NOBLE CONSTRUCTION COMPANY,PUNE V. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1(1), PUNE, PUNE

ITA 481/PUN/2024

AI Insights

The case involves Noble Construction Company, which appealed against the order of the Commissioner of Income Tax (Appeals), Pune-11, pertaining to the Assessment Year 2013-14. The primary contention was the rejection of the books of accounts by the AO and the subsequent estimation of net profit at 8% of gross receipts. The AO had rejected the books due to incomplete and unsatisfactory details regarding work-in-progress (WIP) and other discrepancies. The CIT(A) upheld the AO's decision, leading to the appeal before the Tribunal. The Tribunal, considering the totality of facts and in the interest of justice, decided to set aside the matter back to the AO for a fresh assessment, allowing the assessee to present additional evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472576 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Other Referred Cases: CIT Vs. Realest Builders & Services Ltd. (2008) 307 ITR 202 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMNATH P. MURKUNDE
• Assessee Lawyers: PRAMOD S. SHINGTE
• Keywords: Set aside; Business income; Rejection of books of accounts; TDS
• Section: 144; 44AB; 145(3)

Judgement Text

" आयकर अपीलीय अधिकरण “ए” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI R.K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER आयकर अपील सं. / ITA No.481/PUN/2024 धििाारण वर्ा / Assessment Year : 2013-14 Noble Construction Company, Office No. 113-114, Atharva Feriyaz Plaza, Dhankawadi, Pune-411043 PAN : AAEFN2290B Vs. Dy. Commissioner of Income Tax, Central Circle-1(1), Pune अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Pramod S. Shingte Department by : Shri Ramnath P. Murkunde Date of hearing : 05-11-2024 Date of Pronouncement : 30-01-2025 आदेश / ORDER PER ASTHA CHANDRA, JM : The appeal filed by the assessee is directed against the order dated 10.01.2024 of the Ld. Commissioner of Income Tax (Appeals), Pune-11 [“CIT(A)”] pertaining to Assessment Year (“AY”) 2013-14. 2. The assessee has raised the following grounds of appeal :- “1. On the facts and circumstances of the case and in law the learned CIT(A) erred in upholding the Assessing officers action of rejecting the books of Accounts. 2. On the facts and circumstances of the case and in law the learned CIT(A) erred in upholding the Assessing officers action of estimating the net profit @8% of the Gross Receipts. 3. On the facts and circumstances of the case and in law the learned CIT(A) failed to appreciate that no rejection of Books of accounts by AO was required ignoring that accounts were audited u/s 44AB of the Act. 4. The Appellant craves leave to add, alter withdraw any ground.” 2 ITA No.481/PUN/2024, AY 2013-14 3. Briefly stated, the facts of the case are that the assessee is engaged in the business of Civil Construction. It undertakes civil contract and sub- contract work for Central Railway, State Government, Pune Municipal Corporation and some private parties. The assessee has filed its return of income for the AY 2013-14 on 01.10.2013 declaring total income of Rs.67,08,290/-. The case was selected for scrutiny. Statutory notice(s) u/s 143(2)/142(1) of the Income Tax Act, 1961 (the “Act”) were issued and duly served upon the assessee. In response thereto, the assessee filed its submissions before the Ld. Assessing Officer (“AO”) which were not found satisfactory by him. He proceeded to complete the assessment vide order dated 30.03.2016 u/s 144 r.w.s.145(3) of the Act rejecting the books of account of the assessee and estimating the business income from the civil contract business by applying net profit @ 8% of gross receipts amounting to Rs.1,05,77,501/-, thereby assessing the income of the assessee at Rs.1,48,81,041/-. 4. Aggrieved, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) in para 5 of his appellate order noted the reasons for which the books of account were rejected by the Ld. AO which are as under : “i) Despite giving number of opportunities and reasonable time, the assessee failed to furnish all the required details, books of accounts, bills, vouchers, etc. (para 4.1 of assessment order). ii) The details of WIP filed by the assessee are incomplete and incorrect. It filed details of WIP only for 2 sites and did not file details of other 3 sites despite of issuing a specific show cause notice. (para 4.4 of assessment order). iii) The assessee submitted that the WIP is being valued as per work mentioned in running bills but no copy of any running bill was filed. Neither any reconciliation was filed by the assessee. Thus, Valuation of WIP is arbitrary and without any basis. (para 4.1 of assessment order). iv) As per the provisions of section 145A, the assessee was required to value its purchases, sales and inventory by including VAT, however, same was not done by the assessee. (para 4.1 of assessment order). v) In case of few subcontractors, the assessee has credited net amount after TDS with respect to bills raised by them whereas in case of some of the sub-contractors, gross amount of bills are credited to their accounts. (para 4.1 of assessment order). No explanation to this was filed inspite of specific show cause on this issue. (para 4.6 of assessment order). vi) Even after issue of a show-cause notice, the appellant could not furnish complete details as well as reconciliation regarding WIP.(para 4.4 of assessment order). vii) As detailed in para 4.5 of the assessment order, some of the entries in confirmation vis a vis ledger extracts do not match.” 3 ITA No.481/PUN/2024, AY 2013-14 4.1 The assessee filed its written submissions before the Ld. CIT(A) vide letter dated 02.01.2024 which is reproduced in para 7 of the appellate order. Having considered the facts of the case and the submissions made by the assessee, the Ld. CIT(A) upheld the order of the Ld. AO by confirming his action of rejecting the assessee’s books of account u/s 145(3) of the Act and also estimation of the net profit @ 8% of gross receipts for the reasons mentioned in para 8 to 11 of the appellate order which are reproduced below : “8. I have considered the facts of the case and the submissions made by the appellant. A perusal of the assessment order suggests that one of the main reasons for rejecting the books of accounts of the appellant was that it did not file complete details of WIP for all sites and also did not substantiate the valuation of WIP by filing the copies of running bills. A perusal of the appellant’s submission before me suggests that the copies of running bills are not fled by the appellant even after a lapse of 7 years. Further, it has just filed the closing WIP for remaining sites, but the manner in which the closing value of WIP for these 3 sites (Jaisingpur, Daund and Ramwad) has been arrived at has not been substantiated through the documentary evidences. Filing the ledger extracts in no manner substantiate the correctness of valuation of closing WIP. 9. In the reply submitted before me, the appellant has not explained as to why in some cases, the amount is being credited net of TDS and in some cases, it is being credited on gross basis. Also, the reasons for which the differences in the account of M/s A D Patil (as pointed out by the AO) are appearing have not been furnished. In the submission, the appellant has claimed that the confirmation from A D Patil is enclosed but the same is not found enclosed with the submission made on ITBA. 10. Further, the appellant has explained that VAT was not added in the value of purchases, sales or closing WIP by following its accounting policy which is in sync with Accounting Standards. In this connection, it is seen that section 145A(ii) of the Act, specifically provides that VAT is required to be included. Since, this has been specifically provided in the Income Tax Act, same shall supersede any other accounting policy followed by the appellant. 11. Besides above, there are other deficiencies in the books of accounts such as complete books were never produced before the AO neither complete bills or vouchers were produced. Considering the totality of facts of the case, the action of the assessing officer of rejecting the appellant's books of accounts u/s 145(3) of the Act, is upheld. Further, the action of the assessing officer of estimating the net profit @8% of gross receipts is also upheld. The grounds of appeals raised by the appellant are DISMISSED.” 5. Dissatisfied, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto. 6. The Ld. AR submitted that the Ld. CIT(A) has confirmed the action of the Ld. AO in rejecting the books of account of the assessee as the assessee could not furnish complete details of WIP and its valuation for all sites with supporting documentary evidence to substantiate its case. The 4 ITA No.481/PUN/2024, AY 2013-14 Ld. AR also submitted that the assessee could not produce proper books of account before the Ld. AO. He submitted that given an opportunity the assessee is in a position to file the required details/documentary evidence in support of its claim. He, therefore, requested that the matter may be set aside to the file of the Ld. AO to decide the issues afresh. 7. The Ld. DR relied on the order of the Ld. CIT(A) and submitted that the assessee is a big civil contractor and therefore it is expected of him to maintain proper books of account which would have been submitted by it during the assessment/appellate proceedings if available. However, it failed to do so. Therefore, the Ld. CIT(A) was completely justified in upholding the order of the Ld. AO. On merits, the Ld. DR submitted that the decision of the Hon’ble Apex Court in the case of CIT Vs. Realest Builders & Services Ltd. (2008) 307 ITR 202 (SC) relied by the Ld. AR is not applicable to the present case of the assessee as the facts are distinguishable. 8. We have heard the Ld. Representatives of the parties and perused the material on record. We find that the Ld. AO completed the assessment u/s 144 r.w.s. 145(3) of the Act rejecting the books of account of the assessee and estimating the net profit from construction business @ 8% of the gross receipts for the reasons which are reproduced above which are mainly pertaining to non-filing of the required/relevant documentary evidence by the assessee before him. We also notice that the Ld. CIT(A) has upheld the action of the Ld. AO for the same reasons i.e. non- production of the complete details/documentary evidence by the assessee. Admittedly, there was lack on the part of the assessee to furnish proper books of account and other supporting documentary evidence in support of its claim before the Ld. AO as well as Ld. CIT(A). Before us, the Ld. Counsel for the assessee has requested that given an opportunity the assessee is in a position to submit the required details/documentary evidence in support of its case and has therefore prayed that the matter may be set aside to the file of the Ld. AO. Considering the totality of the facts and in the circumstances of the case, we deem it fit, in the interest of justice and fair play to restore the matter to the file of Ld. AO to decide the impugned issues afresh on merits in light of the details documents/ evidence already available on record as well as such other details information/documentary evidence as may be called upon by him during 5 ITA No.481/PUN/2024, AY 2013-14 fresh proceedings. The assessee is hereby granted one more opportunity to produce the proper books of account and other supporting documentary evidences before the Ld. AO as undertaken by it before this Tribunal. The assessee is directed to appear before the Ld. AO and present its case before him on the appointed date without seeking adjournment under any pretext, failing which the Ld. AO shall be at liberty to pass appropriate order as per fact and law. We order accordingly. 9. In the result, the appeal of assessee is allowed for statistical purpose. Order pronounced in the open court on 30th January, 2025. Sd/- Sd/- (R.K. Panda) (Astha Chandra) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; दिन ांक / Dated : 30th January, 2025. रदि आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : 1. अपील र्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The Pr. CIT concerned. 4. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, “ए” बेंच, पुणे / DR, ITAT, “A” Bench, Pune. 5. ग र्ड फ़ इल / Guard File. //सत्य दपि प्रदि// True Copy// आिेश नुस र / BY ORDER, िररष्ठ दनजी सदचि / Sr. Private Secretary आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune "