Sh. Harbans Singh Sahni, Patiala v. DCIT, Patiala

CO 19/CHANDI/2014 | 2009-2010
Pronouncement Date: 28-04-2014 | Result: Dismissed

Appeal Details

RSA Number 1921523 RSA 2014
Assessee PAN AFNPS3490Q
Bench Chandigarh
Appeal Number CO 19/CHANDI/2014
Duration Of Justice 21 day(s)
Appellant Sh. Harbans Singh Sahni, Patiala
Respondent DCIT, Patiala
Appeal Type Cross Objection
Pronouncement Date 28-04-2014
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 28-04-2014
Assessment Year 2009-2010
Appeal Filed On 07-04-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA JUDICIAL MEMBER ITA NO.189/CHD/2014 ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF VS SHRI HARBANS SINGH S AHNI INCOME TAX RAGHO MAJRA CIRCLE KARAH WALA CHOWK PATIALA PATIALA. PAN : AFNPS3490Q & C.O. NO. 19/CHD/2014 IN ITA NO.189/CHD/2014 SHRI HARBANS SINGH SAHNI VS THE DEPUTY COMMISSION ER OF RAGHO MAJRA INCOME TAX KARAH WALA CHOWK CIRCLE PATIALA. PATIALA. (APPELLANT) (RESPO NDENT) DEPARTMENT BY : SHRI J.S.NAGAR ASSESSEE BY : SHRI K.P.BAJAJ DATE OF HEARING : 16.04.2014 DATE OF PRONOUNCEMENT : 28.04.2014 O R D E R PER SUSHMA CHOWLA JM THE APPEAL BY THE REVENUE AND THE CROSS OBJECTIONS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMM ISSIONER OF INCOME TAX (APPEALS) PATIALA DATED 27.12.2013 AGAI NST THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961 ( 'THE ACT' FOR SHORT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS.20 06 597/- MADE BY THE AO BY APPLYING NET PROFIT RATE OF 12% OF GROSS RECEIPT S AFTER REJECTING 2 THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT BY APP LYING THE NET PROFIT RATE OF 7.78%. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN REDUCING THE NET PROFIT RATE TO 7.78% EVEN THOUGH THE ASSESSEE HAS FAILED TO FILE THE DETAILS OF STOCK/LA BOUR REGISTER IN THE ABSENCE OF WHICH THE LABOUR EXPENSES AS WELL A S VALUATION OF CLOSING STOCK WERE NOT VERIFIABLE AND CANNOT BE REL IED UPON. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) HAS ERRED IN RESTRICTING THE NET PROFIT RATE TO 7.78% O N THE BASIS OF PAST RESULTS WITHOUT APPRECIATING THAT LABOUR CHARGES W ERE CLAIMED TO HAVE NOT BEEN PAID FOR SEVERAL MONTHS THE VALUATIO N OF CLOSING STOCK AS NOT SUBSTANTIATED AND NO PLAUSIBLE EXPLAN ATION FOR LOW GROSS PROFIT RATE FOR WORK DONE IN PUNJAB WAS SUBMI TTED. 3. IN CROSS OBJECTIONS THE ASSESSEE HAS RAISED FOLL OWING GROUND: THAT THE COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN UPHOLDING THE ESTIMATION OF INCOME FRO M CONTRACT BUSINESS AT 7.78% AS AGAINST THE RATE DECLARED BY T HE ASSESSEE AT 6.78% WHICH IS HIGHER THAN THAT ACCEPTED IN EARLIER YEARS. 4. THE APPEAL OF THE REVENUE AND THE CROSS OBJECTIO N FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISP OSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 5. THE REVENUE IS AGGRIEVED BY THE ORDER OF COMMISS IONER OF INCOME TAX (APPEALS) IN ESTIMATING THE INCOME IN TH E HANDS OF THE ASSESSEE BY APPLYING A NET PROFIT RATE OF 7.78% TO THE GROSS RECEIPTS AS AGAINST NET PROFIT RATE OF 12% TO THE G ROSS RECEIPTS APPLIED BY THE ASSESSING OFFICER. THE ASSESSEE IS AGGRIEVED BY THE UPHOLDING OF ESTIMATION OF INCOME FROM CONTRACT BUS INESS OF 7.78% AS AGAINST THE RATE DECLARED BY THE ASSESSEE AT 6.7 8% WHICH WAS HIGHER THAN THAT ACCEPTED IN THE EARLIER YEARS. 6. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS CONTRACTOR AND FILED THE RETURN OF INCOME SHOWING N ET PROFIT RATE OF 6.78% TO ITS GROSS RECEIPTS. THE ASSESSING OFFICER DURING THE 3 COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASS ESSEE HAD DEBITED LABOUR EXPENSES OF RS. 18 30 574/- AND IN T HE BALANCE SHEET THE LABOUR PAYABLE WAS DECLARED AT RS. 28 93 500/-. THE ASSESSING OFFICER WAS SURPRISED THAT SUCH HUGE AMOU NT OF LABOUR EXPENSES REMAINED PAYABLE IN THE KIND OF BUSINESS C ARRIED ON BY THE ASSESSEE. THE ASSESSING OFFICER SHOW CAUSED TH E ASSESSEE TO EXPLAIN THE SAME AND ALSO ASKED THE ASSESSEE TO EXP LAIN WHY THE GP RATE WAS TOO LOW FOR THE WORK DONE IN PUNJAB AS COM PARED TO THE WORK DONE IN HARYANA. THE ASSESSEE WAS ALSO SHOW C AUSED THAT IN CASE OF FAILURE TO EXPLAIN THE SAME THE BOOKS OF A CCOUNT WOULD BE REJECTED AND ASSESSMENT WOULD BE MADE UNDER SECTION 145(3) READ WITH SECTION 144 OF THE INCOME TAX ACT. 7. IN REPLY IT WAS SUBMITTED BY THE ASSESSEE THAT THE LABOUR EXPENSES FOR THE YEAR UNDER CONSIDERATION WERE ENTI RELY PAID AND THE AMOUNT OF RS. 28 93 500/- REPRESENTED LABOUR CH ARGES PAYABLE FOR THE EARLIER YEARS AND ADDITION ON THAT ACCOUNT WAS ALREADY MADE IN ASSESSMENT YEAR 2006-07. THE ASSESSEE HAD DRAWN TWO TRADING ACCOUNTS AS THE VAT NUMBERS FOR HARYANA AND PUNJAB WERE DIFFERENT AND THE TURNOVER HAD TO BE EXPLAINED BEFO RE THE EXCISE AUTHORITIES. HOWEVER THE EXPENSES RELATING TO BOT H THE PROJECTS WERE DEBITED TO THE SAME PROFIT & LOSS ACCOUNT AND IT WAS POINTED OUT THAT THE GP RATE DECLARED BY THE ASSESSEE WAS H IGHEST AS COMPARED TO THE PAST THREE YEARS GP RATE. THE ASS ESSING OFFICER FURTHER NOTED FROM THE EXAMINATION OF BOOKS OF ACCO UNT THAT THE ASSESSEE HAD FAILED TO PRODUCE ANY DOCUMENTARY EVID ENCE WITH RESPECT TO THE LABOUR PAID DURING THE YEARS EITHER IN THE FORM OF LABOUR REGISTER OR VOUCHERS AND FURTHER THE ASSESSE E DID NOT MAKE ANY LABOUR PAYMENTS TILL OCTOBER 2008 AND EVEN WHEN THE PAYMENT WAS MADE THROUGH CHEQUE IT WAS MADE TO SINGLE PERS ON. IN REPLY 4 THE ASSESSEE EXPLAINED THAT THE LABOUR REGISTERS AN D VOUCHERS WERE IN THE CHARGE OF SUPERVISOR WHICH WERE NOT TRACEABL E AT THAT POINT AND IT WAS FURTHER POINTED OUT THAT AS COMPARED TO THE EARLIER YEARS THE LABOUR PAYMENTS FOR THE YEAR UNDER CONSIDERATIO N WERE AT A LOWER PERCENTAGE. IN RESPECT OF THE PAYMENTS OF LA BOUR BEING MADE IN OCTOBER 2008 THE ASSESSEE EXPLAINED THAT THE SA ID PAYMENTS WERE MADE TO THE LABOURERS WHEN THEY WENT HOME AND EARLIER ONLY THE RASHAN WAS SUPPLIED BY THE KARYANA DEALERS ON THE ASSESSEE'S GUARANTEE AND THE SAID ACCOUNT WAS SETTLED WHEN ASS ESSEE WAS IN A POSITION TO PAY. FURTHER IT WAS POINTED OUT BY TH E ASSESSEE BEFORE THE ASSESSING OFFICER THAT THERE WERE THREE LABOURE RS WITH THE SAME NAME AND HENCE THE PAYMENTS WERE SHOWN IN THAT MAN NER. 8. THE ASSESSING OFFICER IN VIEW OF THE FACT THAT T HE ASSESSEE FAILED TO PRODUCE LABOUR REGISTER AND/OR THE VOUCHE RS FOR LABOUR PAYMENTS REJECTED THE PLEA OF THE ASSESSEE ON ALL ACCOUNTS AND IN VIEW OF THE PROVISIONS OF SUB-SECTION 145(3) OF THE ACT REJECTED THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. IN VI EW THEREOF AND IN ORDER TO COVER LEAKAGE OF THE REVENUE THE ASSES SING OFFICER ESTIMATED THE NET PROFIT RATE BY APPLYING 12% TO TH E GROSS RECEIPTS AND COMPUTED THE INCOME OF THE ASSESSEE. 9. IN APPEAL THE COMMISSIONER OF INCOME TAX (APPEA LS) THOUGH UPHELD THE REJECTION OF BOOKS OF ACCOUNT BUT ESTIM ATED THE NET PROFITS BY APPLYING NET PROFIT RATE OF 7.78%. THE R EVENUE IS IN APPEAL AGAINST THE SAID SCALING DOWN OF ESTIMATION BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESS EE IS IN APPEAL AGAINST THE PART UPHOLDING OF ADDITION IN HI S HANDS. 10. SHRI K.P.BAJAJ APPEARED FOR THE ASSESSEE AND SH RI J.S.NAGAR APPEARED FOR THE REVENUE AND PUT FORWARD THEIR CONT ENTIONS. 5 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAS NOT RAISED ANY GROUND OF APPEAL AG AINST THE REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT. ACCORDINGLY THE SAID REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT IS UPHELD. AFTER THE BOOKS OF AC COUNT ARE REJECTED IN THE HANDS OF THE ASSESSEE THE NET PROF IT RATE HAS TO BE APPLIED TO ESTIMATE THE INCOME IN THE CAPTIONED ASS ESSMENT YEAR. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES WE ARE IN CONFORMITY WITH THE ESTIMATION MADE BY THE COMMISSIONER OF INC OME TAX (APPEALS). WE UPHOLD THE APPLICATION OF NET PROFIT RATE OF 7.78% TO THE GROSS RECEIPTS IN ORDER TO DETERMINE THE INCOME IN THE HANDS OF THE ASSESSEE WHERE THE ASSESSEE HAD FAILED TO PRODU CE THE VOUCHERS FOR LABOUR PAYMENT AND HAD ALSO FURTHER FAILED TO P RODUCE ANY LABOUR REGISTERS TO JUSTIFY THE CLAIM OF LABOUR EXP ENDITURE IN ADDITION TO OTHER DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER. THE ASSESSEE HAD DECLARED GP RATE OF 6.68 % AS AGAINST WHICH THE INCOME IN THE HANDS OF THE ASSESSEE HAS B EEN ESTIMATED BY APPLYING NET PROFIT RATE OF 7.78%. WE UPHOLD TH E SAME AND DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE. 12. IN THE RESULT BOTH THE APPEAL FILED BY THE REV ENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH APRIL 2014. SD/- SD/- ( T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28 TH APRIL 2014 POONAM COPY TO: THE APPELLANT THE RESPONDENT THE CIT(A) THE CIT DR. ASSISTANT REGISTRAR ITAT CHD.