Shri Suresh Ratilal Sheth, Bhavnagar v. The ACIT.,Circle-2,, Bhavnagar

ITA 1461/AHD/2009 | 2006-2007
Pronouncement Date: 21-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 146120514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 1461/AHD/2009
Duration Of Justice 1 year(s) 8 month(s) 14 day(s)
Appellant Shri Suresh Ratilal Sheth, Bhavnagar
Respondent The ACIT.,Circle-2,, Bhavnagar
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 21-01-2011
Date Of Final Hearing 13-01-2011
Next Hearing Date 13-01-2011
Assessment Year 2006-2007
Appeal Filed On 07-05-2009
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI JM AND D.C.AGRAWAL A M SURESH RATILAL SHETH PROP. SHETH CONSTRUCTION CO. KUBER KRIPA MANIYAR SHERI VORA BAZAR BHAVNAGAR. VS. ASSTT. CIT CIR-2 BHAVNAGAR. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI TUSHAR P. HEMANI AR RESPONDENT BY:- SHRI K. MADHUSUDAN SR. DR O R D E R PER D.C. AGRAWAL ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- THE HONBLE CIT(A) HAS ERRED IN (1) CONFIRMING THE REJECTION OF BOOKS OF ACCOUNT; (2) CONFIRMING THE ADDITION TO THE EXTENT OF RS.5 00 00 0/- OUT OF THE AGGREGATE ADDITION OF RS.10 07 000/- MADE BY TH E AO. ON FACTS OF THE CASE HE OUGHT TO HAVE DELETED THE ENTI RE ADDITION. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS REGARD ING CONFIRMATION OF ADDITION OF RS.5 00 000/-. 3. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAG ED IN THE BUSINESS OF CIVIL CONSTRUCTION AND JOB WORK. DURING THE COURSE OF ASSESSMENT ITA NO.1461/AHD/2009 ASST. YEAR 2006-07 ITA NO.1461/AHD/2009 ASST. YEAR 2006-07 2 PROCEEDINGS THE AO FOUND THAT ASSESSEE HAS SHOWN A TURNOVER OF RS.5 19 36 026/- AND NET PROFIT OF RS.15 90 032/- W HICH COMES TO 3.06% AS AGAINST PRECEDING YEARS NET PROFIT OF RS.10 51 269/- ON A TURNOVER OF RS.3 59 726/- WHICH COMES TO RS.2.92%. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT ASSESSEE USED TO MAKE PAYMENTS TO THE LABOURERS THROUGH CHEQUES AS WELL AS IN CASH. THE C ASH PAYMENT WAS MADE THROUGH SELF MADE VOUCHERS WITHOUT THERE BEING VOUCHER NUMBER AND SITE NUMBER AND FURTHER THAT LUMP SUM PAYMENT O F RS.13 000/- TO RS.14 000/- WERE MADE WHICH REMAINED UNVERIFIABLE. THE AO ALSO POINTED OUT IN HIS ORDER THE DETAILS OF PAYMENT IN CASH AND LABOUR CHARGES IN RESPECT OF SEVERAL WORKERS. IN NUTSHELL HE HAD F OUND FOLLOWING DEFECTS IN THE PAYMENT SYSTEM:- A) NONE OF THE VOUCHERS WERE BEARING VOUCHER NUMBER. B) MANY OF THE VOUCHERS DO NOT REFLECT THE NAME OF THE SITE FOR THE EXPENSES WERE INCURRED. C) MOST OF THE VOUCHERS WERE NOT AUTHENTICATED BY THE PASSING/CHECKING AUTHORITY. D) SOME OF THE VOUCHERS DOES NOT BEAR THE SIGNATURE OF THE RECIPIENT. E) SOME OF THE VOUCHERS DOES NOT REFLECT THE DETAILS O F PAYMENTS MADE NOR SHOWED THE FULL NAME OF THE RECIPIENT. F) SOME OF THE VOUCHERS DO NOT BEAR REVENUE STAMP. 3. AFTER CONSIDERING THE REPLY OF THE ASSESSEE AO A PPLIED THE NET PROFIT OF 5% ON GROSS RECEIPT WHICH RESULTED IN ADD ITION OF RS.10 07 000/-. 4. THE LD. CIT(A) CONSIDERING THE DEFECTS IN THE BO OKS OF ACCOUNTS RETAINED ADDITION OF RS.5 LAKHS. 5. BEFORE US THE LD. AR FOR THE ASSESSEE SUBMITTED THAT IN THE PRECEDING YEAR THE AO HAD ESTIMATED A NET PROFIT RA TE OF 5% AS AGAINST DECLARED NET PROFIT RATE OF 3.76%. THIS NET PROFIT RATE WAS CONFIRMED BY ITA NO.1461/AHD/2009 ASST. YEAR 2006-07 3 THE TRIBUNAL BECAUSE IN THE PREVIOUS YEAR NET PROFI T RATE TO THAT EXTENT WAS SHOWN. IN OTHER WORDS IN ASST. YEAR 2004-05 & 2005- 06 NET PROFIT RATE OF 3.76% WAS APPLIED BY THE TRIBUNAL. IN THIS REGARD T HE LD. AR SUBMITTED THAT THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR A SST. YEAR 2005-06 HAD OBSERVED AS UNDER :- 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT AUTHORITIES BELOW WERE JUSTIFIED IN NOT RELYING ON THE BOOK RES ULTS AND RESORTING TO ESTIMATION OF PROFITS. EVEN WHERE CASH PAYMENT IS MADE AND CLAIME D TO THE SAME PARTIES IT WAS NECESSARY TO SHOW THAT CASH PAYMENT HAS ACTUALLY GO NE TO THEM BY SUBMITTING ACKNOWLEDGMENT FROM THESE PARTIES. CHEQUE PAYMENT N ECESSARILY CONFIRMS THAT IT HAS GONE TO THIRD PARTIES BUT NOT THE CASH PAYMENT UNL ESS THERE IS DIRECT ACKNOWLEDGMENT FROM THEM. FURTHER IF PAYMENT BY CHEQUE CAN GO TO T HOSE PARTIES THEN THERE IS NO REASON WHY FURTHER PAYMENT BY CHEQUE SHOULD NOT GO TO THEM AND WHY MAJOR PORTION OF PAYMENT IS MADE BY CASH. ACCORDINGLY WE DECLINE TO INTERFERE IN REJECTING THE BOOKS BY THE AUTHORITIES AND IN ESTIMATING THE INCO ME. HOWEVER ESTIMATE MADE BY THE AUTHORITIES BELOW IS NOT SOUND. IF PROFIT IN THE EA RLIER YEAR WAS 3.76% THEN THERE IS NO REASON TO SAY THAT PROFIT THIS YEAR SHOULD BE HIGHE R. NO COMPARATIVE WORK FOR THE TWO YEARS IS DONE BY THE AO SO AS TO SHOW THAT CASH OUT FLOW THIS YEAR IS MUCH HIGHER AS COMPARED TO EARLIER YEAR AND THEREFORE THERE IS H IGHER PILFERAGE THIS YEAR. ONCE CONDITION OF BUSINESS REMAINS THE SAME THEN RATE OF PROFIT TO BE ADOPTED SHOULD NOT VARY DRASTICALLY AS COMPARED TO PREVIOUS YEAR. ACC ORDINGLY WE DIRECT TO APPLY NET PROFIT RATE OF 3.76% AS AGAINST 5% CONFIRMED BY THE LD. CIT(A). THE AO WILL ACCORDINGLY CALCULATE THE ADDITION. THE ASSESSEE T HEREFORE GETS PART RELIEF. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF THE CONSIDERED VIEW THAT THERE BEING NO CHANGE IN THE FACTS OF THE CASE AS COMPARED TO EARLIER YEARS RATHER THE AO HAS RELIED ON THE ORDE R IN THE CASE OF THE ASSESSEE FOR ASST. YEAR 2005-06 WE DIRECT THE AO T O APPLY THE NET PROFIT ITA NO.1461/AHD/2009 ASST. YEAR 2006-07 4 RATE OF 3.76% THIS YEAR ALSO. AS A RESULT THE APPE AL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 21.1.11. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEM BER AHMEDABAD DATED : 21.1.11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD 1.DATE OF DICTATION 13/1/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 17/1/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..