING TO EITHER SUBSTANTIATE ITS OWN POSITION OR TO FURNISH REASONABLE EXPLANATION FOR THE QUERIES RAISED. THE AO THUS IN THE PRESENT SET OF FACTS MADE A DISALLOWANCE OF 3% ON TOTAL CONTRACT E XPENSES OF RS. 14,00,93,774/- WHICH WORKS OUT TO RS. 42,02,813/-. HOWEVER, THE LD. CIT(A) GAVE A RELIEF OF RS. 8,02,363/- TO THE ASSES SEE BY SUSTAINING AN ADDITION OF RS. 34,00,450/-. IT IS PERTINENT TO MEN TION THAT THE ITAT COORDINATE BENCH IN ASSESSEE'S OWN CASE FOR THE ASS ESSMENT YEAR 2010-11 VIDE ITS ORDER DATED 24-09-2015 IN ITA NO.9 18/JP/2013 APPLIED THE N.P. RATE @ 5.1% ON THE TURNOVER OF RS. 14,71,7 0,861/- BY OBSERVING AS UNDER:- ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 14 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE A SSESSEE HAS SHOWN TOTAL TURNOVER DURING THE YEAR AT RS. 14.71 C RORES 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 ASSESSEE CLAIMED THAT HE PRODUCED THE BOOKS OF ACCO UNT BUT THE ASSESSING OFFICER WAS NOT AVAILABLE IN THE OFFICE B UT BOOKS WERE EXAMINED BY THE INSPECTOR ON BEHALF OF THE ASSESSIN G OFFICER. THE LD ASSESSING OFFICER APPLIED SECTION 145(3) AND REJECT ED THE BOOK RESULT ON THE GROUND THAT REQUIRED DETAILS OF CONTR ACT EXPENSE WERE NOT SUBMITTED BEFORE HIM. THEREFORE, WE CONFIRM THE ORDER OF REJECTION U/S 145(3), WHICH HAS NOT BEEN CHALLENGED BY THE ASSESSEE. HOWEVER, ESTIMATE MADE BY THE LD ASSESSIN G OFFICER AND CONFIRMED BY THE LD CIT(A) IS HIGHER SIDE, WHICH WO ULD GIVE NET PROFIT RATE OF 12.84% BEFORE DEPRECIATION, WHICH IS NOT POSSIBLE IN CONTRACT BUSINESS. IT IS ALSO FACT THAT REQUIRED DE TAILS OF CONTRACT EXPENSES WERE NOT SUBMITTED BEFORE THE ASSESSING OF FICER AND NET PROFIT HAS DECLINED FOR WHICH THE ASSESSEE EXPLAINE D THAT PRICE HAS GONE UP. HE ALSO REFERRED THE COST OF INFLATION IND EX FOR THIS PURPOSE, WHICH SUPPORTS THE ASSESSEES CLAIM. THE L OWER AUTHORITIES ALSO HAVE NOT COMPARED THE CASE WITH OTHER ASSESSEE S FOR ESTIMATING 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 ADDITION IS DELETED. THE ASSESSING OFFICE R IS DIRECTED TO CALCULATE THE INCOME AS PER THE ABOVE FINDING. IT IS ALSO NOTED THAT THE FACTS OF THIS YEAR IS DIF FERENT THAN LAST YEAR IN RESPECT OF DEPRECIATION, ROYALTY, LABOUR CESS AND S ALES TAX. IT IS ALSO NOTED THAT DUE TO NEW PURCHASE OF PLANT AND MACHINE RY, THERE IS INCREASE IN DEPRECIATION. IT IS ALSO NOTED THAT THE LABOUR CESS WAS NOT IN A.Y. 2010-11 WHILE THE SAME WAS PAID BY THE ASSESSE E IN A.Y. 2011-12. WE HAVE ALSO NOTED THAT THERE WAS SUBSTANTIAL INCRE ASE IN SALES TAX AND ROYALTY DURING THIS YEAR IN COMPARISON TO LAST YEAR AND ALL THESE FACTORS RESULTED INTO LOWER NET PROFIT IN SPITE OF THE FACT THAT OVER ALL GROSS PROFIT OF THE ASSESSEE WAS MORE THAN THE LAST YEAR AS PER FOLLOWING CHART. PARTICULARS IN AY 2010 - 11 IN AY 2011 - 12 DIFFERENCE DEPRECIATION 58,97,727 82,65,004 23,67,277 SALES TAX 6,54,678 10,75,725 4,21,047 ROYALTY 2, 09,219 7,89,592 5,80,373 LABOUR CESS 0.00 3,13,993 3,13,993 TOTAL 67,61,624 1,04,44,314 36,82,690 ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 15 IT IS ALSO NOTED THAT ESTIMATION OF TRADING RESULTS IN THE CASE OF CONTRACTOR IS @ 8% OF CONTRACT RECEIPT SUBJECT TO D EDUCTION OF DEPRECIATION AND INTEREST. IT IS ALSO FURTHER NOTED THAT ITAT JAIPUR BENCH IN THE CASE OF DCIT VS RISHABH CONSTRUCTION PVT.LTD IN ITA NO.1081/JP/2011 VIDE ITS ORDER DATED 30-08-2012 FOR THE A.Y.2008-09 HELD THE N.P. RATE OF 8% SUBJECT TO DEDUCTION OF DE PRECIATION AND INTEREST AS REASONABLE IN THE CASE OF CIVIL CONTRAC TORS. THE COMPARATIVE CHART AS SUBMITTED BY THE ASSESSEE IN THIS CASE IS AS UNDER:- 8% OF GROSS RECEIPT METHOD- DEPRECIATION AND INTEREST 5.10% NP AS PER FINDINGS OF ITAT IN AY 2010-11 PARTICULARS AMOUNT AMOUNT PARTICULARS AMOUNT AMOUNT 8% OF GROSS RECEIPTS 12400187 5.10% OF GROSS RECEIPTS 7905119 LESS DEPRECIATION -8265004 INCREASE IN DEPRECIATION IN 2011-12 IN COMPARISON TO AY 2010-11 (8265004-5897727) -2367277 LESS INTEREST INCREASE IN LABOUR CESS IN 2011-12 IN COMPARISON TO AY 2010-11 (313993-0) -313993 RECEIVED 2745305 INCREASE IN SALES TAX IN 2011- 12 IN COMPARISON TO AY 2010- 11 (1075725-654678) -424047 PAID 2461386 INCREASE IN ROYALTY IN 2011-12 IN COMPARISON TO AY 2010-11 (789592-209219) -580373 NET SURPLUS IN INTEREST (+)28391 9 TOTAL INCOME BEFORE INTEREST 4219429 PROFIT AS PER ESTIMATION 4419103 INTEREST PROFIT SHOWN BY ASSESSEE 4737173 PAID 2461386 FURTHER ADDITION IF ANY 0 RECEIVED 2745305 NET SURPLUS IN INTEREST (+)28391 9 PROFIT AS PER ESTIMATION 4503349 PROFIT SHOWN BY ASSESSEE 4737173 FURTHER ADDITION IF ANY 0 ITA 986/JP/2017_ SHASHI KANT KHETAN VS ACIT 16 TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE LD .AR OF THE ASSESSEE AND ORDERS OF THE LOWER AUTHORITIES AND ALSO THE DE CISION AS RELIED ON BY THE ASSESSEE IN THE PRESENT CASE, WE HOLD THAT THE LD. CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 34,00,4 50/- AND THE SAME IS DELETED. THUS GROUND NO. 1 OF THE ASSESSEE IS ALLOW ED AND GROUND NO. (I) AND (II) OF THE REVENUE ARE DISMISSED. CONSIDERING ALL THESE RELEVANT FACTS, THE BENCH HOL D THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE PART ADDITION IN BOTH BUSINESS OF THE ASSESSEE. HENCE, APPEAL OF THE ASSESSEE STANDS ALLO WED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/01/2018. SD/- SD/- DQY HKKJR HKKXPAN (KUL BHARAT) (BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 24 TH JANUARY, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI SHASHI KANT KHETAN, JHUNJHUNU. 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., CIRCLE- JHUNJHUNU. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 986/JP/2017) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR