The Assistant Commissioner of Income tax, Amritsar. V. Sh. Parvinder Singh Prop., Amritsar.

MA 105/ASR/2013

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1592 (ITAT-AMRITSAR)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 10-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A M ZARGARCA
• Keywords: Business income; Bad and doubtful debts
• Section: 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.527(ASR)/2013 ASSESSMENT YEAR:2010-11 PAN :AABFK5057G M/S. KHANDAY CONSTRUCTION CO. VS. DY.COMMR. OF INCO ME TAX, SRINAGAR. CIRCLE-3, SRINAGAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.A.M.ZARGAR,CA RESPONDENT BY:SH.TARSEM LAL, DR DATE OF HEARING: 04/03/2014 DATE OF PRONOUNCEMENT:18/03/2014 ORDER PER BENCH ; THIS APPEAL OF ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JAMMU, DATED 12/07/2013 FOR THE ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL 1. ON THE LAW AND FACTS OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE REJECTION OF BOOKS OF ACCOUNT & ESTIMATION OF PROFITS BY A.O. ARE IN ORDER. 2. ON THE LAW AND FACTS OF THE CASE THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE HAS FAILED TO PRODUCED BO OKS OF ITA NO.527(ASR)/2013 2 ACCOUNTS, BILLS & VOUCHERS BY MERELY RELYING UPON O BSERVATION IN ASSESSMENT ORDER WITHOUT GOING THROUGH THE ASSES SMENT RECORD. 3. ON THE LAW AND FACTS OF THE CASE THE LD. CIT(A) HAS ERRED IN NOT TAKING COGNIZANCE OF THE FACT THAT THE ASSESSEE WAS PREVENTED FROM COMPLYING TO THE TERMS OF NOTICE WHICH WAS DEF ECTIVE & INCOMPLETE IN SO FAR AS IT DID NOT SPECIFY THE DATE & TIME OF COMPLIANCE BY THE ASSESSEE. 4. ON THE LAW AND FACTS OF THE CASE THE LD. CIT(A) HAS ERRED IN NOT TAKING COGNIZANCE OF THE REVISED ARGUMENTS PUT FORW ARD BY THE ASSESSEE. 5. ON THE LAW AND FACTS OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN DETERMINING NET PROFITS BY APPLYING A RATE OF 7% OF GROSS RECEIPTS WITHOUT TAKING INTO ACCOUNT THE CIRC UMSTANCES AND PAST HISTORY OF THE ASSESSEE. 6. THAT THE LD. CIT(A) ALSO ERRED IN NOT COMMUNICAT ING THE DETAILS OF COMPARABLE CASE AS APPLIED BY HIM, TO TH E ASSESSEE THUS DEPRIVING HIM OF A CHANCE TO DEFEND HIS CASE. 7. THAT THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN UPH OLDING ADDITION OF RS.15,00,000/- ON ACCOUNT OF SALE OF PLOTS WITHO UT CONSIDERING THE DEDUCTION ON ACCOUNT OF OPENING STO CK OF RS.14,05,500/- . IN OTHER WORDS WHAT HAS BEEN ADDED TO INCOME IS THE WHOLE SALE PROCEEDS & NOT THE PROFIT EARNED ON SUCH SALE. 8. THE APPELLANT CRAVE LEAVE TO ADD, AMEND, ALTER O R SUBSTITUTE ANY OTHER GROUND NECESSARY TO MEET ENDS OF JUSTICE. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE ORDER OF THE A.O. ARE REPRODUCED AS UNDER: RETURN DECLARING INCOME OF RS.4923386/- HAD BEEN FI LED BY THE ASSESSEE ON 4.12.2010. SUBSEQUENTLY THE CASE WAS T AKEN UP FOR SCRUTINY AND ACCORDINGLY NOTICE U/S 143(2) OF THE A CT DATED 15.09.2011 WAS ISSUED BY MY PREDECESSOR AND SERVED UPON THE ITA NO.527(ASR)/2013 3 ASSESSEE VIA SPEED POST AND THE CASE WAS FIXED FOR HEARING ON 23 RD SEPT., 2011. SUBSEQUENTLY, VIDE NOTICE U/S 139D D ATED 15.2.2012 ASSESSEE WAS REQUESTED TO FURNISH A COPY OF THE AUD IT REPORT UNDER SECTION 44AB OF THE ACT. THE AUDIT REPORT WAS FURNI SHED BY THE ASSESSEE ON 12.6.2012. SUBSEQUENTLY, A DETAILED QUE STIONNAIRE DATED 21.6.2012 ALONGWITH NOTICE U/S 142(1) OF THE ACT W ERE ISSUED AND DULY SERVED UPON THE ASSESSEE AND THE CASE WAS FIXED FOR HEARING ON 4.7.2012. NO REPLY WAS RECEIVED NEITHER ANY REQUEST FOR ADJOURNMENT WAS RECEIVED IN THIS REGARD. THEREAFTER, ANOTHER NO TICE U/S 142(1) DATED 9.11.2012 WAS ISSUED AND DULY SERVED UPON THE ASSESSEE FIXING THE DATE FOR COMPLIANCE ON 22.11.2012. IN RESPONSE TO THIS THE COUNSEL OF THE ASSESSEE SH. ABDUL MAJID ZARGAR ATTE NDED AND REQUESTED FOR ADJOURNMENT OF THE CASE AND THE CASE WAS ADJOURNED FOR 29 TH NOV. 2010. ON 29.11.2012 NEITHER THE ASSESSEE ATTE NDED THE PROCEEDINGS NOR ANY REQUEST FOR ADJOURNMENT OF THE CASE WAS RECEIVED IN THIS OFFICE. 2. THEREAFTER ANOTHER NOTICE U/S 142(1) DATED 18.12 .2012 WAS ISSUED BY THIS OFFICE FIXING THE DATE FOR COMPLIANC E ON 4.1.2013. ON 4.1.2013 THE COUNSEL OF THE ASSESSEE ATTENDED AND F URNISHED PART REPLY TO THE QUESTIONNAIRE DATED 21.06.2012. IT WAS SEEN THAT THE COMPLETE REPLY TO THE QUESTIONNAIRE WAS NOT FILED BY THE AS SESSEE. THEREAFTER, ANOTHER NOTICE U/S 142(1) DATED 15.1.2013 WAS ISSUE D FIXING THE DATE FOR COMPLIANCE ON 24.1.2013. ON THIS DATE FIXED FOR COMPLIANCE NEITHER ANYBODY ATTENDED NOR ANY REQUEST FOR FURTH ER ADJOURNMENT WAS RECEIVED. HOWEVER, IN RESPONSE THE ASSESSEE HAD SUBMITTED THAT NO FURTHER INFORMATION IS REQUIRED IN THIS CASE AND THE CASE MAY BE COMPLETED ON THE BASIS OF MATERIAL ALREADY SUBMITTE D ON RECORDS. 3. HOWEVER, FROM THE PERUSAL OF RECORDS IT WAS NOTI CED THAT CERTAIN INFORMATION/DETAILS WERE REQUIRED TO BE PRO DUCED TO SUBSTANTIATE THE STAND OF THE ASSESSEE. ACCORDINGLY , VIDE LETTER NO.1222 DATED 4.2.2013 THE ASSESSEE WAS REQUESTED T O FURNISH THE FOLLOWING INFORMATION/DOCUMENTS: PLEASE REFER TO YOUR REPLY DATED 639 ON THE SUBJE CT CITED ABOVE. IN THIS REGARD YOU ARE REQUESTED TO PLEASE F URNISH THE FOLLOWING INFORMATION /DOCUMENTS FOR COMPLETING THE ASSESSMEN T PROCEEDINGS: 1. PRODUCE COMPLETE BOOKS OF ACCOUNTS WITH BILLS/VOUCH ERS ITA NO.527(ASR)/2013 4 2. PRODUCE BILLS OF WORK COMPUTATION FOR THE FINANCIAL YEAR 2009- 10. 3. AS PER WAGE LEDGER, YOU HAVE MENTIONED THE FOLLOWIN G PAYMENTS: DATE TO WHOM PAYMENTS HAVE BEEN MADE AMOUNT 14.07.2009 SELF 2,00,000/- 31.07.2009 KULDEEP OPERATOR CASH PER BILL 70,000/ - 10.09.2009 ABDUL HAMID SHEIKH BILL NO.179 24,000/ - 14.09.2009 JK BANK PAWAN BILL NO.181 20,000/- 26.09.2009 SUNDHER OPERATORS 28,830/- 30.09.2009 MANZOOR AHMED DRILLER 38,500/- 27.11.2009 PAWAN KAPOOR 50,000/- 29.03.2010 ASHOK KUMAR AS PER BILL 1,10,000/- 31.03.2010 HAYAT B 1,60,000/- 31.3.2010 BAKER KHANDEY 1,14,278/- 31.03.2010 ABDUL HAMID SHEIKH 56,000/- YOU ARE REQUESTED TO PRODUCE BILLS UNDER REFERENCE IN RESPECT OF THE ABOVE PAYMENTS. 4. PLEASE PRODUCE WAGE REGISTER 5. PRODUCE BILLS/VOUCHERS IN SUPPORT OF PURCHASE (OTHE R DIRECT EXPENSES. 6. GIVE DETAILS OF EXPENSES OF RS.9,64,4811/- DEBITED UNDER BAD DEBTS UNDER GULZAR AHMED SHEIKH. GIVER LEDGER ACCOU NT OF PREVIOUS 3 YEARS AND ACCOUNT FOR YEAR IN WHICH SALE S HAVE BEEN EFFECTED. 7. GIVE COPIES OF BANK ACCOUNT MAINTAINED. YOURS FAITHFULLY SD/- (RISHPAL BEDI) DCIT, CIRCLE3, SRINAGAR TILL DATE NO REPLY HAS BEEN RECEIVED IN THIS REGARD . DESPITE GIVING AMPLE OPPORTUNITIES DETAILED ABOVE THE ASSESSEE HAD FAILED TO PRODUCE THE COMPLETE BOOKS OF ACCOUNTS AS WELL AS THE COMPL ETE DETAILS CALLED FOR. 4. IN THE ABSENCE OF ANY PRIMARY DOCUMENTS, THE CONTENTIONS/CLAIMS OF THE ASSESSEE CANNOT BE RELIED UPON. IT IS ALSO SEEN THAT THE ASSESSEE HAD BEEN REQUESTING FOR ITA NO.527(ASR)/2013 5 ADJOURNMENTS ON ONE PRETEXT OR THE OTHER. THE COUN SEL OF THE ASSESSEE VIDE HIS REPLY DATED 24.01.2013 ALREADY S UBMITTED THAT THE CASE MAY BE COMPLETED ON THE MATERIALS ON RECORD. 5. THE ASSESSEE IS A CIVIL CONTRACTOR AND HAS DECLARED A NET PROFIT OF RS.4923385/- AGAINST THE GROSS RECEIPTS OF RS.1 05,215,215/- WHICH INCLUDES INCOME FROM THE SALE OF PLOT AT RS.1 5,00,000/- AND INCOME FROM SUB CONTRACT AT RS.2399873/-. THIS GIVES A NET PROFIT RATIO OF 4.51% WHICH IS EXTREMELY LOW CONSID ERING THAT SINCE THE TURNOVER IS ABOVE RS. ONE CRORE, A NET PR OFIT RATE OF AROUND 10% IS EXPECTED IN ASSESSES LINE OF BUSINESS . FROM THE PERUSAL OF P & L ACCOUNT FILED, IT WAS SEEN THAT HU GE EXPENSES AT RS.1665458/- HAVE BEEN DEBITED ON A/C OF LABOUR AND WAGES. VIDE THIS OFFICE LETTER NO.1222 DATED 4.2.2013 THE ASSESSEE WAS CALLED UPON TO PRODUCE THE WAGE REGISTER. THE ASSES SEE WAS ALSO CALLED UPON TO FURNISH CERTAIN BILLS WHICH WER E DETAILED IN THE AFORESAID LETTER TO CORROBORATE THE WAGE LEDGE R SUBMITTED BY THE ASSESSEE ON RECORDS. HOWEVER, NO REPLY HAS B EEN RECEIVED BY THIS OFFICE IN THIS REGARD. FURTHER, A SUM OF RS.23500,836 HAVE BEEN DEBITED ON ACCOUNT OF COST O F DIRECT MATERIALS. VIDE LETTER NO.1222 DATED 4.2.2013 THE ASSESSEE WAS CALLED UPON TO PRODUCE THE COMPLETE BOOKS OF ACCOUN T AND IN PARTICULAR TO FURNISH THE BILLS/VOUCHERS IN SUPPORT OF PURCHASE. NO REPLY HAS BEEN RECEIVED IN THIS REGARD TILL DAT E. FURTHER, IT WAS NOTICED THAT EXPENSES AT RS.964811/- HAD BEEN DEBITED UNDER THE BAD DEBTS TO GULZAR AHMAD SHEIKH. THE ASS ESSEE WAS CALLED UPON TO FURNISH THE LEDGER ACCOUNT OF THREE PRECEDING YEARS TO SUBSTANTIATE THE CLAIM OF BAD DEBTS. NO DE TAILS HAVE BEEN FURNISHED IN THIS REGARD TILL DATE. NO PRIMAR Y BILLS/VOUCHERS WHATSOEVER WERE SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FURTHER, NO BANK ACCOUNTS HAVE BEEN FURNISHED BY THE ASSESSEE AS CALLED FOR IN THE AFOR ESAID LETTER. 6. IN THE ABSENCE OF ANY PRIMARY DOCUMENTS/BILLS AND V OUCHERS, THE BOOKS OF ACCOUNT OF THE ASSESSEE CANNOT BE RELI ED UPON. THEREFORE, THE UNDERSIGNED IS NOT SATISFIED AS TO T HE CORRECTNESS/COMPLETENESS OF THE SAME AS THE ASSESSE E FAILED TO PRODUCE THE SAME INSPITE OF MANY OPPORTUNITIES GIVE N TO HIM. THE BOOKS OF ACCOUNT ARE HERBY REJECTED UNDER SECTI ON 145(3) AND THE NET PROFIT IS ESTIMATED AS UNDER: ITA NO.527(ASR)/2013 6 RELYING ON THE CASE LAW OF M/S. SHIVAM CONSTRUCTION CO. VS. ACIT NOS. 383 & 384/2004, 622/2055, 385 & 386/2004 AND 728/2005 OF THE ITAT CHANDIGARH BENCH, THE INCOME FROM BUSINESS OF CONTRACT WILL BE DETERM INED @ 10% ON GROSS CONTRACTUAL RECEIPTS. THIS VIEW HAS BEEN DULY ENDORSED BY THE HONBLE PUNJAB & HARYANA HIGH COURT ALSO. THE NET PROFIT @ 10% ON GROSS CONTRACTU AL RECEIPTS [RS.105,215,215] = RS.10521521]. 2. BEFORE THE LD. CIT(A), THE ASSESSEE MADE THE SUB MISSIONS, WHO CONFIRMED THE ACTION OF THE A.O. WITH REGARD TO THE APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT AND DIRECTED THE A.O. TO APPLY NET PROFIT RATE OF 7% ON THE GROSS RECEIPTS IN THE CONTRACT BUSINESS A ND CONFIRMED THE ADDITION OF RS. 15 LACS AND DELETED THE ADDITION OF RS.23,99 ,873/-. THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE REPRODUCED FOR THE S AKE OF CONVENIENCE AS UNDER: 4.1. GROUND OF APPEAL NOS. 1,4,5,6 & 7 RELATES TO ADDITION OF RS.1,05,21,521/- ON ACCOUNT OF REJECTION OF BOOKS O F ACCOUNT AND APPLICATION OF NET PROFIT OF 10% ON GROSS RECEIPT. THE ASSESSEE HAS ARGUED THAT THE REJECTION OF BOOK RESULTS AND APPLI CATION OF RATE OF PROFIT IS UNJUSTIFIED. IT IS OBSERVED FROM THE ASSE SSMENT ORDER THAT THE BOOKS OF ACCOUNT, BILLS AND VOUCHERS WERE NOT PRODU CED BEFORE THE AO AND NOTICES ARE NOT COMPLIED WITH, THEREFORE, THE A O HAD NO OPTION BUT TO REJECT THE BOOK RESULTS AND COMPLETE THE ASS ESSMENT IN THE MANNER PROVIDED IN SECTION 144 OF THE ACT. HOWEVER, THE AO HAS ALSO NOT JUSTIFIED THE RATE OF PROFIT AT 10% ON GROSS RE CEIPTS. AFTER CONSIDERING THE RIVAL ARGUMENTS, I AM OF THE VIEW T HAT THE REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF PROFIT ARE IN OR DER BUT THE RATE APPLIED @ 10% IS EXCESSIVE KEEPING IN VIEW THAT THE ASSESSEE IS A CONTRACTOR OPERATING IN KASHMIRS EXTREME WEATHER C ONDITION WHICH RESULTS IN INTERMITTENT STOPPAGE OF WORK LEADING TO HIGH COST OF INPUTS. FURTHER HIGH LABOUR COST IS ALSO RESPONSIBLE FOR RE DUCTION IN MARGIN OF PROFIT AND THE PERFORMANCE OF WORK CONTRACT IS A LABOUR INTENSIVE ITA NO.527(ASR)/2013 7 EXERCISE. THEREFORE, THE COMPARISON OF SIMILARLY PL ACED ENTITY UNDER SAME SITUATION IS JUSTIFIABLE. IT IS TO MENTION THA T IN THE CASE OF M/S. CONSTRUCTION ENGINEERS VS. ADDL. CIT RANGE-3, SRINA GAR IN ITA NO.493(ASR)/2010 DATED 11.05.2010 THE ITAT AMRITSAR HAS UPHELD A NET PROFIT RATE OF 7% ON GROSS RECEIPTS IN THE CONT RACT BUSINESS. SINCE THE ABOVE COMPANY IS COMPARABLE AND OPERATING IN T HE SAME ENVIRONMENT, BASED ON THE ABOVE QUOTED DECISION, I AM OF THE CONSIDERED VIEW THAT APPLICATION OF A RATE OF 7% W ILL MEET THE END OF JUSTICE. THE GROSS RECEIPT OF RS.10,52,15,215/- INC LUDES THE INCOME FROM SALE OF PLOT AT RS.15,00,000/- AND SUB CONTRAC T RECEIPT AT RS.23,99,873/-. WHILE DETERMINING THE NET PROFIT AT THE RATE OF 7% THE AMOUNT OF RS. 15 LAC SHOULD BE EXCLUDED FROM GROSS RECEIPTS AS THIS HAS BEEN DEALT WITH SEPARATELY IN A SUBSEQUENT PARA . THIS GROUND OF APPEAL IS PARTLY ALLOWED. 4.2. GROUND NO.2 RELATES TO ADDITION OF RS.15,00,0 00/- ON ACCOUNT OF SALE OF PLOT BY THE ASSESSEE. IT IS OBSERVED THA T THE ASSESSEE HIMSELF HAS DECLARED THIS AMOUNT IN HIS BOOKS OF ACCOUNT. H OWEVER, THE ASSESSEE HAS ARGUED THAT SINCE THE INCOME OF THE AS SESSEE HAS BEEN ESTIMATED BY APPLYING RATE OF TAX, NO OTHER ADDITIO N CAN BE MADE. HOWEVER, THE PLEA OF THE ASSESSEE CANNOT BE SUSTAIN ED AS THE NET PROFIT RATE IS APPLIED TO THE BUSINESS RECEIPTS OF THE ASS ESSEE AND NOT TO THE CAPITAL GAINS. INCOME FROM SALE OF PLOT IS TO BE TA XED AS CAPITAL GAIN INCOME AND IS THEREFORE RIGHTLY ADDED BY THE AO SEP ARATELY TO THE INCOME OF THE ASSESSEE. THEREFORE, THIS GROUND OF A PPEAL IS DISMISSED. 4.3. GROUND OF APPEAL NO.3 RELATES TO ADDITION OF RS.23,99,873/- ON ACCOUNT OF SUB CONTRACTING INCOME. THE ASSESSEE HAS ARGUED THAT SINCE THE PROFIT HAS BEEN DETERMINED ON ESTIMATION BASIS BY APPLYING NET PROFIT RATE, SEPARATE ADDITION ON ACCOUNT OF SU BCONTRACTING INCOME SHOULD NOT BE MADE. IT IS OBSERVED THAT THE NET PRO FIT RATE HAS BEEN APPLIED BY THE AO ON THE GROSS RECEIPTS INCLUDING R ECEIPTS ON ACCOUNT OF SUB CONTRACTING, THEREFORE, NO SEPARATE ADDITION IS CALLED FOR. MOREOVER, THE GROSS RECEIPTS IN RESPECT OF SUB CONT RACTING BUSINESS CANNOT BE REGARDED AS INCOME. THE INCOME IN RESPECT OF SUCH SUB CONTRACTING RECEIPTS HAS ALREADY BEEN ADDED BY APPL YING 7% NET PROFIT RATE IN THE PARA 4.1. THEREFORE, NO FURTHER ADDITIO N IS WARRANTED ON THIS ACCOUNT. THUS, GROUND OF APPEAL OF THE ASSESSE E IS ALLOWED AND A RELIEF OF RS.23,99,873/- IS ALLOWED. ITA NO.527(ASR)/2013 8 3. THE LD. COUNSEL FOR THE ASSESSEE AGITATED THE AP PLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. HE ALSO AGITATED THE APPLYING OF NET PROFIT RATE OF 7% LOOKING TO THE PAST HISTORY OF THE ASSESSEE. HE ALSO ARGUED THAT THE OPENING STOCK OF RS.1,405,500/- SHOULD BE CREDITED WHILE UPHOLDING THE ADDITION OF RS.15,00,000/-. HE PLACED ON RECORD COP Y OF PROFIT & LOSS ACCOUNT IN THIS REGARD, WHICH SHOWS GROSS TURNOVER ON SALE OF PLOTS INCOME FROM SUB-CONTRACT ALAONGWITH CLOSING STOCK OF WORK IN PROGRESS AS UNDER: PARTICULARS AMOUNT BY GROSS TURNOVER 105,215,215.11 SALE OF PLOTS 1,500,000.00 INCOME FROM SUB-CONTRACT 2,399,873.00 CLOSING STOCK 518,000.00 WORK IN PROGRESS (AS TAKE VALUED & CERTIFIED BY PARTNERS) 4. THE LD. DR, ON THE OTHER HAND, ARGUED AT THE OUT SET THAT THE ORDER OF THE LD. CIT(A) IS PRIMA FACIE HAVING THE DEFECT WIT H REGARD TO THE GROSS RECEIPTS OF RS.105,215,215/- BY MENTIONING BY THE LD.CIT(A) THAT THE SAME INCLUDES INCOME FROM SALE OF PLOTS AMOUNTING TO RS. 15,00,000/- AND SOME CONTRACT RECEIPTS AT RS.23,99,873/- WHEREAS THE SAL E OF PLOTS INCOME FROM SUB CONTRACTS AT RS. 15 LACS AND RS.23,89,873/- ARE SE PARATE INCOME CREDITED TO THE PROFIT & LOSS ACCOUNT AS PER ORDER OF THE A.O. AND AS PER PROFIT & LOSS ITA NO.527(ASR)/2013 9 ACCOUNT PLACED ON RECORD BY THE ASSESSEE HIMSELF TH ROUGH HIS REPRESENTATIVE. THEREFORE, THE SAID INCOME FROM SALE OF PLOTS AND I NCOME FROM SUB-CONTRACT CANNOT BE PART OF GROSS TURNOVER OF RS.105,215,215/ -, SINCE THE AO HIMSELF HAS ESTIMATED THE RATE OF 10% ON THE GROSS CONTRACT UAL RECEIPTS OF RS.105,215,215/- AT RS.10521521/-. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS REGARDS THE APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT, IT IS EVIDENT FROM THE ORDER OF THE A.O. THAT THE ASSESSE E HAS NOT CO-OPERATED IN THE ASSESSMENT PROCEEDINGS INSPITE OF SHOW CAUSE NO TICE GIVEN. ACCORDINGLY, THE A.O. AFTER RELYING UPON THE DECISION OF M/S. SH IVAM CONSTRUCTION CO. VS ACIT MENTIONED IN HIS ORDER DECIDED BY THE ITAT, CH ANDIGARH BENCH, WHICH ORDER HAS BEEN AFFIRMED BY THE HONBLE PUNJAB & HARYANA HIGH COURT WHERE NET PROFIT RATE OF 10% ON GROSS CONTRAC TUAL RECEIPTS HAS BEEN UPHELD. WE FIND NO INFIRMITY IN THE ORDER OF THE LD . CIT(A) IN CONFIRMING THE ACTION OF THE A.O. AS REGARDS TO UPHOLDING THE PROVISIONS OF SECTION 145(3) OF THE ACT FOR THE REASONS THAT THE ASSESSEE HAS NOT CO-OPERATED IN THE ASSESSMENT PROCEEDINGS AND BOOKS HAVE NOT BEEN FOUN D TO BE ACCURATE AND IT WAS NOT POSSIBLE FOR THE AO TO DEDUCE INCOME PROPER LY. AS REGARDS THE APPLICATION OF NET PROFIT RATE, THE LD. CIT(A) HAS NOT DISTINGUISHED THE APPLICATION OF DECISION IN THE CASE OF M/S. SHIVAM CONSTRUCTION CO. (SUPRA) ITA NO.527(ASR)/2013 10 DECIDED BY THE ITAT, CHANDIGARH BENCH AND UPHELD BY THE HONBLE PUNJAB & HARYANA HIGH COURT AND HOW THE NET PROFIT RATE OF 10% APPLIED IN THAT CASE IS EXCESSIVE IN THE PRESENT FACTS AND CIRCUMST ANCES OF THE CASE. THOUGH THE LD. CIT(A) HAS NOT BROUGHT ON RECORD THE IDENT ICAL SITUATION OF THE DECISION IN THE CASE OF M/S. CONSTRUCTION ENGINEERS VS. ADDL. CIT, RANGE-3, SRINAGAR, DECIDED BY THE ITAT, AMRITSAR BENCH, AMRI TSAR TO THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. THOUGH HE IS N OT JUSTIFIED IN VARYING THE DECISION OF A.O. AS REGARDS TO APPLICATION OF NET P ROFIT RATE, BUT BEFORE US, THE REVENUE IS NOT IN APPEAL. WE HAVE NOT ALTERNA TIVE BUT TO CONFIRM THE ORDER OF THE A.O. AS REGARDS TO THE APPLICATION OF NET PROFIT RATE OF 7% ON THE GROSS RECEIPTS OF RS.105,215,215/-. THERE IS NO DIS PUTE TO THE FACT THAT THE GROSS RECEIPTS OF THE ASSESSEE AS ARGUED BY THE LD. DR AND ON THE BASIS OF THE ORDER OF THE A.O. AND PROFIT & LOSS ACCOUNT PLA CED ON RECORD BY THE LD. COUNSEL FOR THE ASSESSEE HIMSELF IS RS.105,215,215 /-, WHICH DOES NOT INCLUDE SALE OF PLOTS OF RS. 15 LACS AND SUB CONTRA CT RECEIPTS AT RS.23,99,873/-. THE SAID INCOME AND SALE OF PLOTS AND CIVIL CONTRACT INCOME ARE INCOMES SEPARATELY ASSESSED AS INCOME WHICH HA S NOTHING TO DO WITH THE GROSS CONTRACT RECEIPTS OF RS.105,215,215/-. ACCORD INGLY, THE ASSESSEE CANNOT BE GIVEN THE OPENING BALANCE OF RS.1,405,500 /- AS AGAINST SALE OF PLOTS AS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE , SINCE THE A.O. WHILE ITA NO.527(ASR)/2013 11 MAKING ESTIMATES HAS TAKEN INTO CONSIDERATION THE G ROSS CONTRACT RECEIPTS OF RS.105,215,215/- WITHOUT THE INCOME FROM SALE OF PL OTS AND INCOME FROM SUB-CONTRACTS. ACCORDINGLY, GROUNDS NO.1 TO 4 OF TH E ASSESSEE WITH REGARD TO THE APPLICATION OF PROVISIONS OF SECTION 145(3) ARE DISMISSED, GROUND NO.5 OF THE ASSESSEE IS ALLOWED AND GROUNDS NO. 6 & 7 A RE DISMISSED. GROUND NO.8 IS GENERAL IN NATURE AND THEREFORE, DOES NOT R EQUIRE ANY ADJUDICATION. 7 IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.527(ASR)/2013 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18TH MARCH, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH MARCH, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. KHANDEY CONSTRUCTION CO. SRINAGAR . 2. THE DCIT, CIR-3, SRINAGAR. 3. THE CIT(A), JAMMU. 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR