Om Construction, Dist.Baroda v. The Income tax Officer, Ward-2(2),, Baroda

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER DATE OF HEARING : 26.04.10 DRAFTED ON: 26.04.1 0 ITA NO.2245/AHD/2007 ASSESSMENT YEAR : 2003-2004 M/S.OM CONSTRUCTION SUNDER BAZAR SOKHADA DIST.VADODARA VS. I.T.O. WARD 2(2) AYAKAR BHAVAN VADODARA-7 PAN/GIR NO. : AAAFO3920D (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI M.J.SHAH A.R. RESPONDENT BY: SHRI C.K.MISHRA. SR. D.R. O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II BARODA DATED 02.03.2007. 2. GROUND NO.1 OF THE APPEAL READS AS UNDER:- 1. THE ASSESSING OFFICER ERRED IN REJECTING BOOKS OF ACCOUNTS AND HAS WRONGLY INVOKED THE PROVISIONS OF SECTION 145 OF THE INCOME TAX ACT 1961 AND THE LEAR NED CIT APPEALS - II HAS WRONGLY UPHELD THE SAME WITHOU T LOOKING INTO THE FACTS AND CIRCUMSTANCES AND SUB-CO NTRACT WORK UNDERTAKEN BY THE APPELLANT'S FIRM. 3. AT THE TIME OF HEARING THE AUTHORISED REPRESEN TATIVE DID NOT PRESS THIS GROUND OF APPEAL. HENCE THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. - 2 - 4. GROUND NO.2 AND 3 OF THE APPEAL READS AS UNDER: - 2. THE ASSESSING OFFICER HAS WRONGLY ASSESSED THE PROFIT OF THE FIRM AT THE HIGHER RATE OF 8 % INSTEAD OF LOOKING T O THE FACTS AND NATURE OF BUSINESS OF THE FIRM AND THE SAME IS WRONGLY CONFIRMED BY THE LEARNED CIT-APPEALS-LL AT THE RATE OF 6%. 3. THE ASSESSING OFFICER AND THE LEARNED CIT-APPEAL S-LL OUGHT TO HAVE APPRECIATED THE BOOK RESULT AS PER AUDITED ACCOUNTS OF THE FIRM INSTEAD OF ESTIMATING THE PROFIT OF THE FIRM ON ASSUMPTION BASIS WITHOUT BRINGING ANY MATERIAL FACT S ON THE RECORDS. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HELD AS UNDER:- 2. THE FIRST GROUND OF THE APPEAL IS AGAINST REJE CTION OF BOOKS OF ACCOUNT AND ESTIMATION OF NET PROFIT @ 8% OF CONTRACT RECEIPTS. 2.1. AS PER THE ASSESSMENT ORDER COMPLETE BOOKS O F ACCOUNTS BILLS VOUCHERS ETC. WERE NOT PRODUCED D URING THE ASSESSMENT PROCEEDINGS DESPITE AMPLE OPPORTUNITIES AFFORDED AS ENUMERATED AT PARAS-5 TO 7 OF THE ASSESSMENT ORDER. IN THE ABSENCE OF COMPLETE BOOKS OF ACCOUNTS BILLS AND VO UCHERS ETC. THE BOOK RESULTS WERE REJECTED BY THE ASSESSING OFF ICER BY INVOKING PROVISIONS OF SECTION 145 AND NET PROFIT @ 8% OF THE CONTRACT RECEIPTS WAS ESTIMATED. 2.2. IT IS CONTENDED BY THE LD. COUNSEL THAT COMPL ETE BOOKS OF ACCOUNTS COULD NOT BE PRODUCED SINCE THE S AME WERE IN THE CUSTODY OF THE WIFE OF THE DECEASED PARTNER WHO WAS NOT CO- OPERATING. IT IS FURTHER CONTENDED THAT THE BOOKS W ERE DULY AUDITED AS PER THE AUDIT CERTIFICATE FURNISHED ALONG WITH T HE RETURN OF INCOME. AS REGARDS ESTIMATION OF NET PROFIT IT IS CONTENDED BY THE LD. COUNSEL THAT THE APPELLANT IS SUB-CONTRACTOR AN D THEREFORE THE RATE OF 8% ADOPTED BY THE ASSESSING OFFICER IS QUIT E HIGH. RELIANCE WAS ALSO PLACED ON THE NET PROFIT RATIOS O F PRECEDING TWO ASSESSMENT YEARS WHICH WERE 3.05% AND 2.62%. RELIAN CE IS ALSO PLACED ON THE FOLLOWING CASE LAWS: 1. PUSHPANJALI DYEING & PRINTING MILLS (P) LTD. VS JCIT 72 TTJ 886 (ITAT AND) - 3 - 2. S. SARABHAIAH SETTY & SONS VS. CIT 64 ITR 175 (AP) 3. YAGGINA VEERARAGHAVULU & MAVULETI SOMERAJU & CO. VS CIT 62 ITR 528 (AP) 4. JOSEPH THOMAS & BROS. VS CIT 68 ITR 796 (KER.) 5. MYSORE FERTILISER & CO. VS CIT 59 ITR (MAD) 6. CIT VS EASTERN COMMERCIAL ENTERPRISES 210 ITR 103 (CAL.) 2.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNSEL AND FACTS OF THE CASE. ADMITTEDLY COMPLETE BOOKS OF ACCOUNTS INVOICES AND BILLS WERE NOT PRODUCED FOR WHATEVER REASONS. ACCORDINGLY REJECTION OF BOOK RESULTS BY THE ASSESSING OFFICER IS IN ORDER AND THE SAME IS UPHELD. 2.3.1. AS REGARDS ESTIMATION OF NET PROFIT @ 8% I INTEND TO AGREE WITH THE LD. COUNSEL THAT A LOWER RATE SHO ULD BE APPLIED IN THE CASE OF A SUB-CONTRACTOR. AS PER THE COPY OF AGREEMENT WITH THE MAIN CONTRACTOR FILED DURING THE APPELLATE PROC EEDINGS A COMMISSION OF 2% OF THE GROSS RECEIPTS WAS RECEIVAB LE BY THE MAIN CONTRACTOR. ACCORDINGLY THE ASSESSING OFFICER IS DIRECTED TO ADOPT THE RATE OF 6% INSTEAD OF 8% WHILE ESTIMATING THE NET PROFIT OF THE APPELLANT. THEREFORE THE ADDITION MADE BY T HE ASSESSING OFFICER SUBJECT TO RE-COMPUTATION AS STATED ABOVE IS CONFIRMED IN PRINCIPLE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS A VAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE IS IN THE BUSINESS O F CIVIL CONSTRUCTION. THE LEARNED ASSESSING OFFICER OBSERVED THAT COMPLETE BO OKS OF ACCOUNT BILLS VOUCHERS ETC WERE NOT PRODUCED DURING THE A SSESSMENT PROCEEDINGS IN SPITE OF AMPLE OPPORTUNITY AFFORDED TO THE ASSESSEE. IN ABSENCE OF COMPLETE BOOKS OF ACCOUNT BILLS AND VOUC HERS ETC THE LEARNED ASSESSING OFFICER REJECTED THE BOOK RESULT OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT A ND ESTIMATED THE INCOME OF THE ASSESSEE @ 8% OF THE CONTRACT RECEIPT S. - 4 - 5. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVED FROM THE COPY OF AGREEMENT WI TH MAIN CONTRACTOR M/S.NBCC VADODARA WHO HAD SUB CONTRACTE D THE WORK TO M/S.JAGAJI CONSTRUCTION CO. WHO IN TURN SUB-CONTRAC TED THE WORK TO THE ASSESSEE THAT A COMMISSION OF 2% OF THE GROSS RECE IPTS WAS RECEIVABLE BY M/S.JAGAJI CONSTRUCTION CO. THEREFORE HE DIRE CTED THE LEARNED ASSESSING OFFICER TO ADOPT RATE OF 6% IN PLACE OF 8 % IN ESTIMATING THE INCOME OF THE ASSESSEE. 6. BEFORE US THE LEARNED AUTHORISED REPRESENTATIV E OF THE ASSESSEE SUBMITTED A CHART OF NET PROFIT SHOWN BY T HE ASSESSEE IN THE IMMEDIATELY PRECEDING THREE ASSESSMENT YEAR AND SUB MITTED THAT IN ASSESSMENT YEAR 2002-03 NET PROFIT SHOWN BY THE AS SESSEE AT 2.62% IN ASSESSMENT YEAR 2001-02 NET PROFIT SHOWN BY THE AS SESSEE AT 3.05% AND IN THE ASSESSMENT YEAR 2000-01 NET PROFIT SHOW N BY THE ASSESSEE AT 3.21% WAS ACCEPTED BY THE LEARNED ASSESSING OFFICER IN THE ASSESSMENT MADE BY HIM. HE SUBMITTED THAT IN THE LI GHT OF THE ABOVE THE INCOME OF THE ASSESSEE SHOULD BE ESTIMATED AT 4 % OF THE CONTRACT RECEIPTS. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD N OT CONTROVERT THE ABOVE SUBMISSIONS MADE BY THE ASSESS EE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS A VAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE IS A CIVIL CONTRACTO R AND HAS SHOWN INCOME OF RS.2 53 150/- IN THE RETURN OF INCOME FROM SUBCO NTRACT WORK DONE DURING THE YEAR. SINCE THE ASSESSEE DID NOT PRODUC E THE BOOKS OF ACCOUNT BILLS AND VOUCHERS BEFORE THE LEARNED ASSE SSING OFFICER FOR - 5 - VERIFICATION HE REJECTED THE BOOK RESULTS OF THE A SSESSEE AND ESTIMATED THE INCOME AT 8% OF THE CONTRACT RECEIPTS SHOWN BY THE ASSESSEE. IN APPEAL THE LEARNED COMMISSIONER OF INCOME TAX(APPE ALS) REDUCED THE RATE FROM 8% TO 6% FOR ESTIMATION OF INCOME OF THE ASSESSEE DURING THE YEAR AFTER UPHOLDING THE REJECTION OF BOOK ACCOUNT BY THE LEARNED ASSESSING OFFICER. ALTHOUGH THE ASSESSEE HAS CHALLE NGED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) UPHOLDI NG THE REJECTION OF BOOK OF ACCOUNT OF THE ASSESSEE BY THE LEARNED A SSESSING OFFICER BUT DID NOT PRESS THE SAID GROUND OF APPEAL DURING THE COURSE OF HEARING. THUS THE ASSESSEE HAS ACCEPTED THE REJECTION OF BO OKS OF ACCOUNT BY THE LOWER AUTHORITIES AS CORRECT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE. THUS THE LOWER AUTHORITIES WERE J USTIFIED IN ESTIMATING THE INCOME OF THE ASSESSEE BY ADOPTING SUITABLE RAT E OF NET PROFIT. WE FIND THAT THE LEARNED ASSESSING OFFICER HAD ESTIMAT ED THE NET PROFIT @ 8% WHICH WAS REDUCED TO 6% OF THE CONTRACT RECEIPTS BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THE ONLY CONTE NTION OF THE ASSESSEE IS THAT THE RATE OF 6% ADOPTED FOR ESTIMAT ING INCOME OF THE ASSESSEE IS ON A HIGHER SIDE. WE FIND THAT IN THE C ASE OF THE ASSESSEE ITSELF IN THE ASSESSMENT YEAR 2000-01 THE RATE OF NET PROFIT SHOWN BY THE ASSESSEE AS 3.21% OF CONTRACT RECEIPT WAS ACCEP TED BY THE LEARNED ASSESSING OFFICER. THEREFORE IN OUR CONSIDERED OPI NION IT WOULD BE JUST AND FAIR TO ESTIMATE THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION @ 4% WHICH WAS ACCEPTED BY THE LEARNE D AUTHORISED REPRESENTATIVE OF THE ASSESSEE DURING THE COURSE OF THE HEARING OF THE APPEAL TO WHICH THE LEARNED DEPARTMENTAL REPRESENTA TIVE DID NOT MAKE ANY OBJECTION. IN THE ABOVE FACTS AND CIRCUMSTANCE S WE MODIFY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) AND DIRECT THE LEARNED ASSESSING OFFICER TO ESTIMATE THE INCOM E OF THE ASSESSEE FOR - 6 - THE YEAR UNDER CONSIDERATION @ 4% OF THE CONTRACT R ECEIPTS. THUS THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE H EARING IN THE PRESENCE OF THE PARTIES ON 26 TH DAY OF APRIL 2010. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 26 TH DAY OF APRIL 2010 PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II BARODA. 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 26.04.2010 -------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 26.04.2010 ---- --------------- 3. DRAFT PROPOSED & PLACED 26.04.2010 --------- ---------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 26.04.2010 --------- ---------- JM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 27.04.2010 -------- ------------ 6. KEPT FOR PRONOUNCEMENT ON ---------------- -- ------------------ 7. FILE SENT TO THE BENCH CLERK 27.04.2010 ------ -------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- - --------------------