Shri Manohar Lal Dureja Gurgaon v. Ito New Delhi

Shri Mohanlal Dureja V Ito Ita No 2804 Del 2016 A Y 2011 12 1 Income Tax Appellate Tribunal Delhi Bench B New Delhi Before Shri Bhavnesh Saini Judicial Member And Shri Prashant Maharishi Accountant Member Ita No 2804 Del 2016 Assessment Year 2011 12 Shri Manoharlal Dureja 107 Dlf Phase I Arjun Marg Near Malik Hospital Gurgaon Pan Aanpd 3365 L Vs The Income Tax Officer Ward 38 2 New Delhi Appellant Respondent A Ppellant By Shri Sunil Arrora Ca Shri Akash Chug Ca Revenue By Ms Ashima Neb Sr Dr Date Of Hearing 08 12 2017 Date Of Pronouncement 0 7 03 2018 O R D E R Per Prashant Maharishi A M 1 This Appeal Is Filed By The Assessee An Individual Against The Order Of The Commissioner Of Income Tax Appeals 20 New Delhi The Ld Cit A Dated 15 3 2016 For Assessment Year 201 1 1 2 Wherein Appeal Filed By The Assessee Against The Order Of The Income Tax Shri Mohanlal Dureja V Ito Ita No 2804 Del 2016 A Y 2011 12 2 Officer Ward 38 2 New Delhi The Ld Ao Dated 29 03 2014 Under Section 143 3 Of The Income Tax Act 1961 The Act Was Dismissed 2 The Assessee Has Raised Following Grounds Of Appeal I The Ld Ao Has Grossly Erred In Passing Assessment Order By Making Incorrect And Unwarranted Allegations Against The Assessee And Without Giving Reasonable And Fair Opportunity To The Assessee To Present Its Case Ii Under The Facts And Circumstanc Es Of The Case The Ld 1 St Appellate Authority Has Grossly Erred In Confirming The Action Of The Ld Ao Rejecting The Books Of Accounts Of The Assessee Under Section 145 Of The Act Which Is Grossly Injudicious Against The Facts Of The Case And Bad In La W Iii Under The Facts And Circumstances Of The Case Ld 1 St Appellate Authority Has Grossly And In Affirming The Action Of The Ld Ao Estimating The Net Profit Of The Assessee At The Rate Of 8 Of The Gross Receipts Which Is Grossly Injudicious Near The Fa Cts Of The Case And Bad In Law 3 Brief Facts Of The Case Shows That Assessee Is An Individual Running His Proprietary Business In The Name And Style Of M S Shiv Shankar Construction Co Which Was Engaged In The Business Of Civil Construction Assessee Filed His Return Of Income On 30 9 2011 Shri Mohanlal Dureja V Ito Ita No 2804 Del 2016 A Y 2011 12 3 Declaring Income Of Rs 1 434767 During The Year The Assessee H As Shown Gross Receipt Of Rs 9 5201519 On Which A Net Profit Of Rs 1 978017 Has Been Declared Which Is 2 07 Percentage However In The Immediately Prece Ding Year The Assessee Has Declared The Net Profit At The Rate Of 2 38 On Receipt Of Rs 11 2 98 7687 As The Assessee Was Asked To Explain The Downfall In Net Profit Assessee Did Not Furnish Any Explanation The Ld Assessing Officer Held That Assessee Has Incurred Huge Expenses Under The Different Heads And Assessee Was Asked To Produce The Books Of Accounts And Vouchers Along With The Supporting Evidences D Espite Se Veral Opportunities Afforded Neither The Books Of Accounts Were Produced Nor Any Documentary Evidences Were Furnished And Therefore No Verification Could Be Done It Further Held That Assessee Has Debited Huge Expenses In The Trading Profit And Loss Acc Ount Amounting To Rs 9 51 Crores And Shown Net Profit Of Rs 19 78 Lacs Out Of Gross Contract Receipt Of Rs 9 71 Crores For Which No Documentary Evidences Produced Or Furnished By The Assessee He Further Held That Assessee Has Not Produced Any Stock Reg Ister A S Evidence Of Receipt Of The Quantity And Quality Of The Raw Material It Was Further Noted By Him That The Closing Stock Has Also Been Accepted Based On The Self Declaration Of The Proprietor Therefore Opening And Closing Balance Of Stock Is Not Verifiable Therefore The Shri Mohanlal Dureja V Ito Ita No 2804 Del 2016 A Y 2011 12 4 Ld Assessing Officer Rejected The Books Of Accounts Applying The Provisions Of Section 145 Of The Income Tax Act And Rejected The Book Results Of The Assessee He Consequently Estimated The Net Profit At The Rate Of 8 Of The Gr Oss Receipt Of Rs 9 71 Crores And Determined The Net Profit Of Rs 77 69 Lacs Against The Net Profit Of Rs 19 78 Lacs Disclosed By The Assessee Consequently It Res Ulted Into An Addition Of Rs 5 791715 The Ld Assessing Officer Passed An Assessment Or Der Under Section 143 3 Of The Act On 29 3 2014 Determining The Total Taxable Income Of The Assessee Of Rs 7227004 Again St The Returned Income Of Rs 1 434767 4 Assessee Aggrieved With The Order Of The Ld Assessing Officer Preferred An Appeal Before The Ld Cit A Without Any Success The Ld Cit A Confirmed The Rejection Of The Books Of Accounts As Well As Estimation Of The Profit At The Rate Of 8 Of The Gross Profit V Ide Para Number 5 3 2 And 5 3 3 Of His Order Therefore Assessee Aggrieved Wit H The Order Of The Ld Cit A Has Preferred An Appeal Before Us 5 The Ld Authorized Representative Submitted That The Assessee Duly Attended The Office Of The Ld Assessing Officer On 26 3 2014 Along With The Requisite Details And Books Of Accounts Of Th E Appellant However The Ld Assessing Officer Was Very Busy And Therefore The Ld Authorized Repr Esentative Was Given Further Time To Appear On Shri Mohanlal Dureja V Ito Ita No 2804 Del 2016 A Y 2011 12 5 29 3 2014 On Th At Date Assessee Attended The Office Of The Ld Ao However It Was Informed By The Ld Assessin G Officer That The Assessment Order Has Already Been Passed The Assessee Further Submitted The Affidavit Shown By The Chartered Accountant Who Was Appearing Before The Ld Assessing Officer Therefore The First Contention Of The Ld Authorized Representa Tive Was That Despite Presentation Of The Books Of Accounts Before The Ld Assessing Officer He Rejected Them Without Verification With Respect To The Rejection Of The Books Book Results Ld Ar Submitted That For The Past Assessment Years The Net Profit Ratio Of The Assessee Is In The R Ange Of 2 04 To 2 66 He Submitted That Assessment Of The Appellant For The Past Year Has Been Concluded Under Section 143 3 Of The Act He Submitted That Books Of Ac Counts Were Duly Accepted By The Ld Assessing Officer And The Net Profit Ratio Of 2 23 Were Accepted H E Further Submitted That Merely Because The Books Of Accounts Were Not Produced That Cannot Result Into The Rejection Of The Books Of Accounts With Re Spect To The Estimation Of The Gross Profit At The Rate Of 8 He Submitted That The Percentage Adopted By The Lower Authorities Is Arbitrary He Therefore Referred To The History Of The Assessee Where The Net Profit Ratio In The Range Of 2 04 To 2 66 Wa S Accepted By The Revenue Authorities Shri Mohanlal Dureja V Ito Ita No 2804 Del 2016 A Y 2011 12 6 6 The Ld Authorized Representati Ve Therefore Submitted That Lower Authorities Were Not Correct In Rejecting The Books Of Accounts Of The Assessee And Estimating The Higher Profit At The Rate Of 8 He Vehemently Relied On The Decision Of The Honble Delhi High Court In Case Of Cit Versus Smt Poonam Rani 192 Taxman 167 Delhi Cit Versus Jas Jack Elegance Exports 191 Taxman 386 Delhi And The Decision Of The Jaipur Bench In Case Of Dcit Versus British Health Produc Ts Ltd 82 Taxman Com 388 Tm 7 Ld Departmental Representative Vehemently Supported The Orders Of The Lower Authority And Submitted That When The Assessee Has Failed To Produce The Books Of Accou Nts Despite Repeated Opportunities Given By The Ld Assessing Officer There Is No Option Available With The Ld Assessing Officer Except To Reject The Books Of Account And Estimate The Net Profit Of The Assessee It Was Further Submitted By Her That Even Before The Ld Cit A The Assessee Has Not Produced Any Book S Of Accounts It Was Further Stated By Her That First Notice Under Section 143 2 Of The Income Tax Act Was Issued To The Assessee On 15 9 2012 And Various Other Notices Were Issued Including Show Cause Notice However Assessee Has Not Produced The Book S Of Accounts In View Of This The Ld Assessing Officer Has Correctly Rejected The Books Of Accounts Applying The Provisions Of Section 145 3 Of The Income Tax Act With Respect To The Shri Mohanlal Dureja V Ito Ita No 2804 Del 2016 A Y 2011 12 7 Estimation Of The Net Profit At The Rate Of 8 She Submitted That When The Books Of Accounts Were Not Produced By The Assessee In This Year Before The Assessing Officer For Verification Of The Book Results Assessee Could Not Take Shelter Under The Pretext Of The Earlier Year S Or Subsequent Assessment Year S Asse Ssment Orders In Those Assessment Years Books Of Accounts Have Been Produced In View Of This It Was Her Submission That Net Profit Rate Of 2 04 And 2 66 Claimed By The Assessee Cannot Be Accepted And Ld Ao Has Correctly Estimated The Profit 8 In View Of This Her Submission Was That Orders Of The Lower Authorities Might Be Upheld 8 We Have Carefully Considered The Rival Contention Paper Book Submitted By The Assessee And Orders Of The Lower Authorities Apparently Assessee Is Engaged In The Busin Ess Of Civil Construction And Has Earned The Net Profit Of Rs 1978017 On A Turnover Of Rs 9 5201519 Resulting Into Net Profit Of 2 07 Despite Several Opportunities Given By The Ld Assessing Officer As Mentioned In Paragraph No 1 Of Assessment Order The Assessee Has Not Produced The Books Of Accounts Further More On 21 3 2014 The Chartered Accountant Of The Assessee Attended The Proceedings And On That Occasion He Was Asked To Produce The Books Of Accounts Along With The Complete Bills And Vouch Ers On 26 3 2014 It Was Further Noted By The Ld Assessing Officer That On 26 3 2014 None Appeared On Shri Mohanlal Dureja V Ito Ita No 2804 Del 2016 A Y 2011 12 8 Behalf Of The Assessee But Written Submission Was Made On The Affidavit Of The Chartered Accountant Of The Assessee And Comparing It With The Submission Made Before The Ld Cit A Ppeal Wide Contradictions Are Apparent V Ide Para No 5 2 Of The Order Of The Ld Cit A Wherein A T Serial Number 4 The Assessee Has Submitted That Ld Assessing Officer Has Abruptly Decided The Case On 26 3 2014 Without Considering The Replies Dated 26 3 2014 And 29 3 2014 Submitted On Those Dates It Is Further Submitted That Ld Ao Did Not Grant Any Opportunity To Th E Assessee To Explain And Produce Material However It Is Apparent That Assessee Has Neither Produced The Books Of Accounts Before The Ld Assessing Officer And Even That Opportunity Was Not Availed Before The First Appellate Authority A Ssessee Has Merel Y Made Certain Submissions Despite Specific Request By The Ld Assessing Officer To Produce The Books Of Accounts On Several Occasions Even Before Us The Assessee Has Not Come Out With The Clean Hands By Producing The Books Of Accounts Therefore It Is Clear From The Records That Assessee Did Not Wish To Produce The Books Of Accoun Ts According To Us If The Books Of Accounts Are Not Produced There Is No Option Left With Ao Other Than To Estimate The Net Profit Of The Business Of The Assessee Therefore No Fault Can Be Found With The Ld Assessing Officer In Applying The Provisions Of Section 145 3 Of The Income Tax Act Decsions Relied Shri Mohanlal Dureja V Ito Ita No 2804 Del 2016 A Y 2011 12 9 Up On By The Assessee Are Perused And It Is Found That In All Those Years The Assessee Produced The Books Of Accounts And Ao Verified It However In The Facts In This Case Are Startling That Assessee Has Not Produced The Books Of Accounts At All Hence Reliance On Those Decisions Is Rejected In View Of This Ground No 1 And 2 Of The Appeal Of The Assessee Are Dismissed 9 Now Coming To The Issue Of The Estimation Of The Net Profit Of The Business The Ld Assessing Officer Has Taken It At The Rate Of 8 The Argument Of The Ld Authorized Representative Is That In One Of The Years The Net Profit Of The Assessee Was At 2 04 And In Another Year It Was 2 66 It Was Further Stated That Assessee Was Assessed Under Section 143 3 Of The Income Tax Act For Those Years This Argument Is Though Looks Attractive However Deserves To Be Rejected At The Threshold The Reason For That Is Assessee Produced The Books Of Accounts And All The Details Before The Assessing Officer In Those Years Whereas In This Year The Assessee Has Failed To Produce The Books Of Account Before The Lower Authorities Therefore The Benchmarking Of The Net Profit For The Current Year Cannot Be Made In Comparison With Those Years However It Is Also Correct That The Net Profit At The Rate Of 8 Is Also Too High In Case Of The Business Of The Civil Construction For This Year Compared To The Assessment Histor Y Of Other Years Of The Assessee No Reasons Have Been Given Shri Mohanlal Dureja V Ito Ita No 2804 Del 2016 A Y 2011 12 10 By The Assessing Officer For Estimating The Net Profit At The Rate Of 8 No Comparative Instances Have Also Been Cited Further Even In Section 44 Ad For The Small Business Where The Turnover Is Less Tha 60 Lakhs Rate Of Profit Is 8 In The Present Case The Assessee Has Turnover Of More Than 9 Croes Therefore Such A High Rates Cannot Be Applied To The Business Of The Assessee Henc E Looking To The Facts And Circumstances Of The Case And In Fairness Of The Things No Injustice Would Be Caused If The Net Profit Of The Assessee Were Estimated At The Rate Of 5 Of The Gross Receipt Of The Assessee In The Result The Ld Assessing Officer Is Directed To Estimate The Net Profit Of The Assess Ee At The Rate Of 5 Instead Of 8 Hence Ground No 3 Of The Appeal Of The Assessee Is Partly Allowed 10 In The Result Appeal Of The Assessee Is Partly Allowed Order Pronounced In The Open Court On 0 7 03 2018 S D S D Bhavnesh Saini Prashant Maharishi Judicial Member Accountant Member Dated 0 7 03 2018 A K Keot Copy Forwarded To 1 Applicant 2 Respondent 3 Cit 4 Cit A Shri Mohanlal Dureja V Ito Ita No 2804 Del 2016 A Y 2011 12 11 5 Dr Itat Assistant Registrar Itat New Delhi Shri Mohanlal Dureja V Ito Ita No 2804 Del 2016 A Y 2011 12 12 Date 1 Draft Dictated On Ps 2 Draft Placed Before Author Ps 3 Draft Proposed Placed Before The Second Member Jm Am 4 Draft Discussed Approved By Second Member Jm Am 5 Approved Draft Comes To The Sr Ps Ps Ps Ps 6 Kept For Pronouncement On Ps 7 File Sent To The Bench Clerk Ps 8 Date On Which File Goes To The Ar 9 Date On Which File Goes To The Head Clerk 10 Date Of Dispatch Of Order