Sh. Lakhwinder Singh, Gurdaspur v. The Assistant Commissioner of Income Tax, Pathankot

CO 30/ASR/2015 | 2011-2012
Pronouncement Date: 19-10-2016 | Result: Dismissed

Appeal Details

RSA Number 3020923 RSA 2015
Bench Amritsar
Appeal Number CO 30/ASR/2015
Duration Of Justice 10 month(s) 16 day(s)
Appellant Sh. Lakhwinder Singh, Gurdaspur
Respondent The Assistant Commissioner of Income Tax, Pathankot
Appeal Type Cross Objection
Pronouncement Date 19-10-2016
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 19-10-2016
Assessment Year 2011-2012
Appeal Filed On 03-12-2015
Judgment Text
ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 2 ORDER PER T.S. KAPOOR AM: THESE ARE THE CROSS APPEALS FILED BY THE REVENUE A S WELL AS BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-2 AMR ITSAR DATED 15.07.2015. THE ASSESSEE HAS ALSO FILED C.O. AGAINS T THE APPEAL OF THE REVENUE WHEREIN IT HAS MERELY SUPPORTED THE ORDER OF THE LD. CIT(A). 2. THE REVENUE IN THIS CASE IS AGGRIEVED AS THE LD. CIT(A) HAD ADMITTED THE APPEAL OF THE ASSESSEE WHICH WAS FILE D LATE BY MORE THAN SIX MONTHS AND IS FURTHER AGGRIEVED BY THE FACT THA T THE LD. CIT(A) HAS REDUCED THE NET PROFIT RATE TO 8% OF GROSS RECEIPTS WHICH THE AO HAD APPLIED @ 10%. 3. THE ASSESSEE IS AGGRIEVED WITH THE SUSTENANCE O F THE APPLICATION OF NET PROFIT RATE OF 8% AND IS FURTHER AGGRIEVED BY THE SUSTENANCE OF ADDITION OF RS.1 18 342/- WHICH THE LD. CIT(A) HAS SUSTAINED ON ACCOUNT OF NON-DEDUCTION OF TDS U/S 40(A)(IA) OF THE ACT. 4. THE BRIEF FACTS AS NOTED IN THE ASSESSMENT ORDE R ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR. DURING THE ASSESSME NT YEAR UNDER CONSIDERATION THE GROSS RECEIPTS OF THE ASSESSEE A MOUNTED TO RS.12 58 30 195/- AGAINST WHICH THE ASSESSEE HAD DE CLARED NET PROFITS OF RS.69 34 742/-. DURING THE ASSESSMENT PROCEEDING S THE AO OBSERVED ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 4 ASSESSEE HAD NOT DEDUCTED TDS THEREFORE FURTHER D ISALLOWANCE U/S 40(A)(IA) OF THE ACT TO THE TUNE OF RS.1 18 342/- W AS MADE. 5. AGGRIEVED WITH THE ORDER THE ASSESSEE FILED AP PEAL BEFORE THE LD. CIT(A) AND MADE VARIOUS SUBMISSIONS AND ALSO RELIED UPON A NUMBER OF CASE LAWS FOR THE PROPOSITION THAT NET PROFIT RATE OF 5% WAS SUFFICIENT WHERE THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REJE CTED. THE ASSESSEE ALSO AGITATED BEFORE THE LD. CIT(A) REGARDING REJEC TION OF BOOKS OF ACCOUNT. BEFORE THE LD. CIT(A) THE COMPARATIVE FIGURES OF P REVIOUS TWO YEARS OF GROSS RECEIPTS AND NET PROFIT RATIO WERE ALSO SUBMI TTED. THE LD. CIT(A) AFTER GOING THROUGH THE MATERIAL ON RECORD AND SUBM ISSIONS OF THE ASSESSEE REDUCED THE NET PROFIT RATE OF 10% TO 8% A ND ALSO DIRECTED THE AO TO ALLOW DEPRECIATION OUT OF NET PROFITS OF 8%. HOWEVER THE DISALLOWANCE OF RS.1 18 342/- UNDER SECTION 40(A)(I A) OF THE ACT WAS CONFIRMED. 6. AGGRIEVED BOTH THE PARTIES ARE IN APPEAL BEFORE US. 7. AT THE OUTSET THE LD. AR TOOK UP HIS APPEAL AND SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY APPLIED NET PROFIT RATE OF 8% WHICH IS QUIET EXCESSIVE AND ARBITRARY AND IS AGAINST THE FACTS OF THE CASE AND ALSO THE PAST HISTORY OF THE ASSESSEE. THE LD. AR IN THIS RE SPECT INVITED OUR ATTENTION TO PAGE 7 OF THE LD. CIT(A)S ORDER WHER E THE LD. CIT(A) HAS NOTED GROSS RECEIPTS OF THREE YEARS INCLUDING THE PRESENT YEAR AND TWO PREVIOUS YEARS. THE LD. AR SUBMITTED THAT THE NET PROFIT RATIO OF 5.51% IN THE PRESENT YEAR IS MORE THAN THE NET PROFIT RAT IO OF EARLIER TWO YEARS ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 6 8. THE LD. AR SUBMITTED THAT IN THE CASE OF SH. MO HAN SINGH CONTRACTOR (SUPRA) THE ASSESSEE HAD DECLARED A NE T PROFIT RATE OF 3.60% AS COMPARED TO 3.87% IN THE IMMEDIATELY PRECEDING Y EAR. THE AO AFTER REJECTING THE BOOKS OF ACCOUNT APPLIED NET PROFIT RATE OF 8%. THE TRIBUNAL VIDE ITS ORDER DATED 05.06.2012 HAD HELD THAT THE A SSESSEE HAD DECLARED NET PROFIT RATE OF 3.87% IN THE IMMEDIATELY PRECEDI NG YEAR AND WHICH HAD BEEN ACCEPTED BY THE DEPARTMENT. THEREFORE KE EPING IN VIEW THE PAST HISTORY OF THE ASSESSEE NET PROFIT RATE OF 5% WAS JUSTIFIED. SIMILARLY INVITING OUR ATTENTION TO THE ORDER OF THE AMRITSAR BENCH OF THE TRIBUNAL IN THE CASE OF M/S. SURINDER PALL NAYYAR CONTRACTOR S (SUPRA) IT WAS SUBMITTED AT IN THIS CASE THE AO HAD APPLIED 8% N ET PROFIT RATE AGAINST THE ASSESSEES DECLARED PROFIT IN THE EARLIER YEARS AT 3.6%. THE ITAT DISMISSED THE APPEAL OF THE REVENUE WHEREIN THE LD. CITA) HAD REDUCED THE NET PROFIT RATE FROM 8% TO 5%. THE LD. AR FURTH ER TOOK US TO THE ORDER OF THE TRIBUNAL DATED 26.08.2016 IN THE CASE OF . J.S. GROVER CONSTRUCTIONS (SUPRA) WHEREIN THE LD. CIT(A) HAD R ESTRICTED THE NET PROFIT RATE AT 7% INSTEAD OF 10% DETERMINED BY THE AO AND THE TRIBUNAL HAD CONFIRMED THE ORDER OF THE LD. CIT(A). THE LD. AR A LSO TOOK US TO THE ORDER OF THE TRIBUNAL DATED 21.01.2016 IN THE CASE OF M /S. SATISH AGGARWAL & CO. (SUPRA) ARE SUBMITTED THAT IN THIS CASE ALSO T HE TRIBUNAL HAS HELD THE NET PROFIT RATE OF 5% TO BE REASONABLE PROFIT. IT WAS SUBMITTED THAT THE TRIBUNAL HAD DISMISSED THE APPEAL OF THE REVENUE W HICH WAS REMANDED BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN VIEW OF THE RATIO IN ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 8 ACCOUNT WERE CORRECT. AS REGARDS DISALLOWANCE U/S 40A(IA) OF THE ACT THE LD. DR SUBMITTED THAT THE DISALLOWANCE IS A MAN DATORY DISALLOWANCE FOR NON DEDUCTION OF TDS THEREFORE THE LD. CIT(A ) HAS RIGHTLY CONFIRMED THE SAME. 12. THE LD. DR FURTHER SUBMITTED THAT HIS ARGUMENTS RELATING TO REDUCTION OF RATE FROM 10% TO 8% ALSO APPLIES TO TH E REVENUES APPEAL. IT WAS SUBMITTED THAT THE AO HAD GIVEN COGENT REASONS FOR REJECTING BOOKS OF ACCOUNT AND THEREFORE THE LD. CIT(A) SHOULD NO T HAVE TAKEN A DIFFERENT VIEW. THE LD. DR FURTHER SUBMITTED THAT T HE APPEAL OF THE ASSESSEE WAS LATE BY MORE SIX MONTHS AND THE LD. CI T(A) SHOULD NOT HAVE ADMITTED THE SAME. 13. THE LD. COUNSEL HOWEVER SUBMITTED THAT THE LD . CIT(A) HAD GIVEN COMPLETE REASONS FOR ADMISSION OF APPEAL AFTER SIX MONTHS AS THE FATHER OF THE ASSESSEE WAS ILL AND IN THIS RESPECT OUR ATT ENTION WAS INVITED TO LD. CIT(A)S ORDER AT PAGE 3 WHEREIN IT HAS BEEN STATE D THAT THE FATHER OF THE ASSESSEE WAS TAKEN TO VARIOUS HOSPITALS ON VARIOUS DATES FOR TREATMENT. 14. WE HAVE HEARD THE RIVAL CONTENTIONS IN THE LIGH T OF THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS A FACT THAT TH E ASSESSEE DID NOT PRODUCE COMPLETE VOUCHERS OF PURCHASES AND LABOUR C HARGES DURING ASSESSMENT PROCEEDINGS AND THEREFORE THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNT IS JUSTIFIED AND THE LD. CIT(A ) HAS ALSO UPHELD THE REJECTION OF BOOKS OF ACCOUNT. NOW AFTER REJECTION OF BOOKS OF ACCOUNT ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 10 IN THE PRESENT YEAR THE ASSESSEE DECLARED NET PRO FIT RATE AT 5.51%. THEREFORE THE PRESENT RATE OF NET PROFIT DECLARED BY THE ASSESSEE IS IN LINE WITH THE EARLIER YEARS. WE FURTHER FIND THAT T HE EARLIER YEARS RETURNS HAS BEEN ACCEPTED BY THE DEPARTMENT AND THEREFORE THERE IS NO REASON WHY THE SIMILAR RATHER INCREASED RATE OF NET PROFIT SHOULD NOT HAVE BEEN ACCEPTED BY THE AUTHORITIES BELOW ESPECIALLY KEEPI NG IN VIEW THE FACT THAT THE ASSESSEE IS ENGAGED IN SAME KIND OF ACTIVI TIES AS WAS IN THE EARLIER YEAR. THE LD. COUNSEL HAS RELIED UPON A NUM BER OF CASE LAWS NOTED ABOVE IN THIS ORDER WHEREIN THE TRIBUNAL HAD HELD THE NET PROFIT RATE OF 5% TO BE REASONABLE KEEPING IN VIEW THE PAST HISTO RY OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE THE FINDING OF THE TRIBUNA L IN ITA NO.58/ASR/2012 IN THE CASE OF MOHAN SINGH CONTRACTO R ARE REPRODUCED BELOW: 5.1. AS REGARDS THE ESTIMATION OF INCOME THE AO H AS APPLIED NET PROFIT RATE OF 8% AND HAS RELIED UPON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT HI SSAR VS. PRABHAT KUMAR CONTRACTOR SIRSA IN ITA NO.293 OF 2008 DATE D 14.11.2008. THE AO HAS NOT BROUGHT OUT THE FACTS ON RECORD OF THE CASE OF CIT HISSAR VS. PRABHAT KUMAR CONTRACTOR SIRSA (SUPRA) AS TO HOW THE FACTS IN THAT CASE ARE IDENTICAL TO THE FACTS OF TH E PRESENT CASE. THE ASSESSEE HAS BEEN DECLARING NET PROFIT RATE OF 3.87 % IN THE PRECEDING YEAR AT A TURNOVER OF RS.1 32 26 714/- WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT THERE IS NO DISPUTE TO T HIS FACT. KEEPING IN VIEW THE PAST HISTORY OF THE PRESENT CASE OF THE ASSESSEE AND FACTS AND CIRCUMSTANCES OF THE PRESENT CASE A NET P ROFIT RATE OF 5% IF APPLIED TO THE CONTRACT RECEIPTS DECLARED BY THE AS SESSEE WILL MEET BOTH ENDS OF JUSTICE. THE AO IS DIRECTED TO ACT ACC ORDINGLY. THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE MODIFIED A CCORDINGLY. THUS THE GROUNDS OF THE ASSESSEE ARE PARTLY ALLOWED. ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 12 16. THE TRIBUNAL VIDE ITS ORDER DATED 21.01.2016 I N ITA NO.483/ASR/2013 IN THE CASE OF SATISH AGGARWAL & C O. AFTER TAKING INTO ACCOUNT THE FACTORS NOTED BY THE HONBLE PUNJAB & H ARYANA HIGH COURT IN TELELINKS VS. CIT BATHINDA HAS ALSO HELD THE R ATE OF 5% TO BE REASONABLE BY HOLDING AS UNDER: 12. AS DEMONSTRATED BY LEARNED AR THE PAST AND SUB SEQUENT PROFIT MARGINS REMAINED LESS THAN 5% AND THE ACTIVI TIES OF THE ASSESSEE REMAINED SAME THEREFORE WE UPHOLD THE AP PLICATION OF 5% NET PROFIT RATE. 17. HOWEVER IT IS ALSO A FACT THAT IN CASE OF NON SUBMISSION OF COMPLETE VOUCHERS AND PURCHASE INVOICES TO THE ASSE SSING AUTHORITY THERE IS ALWAYS A CHANCE OF UNDERSTATING THE PROFIT S. THE ACCEPTANCE OF PROFITS DECLARED BY THE ASSESSEE AT THE SAME FIGURE WITHOUT VERIFICATION OF PURCHASE INVOICES AND VOUCHERS CANNOT BE EQUATED W ITH A CASE WHERE COMPLETE VOUCHERS AND BOOKS HAD BEEN SUBMITTED. THO UGH THE ASSESSEE IN EARLIER YEARS HAD DECLARED NET PROFIT RATE RANGI NG FROM 5.21% TO 5.34% AND THE DEPARTMENT HAD ACCEPTED THE SAME THEREFORE IT MAY BE A CASE THAT IN THOSE YEARS THE ASSESSEE HAD FILED COMPLET E VOUCHERS AND PURCHASE INVOICES. THEREFORE TO EQUATE A PERSON WH O MAINTAINS COMPLETE VOUCHES AND BOOKS OF ACCOUNT WITH A PERSON WHO DOES NOT MAINTAIN COMPLETE BOOKS OF ACCOUNT IS NOT JUSTIFIED. THERE S HOULD BE SOME DETERRENT SO AS TO INDUCE A PERSON TO MAINTAIN PRO PER BOOKS OF ACCOUNTS. IN VIEW OF THE ABOVE WE ARE OF THE OPINION THAT TH OUGH KEEPING IN VIEW THE PAST HISTORY OF THE ASSESSEE THE RATE OF NET P ROFIT RATE DECLARED AT ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 14 SHOULD BE SEPARATELY DEDUCTED FROM THE GROSS PROFIT . IF IT IS CONSIDERED THAT THE NET PROFIT SHOULD BE ESTIMATED IT SHOULD BE ESTIMATED SUBJECT TO THE ALLOWANCE FOR DEPRECIATION AND THE DEPRECIATION ALLOWANCE SHOULD BE DEDUCTED THEREFROM . 19. WE FURTHER FIND THAT THE HONBLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF LALI CONSTRUCTION CO. (SUPRA) HAS HELD THAT WHERE THE ASSESSEE GIVES INFORMATION REQUIRED UNDER SECTION 3 2 OF THE ACT REGARDING CLAIM OF DEPRECIATION THE AO IS BOUND TO ALLOW THE CLAIM OF DEPRECIATION. THE FINDINGS OF THE HONBLE COURT ARE REPRODUCED BE LOW: TAKING UP THE FIRST POINT THE MATTER IS NO LONGER RES INTEGRA. THE DIVISION BENCHES OF THIS COURT IN COMMISSIONER OF I NCOME TAX V. CHOPRA BROS. INDIA (P) LIMITED (2001) 252 ITR 412 A ND GIRDHARI LAL V. COMMISSIONER OF INCOME TAX(2002) 256 ITR 318 WHI LE CONSIDERING THE AFORESAID ISSUE IN VIEW OF THE CIRCULAR ISSUED BY THE BOARD HAD HELD IN A CASE WHERE THE ASSESSEE MAKES A SPECIFIC CLAIM FOR DEPRECIATION AND GIVES THE INFORMATION AS REQUIRED U/S 32 OF THE ACT THE ASSESSING OFFICER IS BOUND TO TAKE THE CLA IM OF THE ASSESSEE INTO CONSIDERATION. FOLLOWING THE AFORESAID JUDGMEN TS IT IS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION ON ACCOUNT OF DEPRECIATION FROM RECEIPTS WHILE APPLYING NET PROFIT RATE ON THE GROS S RECEIPTS. IN VIEW OF THE ABOVE THE LD. CIT(A) HAS RIGHTLY A LLOWED THE CLAIM OF DEPRECIATION OUT OF NET PROFIT WORKED OUT BY APPLYI NG NET PROFIT RATE. 20. AS REGARDS THE GRIEVANCE OF THE REVENUE REGARDI NG LATE FILING OF APPEAL BY THE ASSESSEE BEFORE THE LD. CIT(A) AND AD MISSION BY HIM WE FIND THAT THE LD. CIT(A) HAS GIVEN COGENT REASONS F OR ACCEPTING THE APPEAL OF THE ASSESSEE WHICH HE HAS NARRATED AT PAGE 3 OF THE IMPUGNED ORDER ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 16 ASSESSEE RATHER THE CASE OF THE DEPARTMENT. THUS TH IS GROUND OF APPEAL MAY ALSO BE DISMISSED. AS FAR AS THE FOURTH GROUND OF APPEAL IS CONCERNED IT IS ALSO LIABLE TO BE REJECTED ONCE THE RATE OF PROFIT IS APPLIED NO FURTHER DISALLOWANCE OR ADDITION CAN BE MADE. THIS VIEW FINDS SUPPORT FROM THE FOLLOWING JUDGMENTS:- I) DECISION OF JHARKHAND HIGH COURT IN THE CASE OF AMITABH CONSTRUCTION (P) LTD VS. ADDL. CIT REPORTED IN 335 ITR 523. (REFER PAGE NO 101 TO 104 OF PAPER BOOK). II) DECISION OF KERALA HIGH COURT IN THE CASE OF S AMURAI TECHNO TRADING CO LTD VS. CIT REPORTED IN 197 TAXMAN 144. (REFER PAGE NO 105 TO 109 OF PAPER BOOK) III) DECISION OF ANDHRA PRADESH HIGH COURT IN THE C ASE OF MADDI SUDARSANAM OILS MILLS VS CIT REPORTED IN 37 ITR 369 WHICH WAS FOLLOWED IN THE CASE OF INDWELL CONSTRUCTIONS V S CIT REPORTED IN 232 ITR 776. (REFER PAGE NO 110 TO 112 OF PAPER BOOK) IV) DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARILAL BANSIDHAR REPORTED IN 229 ITR 229 IN WHI CH IT WAS HELD NO DISALLOWANCE CAN BE MADE U/S 40(A)(III) WHERE GP RATE IS APPLIED. (REFER PAGE NO 113 TO 115 OF PA PER BOOK) V) DECISION OF ITAT AMRITSAR BENCH IN THE CASE OF SM T. BALBIR KAUR VS. ITO IN ITA NO. 151(ASR)/2016 ORDER DATED 23/05/2016 RELATING TO AY 2004-05. 25. THEREFORE RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL IN THE CASE OF J.S. GROVER CONSTRUCTIONS DATED 26.08.2016 (SUPRA) WE ALLOW THIS GROUND OF APPEAL OF THE ASS ESSEE. 26. IN VIEW OF THE ABOVE THE APPEAL OF THE ASSESSE E IS PARTLY ALLOWED. 27. AS REGARDS THE C.OS. FILED BY THE ASSESSEE THE SAME IS ONLY SUPPORTIVE OF THE LD. CIT(A)S ORDER WHICH WE HAVE ALREADY DISPOSED OFF