ADIT, New Delhi v. M/s Italian Thai Development Public Co. Ltd., New Delhi

ITA 3310/DEL/2011 | 2006-2007
Pronouncement Date: 22-09-2011 | Result: Partly Allowed

Appeal Details

RSA Number 331020114 RSA 2011
Assessee PAN AABCI2013D
Bench Delhi
Appeal Number ITA 3310/DEL/2011
Duration Of Justice 3 month(s)
Appellant ADIT, New Delhi
Respondent M/s Italian Thai Development Public Co. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 22-09-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 22-09-2011
Date Of Final Hearing 02-09-2011
Next Hearing Date 02-09-2011
Assessment Year 2006-2007
Appeal Filed On 21-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER I.T.A. NO.3310/DEL/2011 ASSESSMENT YEAR : 2006-07 ASSTT. DIRECTOR OF INCOME-TAX VS. M/S ITALIAN THAI DEVELOPMENT CIRCLE-1(2) (INTL. TAX) PUBLIC CO. LTD . 301-302 3 RD NEW DELHI FLOOR SAGAR TOWER DISTRICT CENTRE JANAKPURI NEW DELHI AND CROSS OBJECTION NO. 288/D/2011 (IN I.T.A. NO.3310/DEL/2011) ASSESSMENT YEAR : 2006-07 M/S ITALIAN THAI DEVELOPMENT VS. A.D.I.T. PUBLIC CO. LTD. 301-302 3 RD FLOOR CIRCLE 1(2) INTER- SAGAR TOWER DISTT. CENTRE JANAKPURI NE W DELHI NEW DELHI PAN NO.AABCI 2013 D (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI S.R. WADHWA ASIT K. DAS ADVOATES & SUMEET SAREEN FCA DEPARTMENT BY : SHRI ASHWANI KUMAR MAHAJAN CIT-DR DATE OF HEARING: 02-09-2 011 DATE OF PRONOUNCEMENT: 22-09-2011 ORDER PER K.G. BANSAL: AM THIS APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE IN RELATION TO THE ORDER PASSED BY THE CIT(A)-VII NEW DELHI ON 26.04.2011 ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 2 IN APPEAL NO.51/2010-11 FOR ASSESSMENT YEAR 2006-0 7. 1.1 THE REVENUE HAS TAKEN TWO GROUNDS IN THE APPEAL QUESTIONING THE FINDINGS OF THE LEARNED CIT(A) IN REGARD TO REJECTI ON OF BOOKS OF ACCOUNT AND THE CONSEQUENT DELETION OF THE ADDITION MADE BY TH E ASSESSING OFFICER. ON THE OTHER HAND THE ASSESSEE HAS CHALLENGED THE VAL IDITY OF THE ASSESSMENT ON THE GROUND THAT NOTICE U/S 143(2) OF THE INCOME-TAX ACT 1961 (THE ACT FOR SHORT) HAS NOT BEEN SERVED ON THE ASSESSEE. SINCE THE CROSS OBJECTION IS JURISDICTIONAL IN NATURE WE PROCEED TO DECIDE THE SAME AT THE OUTSET. 2. IN THIS CONNECTION IT HAS BEEN MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE-COMPANY FILED ITS RETURN ON 29.11.2006 DECLARING LOSS OF RS. 25 70 58 700/-. IN THIS RETURN REFUND OF RS. 5 0 5 95 897/- WAS CLAIMED. THE RETURN WAS TAKEN UP FOR SCRUTINY AND FOR THIS P URPOSE THE NOTICE U/S 143(2) OF THE ACT WAS ISSUED AND SERVED ON THE ASSE SSEE. IN RESPONSE TO THIS NOTICE REPRESENTATIVES OF THE ASSESSEE FROM DELOIT TE HASKINS & SELLS ATTENDED FROM TIME TO TIME. THIS FINDING WAS CHALL ENGED BEFORE THE LEARNED CIT(A). FOR THIS PURPOSE AN AFFIDAVIT HAS ALSO BE EN FILED ON BEHALF OF THE COMPANY DEPOSING INTER ALIA THAT THE NOTICE U/S 143 (2) HAS NOT BEEN RECEIVED ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 3 BY THE ASSESSEE. THE LEARNED CIT(A) FORWARDED THIS AFFIDAVIT TO THE ASSESSING OFFICER FOR HER COMMENTS. IT WAS SUBMITT ED THAT AS PER RECORDS A NOTICE U/S 143(2) DATED 28.09.2007 WAS ISSUED TO TH E ASSESSEE. THIS NOTICE WAS DISPATCHED BY SPEED POST ON 04.10.2007 AS PER A CKNOWLEDGEMENT OF THE DISPATCH WITH CODE NO.902-10 IN WHICH THE ENTRY IN RESPECT OF THE ASSESSEE APPEARS AT SERIAL NO.15. IT WAS FURTHER SUBMITTED THAT THE ENVELOPE CONTAINING THE NOTICE WAS NOT RECEIVED BACK BY THE OFFICE TO SHOW THAT IT REMAINED UNDELIVERED. IT WAS ARGUED THAT IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MAD HSY FILMS (P) LIMITED IT CAN BE TAKEN THAT THE NOTICE HAS BEEN SERVED. T HIS REPORT WAS HANDED OVER TO THE REPRESENTATIVES OF THE ASSESSEE. ON ITS BEH ALF IT WAS SUBMITTED THAT AN AFFIDAVIT HAS BEEN FILED FROM THE BRANCH MANAGER OF THE COMPANY CATEGORICALLY DEPOSING THAT NO NOTICE U/S 143(2) HA S BEEN SERVED ON THE ASSESSEE. THUS THE PRESUMPTION OF SERVICE S TANDS REBUTTED. THE SERVICE OF THE NOTICE WITHIN THE PRESCRIBED TIME IS MANDATO RY AS PER THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. LUN ER DIAMONDS LTD. (2005) 281 ITR 1. IT WAS FURTHER SUBMITTED THAT TH E ASSESSING OFFICER HAS NOT FURNISHED ANY PROOF ABOUT THE SERVICE OF THE N OTICE. THE EVIDENCE PRODUCED BY THE ASSESSING OFFICER DOES NOT BEAR THE STAMP OF THE POST OFFICE AND THUS IT HAS NO VALIDITY. AS PER THE PROVISION S CONTAINED IN SECTION 282 ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 4 OF THE ACT AND SECTION 27 OF GENERAL CLAUSES ACT I T HAS TO BE SHOWN THAT THE ENVELOPE HAS BEEN PROPERLY ADDRESSED REQUISITE STA MPS HAVE BEEN AFFIXED AND IT HAS BEEN POSTED BY REGISTERED POST ACKNOWLED GEMENT DELIVERED. THE FACTS OF THE CASE OF CIT VS. MADHSY FILMS (P) LTD. HAVE BEEN DISTINGUISHED BY STATING THAT THE NOTICE DATED 25.10.2002 WAS DUL Y POSTED AT THE CORRECT ADDRESS AND IT WAS NOT RECEIVED BACK THEREFORE A PRESUMPTION WAS RAISED THAT IT HAD BEEN SERVED WITHIN TWO TO THREE DAYS O F ITS POSTING. THE ASSESSEE HAD NOT FILED AFFIDAVIT TO THE EFFECT THAT IT HAD N OT RECEIVED THE NOTICE. THUS THE PRESUMPTION U/S 27 OF THE GENERAL CLAUSES ACT H AD NOT BEEN REBUTTED BY THE ASSESSEE. IN THIS CASE THE PRESUMPTION HAS BE EN REBUTTED. 2.1 THE LEARNED CIT(A) CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM. IT IS MENTIONED THAT ASSESSMENT R ECORDS CLEARLY INDICATE THAT THE NOTICE WAS CORRECTLY ADDRESSED AND IT WAS SENT BY SPEED POST ON 04.10.2007. THERE IS NOTHING ON RECORD TO INDICATE THAT THE NOTICE WAS NOT SERVED OR IT WAS SERVED ON AN UNAUTHORIZED PERSON. THEREFORE A STATUTORY PRESUMPTION IS TO BE DRAWN THAT IT HAS BEEN SERVED. ACCORDINGLY IT HAS BEEN HELD THAT THERE IS FORCE IN THE SUBMISSIONS OF THE ASSESSEE. AS A RESULT THE RELEVANT GROUND HAS BEEN DISMISSED. ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 5 3. BEFORE US LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE RETURN OF INCOME FOR THIS YEAR HAD BEEN FILED ON 29.11.2006 THEREFORE THE NOTICE COULD BE VALIDLY SERVED ON THE ASSESSEE UPTO 20.11. 2007. OUR ATTENTION HAS BEEN DRAWN TOWARDS THE AFFIDAVIT OF THE BRANCH MANA GER DATED 20.10.2010 AFFIRMING INTER ALIA THAT THE ASSESSEE HAD NOT RECE IVED NOTICE U/S 143(2) DATED 28.09.2007. FURTHER OUR ATTENTION HAS BEEN DRAWN TOWARDS STATEMENT OF FACTS FILED BEFORE THE LEARNED CIT(A). IN PARAGR APH NO.4 IT IS STATED THAT NO NOTICE U/S 143(2) HAS BEEN SERVED ON THE ASSESSE E. THE ASSESSING OFFICER SERVED A QUESTIONNAIRE DATED 25.06.2008 SEEKING CE RTAIN INFORMATION AND CLARIFICATIONS FROM THE ASSESSEE. IN THIS QUESTION NAIRE AND REPLY THERETO THE ASSESSING OFFICER AND THE ASSESSEE HAVE REFER RED TO THE NOTICE DATED 28.09.2007. THE NOTICE WAS NEVER SERVED ON THE ASS ESSEE. THEREFORE THE ASSESSMENT IS LEGALLY UNSUSTAINABLE. OUR ATTENTION HAS BEEN SPECIFICALLY DRAWN TOWARDS ASSESSEES REPLY LETTER DATED 14.07.2 008 IN WHICH A REFERENCE HAD BEEN MADE TO THE NOTICE UNDER SECTION 143(2). ACCORDING TO THE LEARNED COUNSEL THE ASSESSEE CAME TO KNOW ABOUT THE NOTICE WHEN THE QUESTIONNAIRE DATED 25.06.2008 WAS RECEIVED. ON THESE FACTS THE ARGUMENTS ARE THAT THE PRESUMPTION CONTAINED IN GENERAL CLAUSES ACT IS REB UTTED BY FILING THE AFFIDAVIT. THERE IS NO PROOF WITH THE ASSESSING OF FICER THAT THE ENVELOPE WAS ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 6 PROPERLY ADDRESSED STAMPED AND POSTED. THEREFORE THE ASSESSMENT IS BAD IN LAW. 3.1 IN REPLY THE LEARNED CIT-DR REFERRED TO THE FI NDINGS OF LEARNED CIT(A) WHICH HAVE BEEN SUMMARIZED BY US. IT IS SU BMITTED THAT THE ASSESSEE NEVER RAISED ANY DISPUTE BEFORE THE ASSESS ING OFFICER REGARDING NON-SERVICE OF THE NOTICE. IN HER QUESTIONNAIRE DA TED 25.06.2008 THE ASSESSING OFFICER REFERRED TO THE NOTICE U/S 143(2) ISSUED ON 28.09.2007. THIS QUESTIONNAIRE WAS RESPONDED TO BY THE REPRESEN TATIVES OF THE ASSESSEE ON 14.07.2008 BY WAY OF A WRITTEN LETTER. THIS LET TER REFERS TO NOTICE ISSUED U/S 143(2). IT IS FURTHER SUBMITTED THAT THE AFFI DAVIT WAS FILED AFTER LAPSE OF MORE THAN TWO YEARS FROM THE ISSUANCE OF QUESTIONNA IRE DATED 25.06.2008. THE AFFIDAVIT DOES NOT DISCLOSE ANY EVIDENCE ON WHI CH IT IS BASED. THEREFORE IT CANNOT BE RELIED UPON. EVERY ASSES SING OFFICER HAS TO ISSUE A NUMBER OF NOTICES EVERY DAY. THE PRACTICE FOLLOWED IS THAT THESE NOTICES ARE TAKEN TO THE POST OFFICE ENTERED INTO A SHEET SUPP LIED BY THE POST OFFICE AND HANDED OVER TO THE POST OFFICE AFTER OBTAINING ACKN OWLEDGMENT FROM THE CONCERNED CLERK. SUCH ACKNOWLEDGMENT IS AVAILABLE ON THE SHEET BY WAY OF INITIALS OF THE CLERK WHICH IS BEING SHOWN TO THE MEMBERS OF THE TRIBUNAL. THE OFFICE COPY OF THE NOTICE SHOWS THAT IT HAS BEE N PROPERLY ADDRESSED. THE ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 7 ACKNOWLEDGMENT FROM THE CLERK SHOWS THAT IT HAS BEE N PROPERLY STAMPED. THERE IS NO EVIDENCE OF RETURN OF THE NOTICE AS UN- SERVED BY THE POSTAL DEPARTMENT. THEREFORE IT IS ARGUED THAT THE NOTIC E HAS BEEN SERVED ON THE ASSESSEE AS PER PRESUMPTION OF THE GENERAL CLAUSES ACT. 3.2 IN THE REJOINDER THE LEARNED COUNSEL SUBMITTED THAT THERE IS NO LEGAL NECESSITY FOR TAKING OBJECTION BEFORE THE ASSESSING OFFICER IN RESPECT OF SERVICE OF THE NOTICE AND THE ISSUE CAN BE RAISED F OR THE FIRST TIME BEFORE THE CIT(A). 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BEFORE US. THE FACTS ARE THAT A NOTICE U/S 143(2) WAS PREPARED ON 28.09.2007 THE OFFICE COPY OF WHICH IS ON RECORD. THIS NOTICE HAS BEEN PROPERLY ADDRESSED AS SEEN FROM THIS COPY. AS PER THE SHEET OF THE POSTAL DEPARTMENT ENVELOPE CONTAINING THIS NOTICE AND OT HER ENVELOPES WERE HANDED OVER TO THE POST OFFICE AS THE SHEET BEARS T HE INITIAL OF THE CLERK. THIS PROCEDURE HAS BEEN FOLLOWED AS AN ESTABLISHED PROCE DURE FOR HANDING VARIOUS COMMUNICATIONS FROM THE DEPARTMENT TO THE ASSESSES AND OTHERS. SECTION 27 OF THE GENERAL CLAUSES ACT CONTAINS A PRESUMPTION T HAT WHERE ANY CENTRAL ACT REQUIRES ANY DOCUMENT ETC. TO BE SERVED BY POST THEN THE SERVICE SHALL BE ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 8 DEEMED TO BE EFFECTED WHERE THE ENVELOPE IS PROPE RLY ADDRESSING PROPER STAMPS AFFIXED THEREON AND POSTED BY REGISTERED POS T AND UNLESS THE CONTRARY IS PROVED THE SERVICE IS DEEMED TO HAVE BEEN E FFECTED AT THE TIME AT WHICH THE DOCUMENT WOULD BE DELIVERED IN THE ORDINARY COU RSE OF POST. IN VIEW OF THIS PROVISION A PRESUMPTION ARISES THAT THE NOTIC E HAS BEEN SERVED ON THE ASSESSEE WITHIN 2-3 DAYS OF POSTING. THIS PRESUMPT ION IS SOUGHT TO BE REBUTTED BY THE AFFIDAVIT OF THE BRANCH MANAGER. H OWEVER THIS AFFIDAVIT DOES NOT DISCLOSE THE BASIS FOR DEPOSING THAT THE N OTICE WAS NOT RECEIVED TILL DATE. NO INQUIRY HAS BEEN MADE FROM THE POST OFFIC E. THE AFFIDAVIT HAS BEEN FILED AFTER A LONG TIME FROM THE ISSUANCE OF THE NO TICE. WITH EFFLUX OF TIME MEMORY IS LIKELY TO FAIL. THUS THERE IS NO BASIS TO SUPPORT THE AFFIDAVIT. 4.1 THE LEARNED COUNSEL RELIED ON A NUMBER OF CASES TO THE EFFECT THAT SERVICE OF THE NOTICE WITHIN TIME IS MANDATORY. TH ERE IS NO QUARREL ABOUT THIS PROPOSITION. THE QUESTION IN THIS CASE IS WHETHE R NOTICE DATED 28.09.2007 HAS BEEN SERVED ON THE ASSESSEE? THE LEARNED CIT(A ) HAS RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MAYAWATI VS. CIT AND OTHERS (2010) 321 ITR 349. THE FACTS OF THE CASE A RE QUITE DIFFERENT AND THEREFORE THE RATIO OF THAT CASE IS NOT RELEVANT F OR OUR PURPOSE. NONETHELESS THE FACTS STAYS THAT THE NOTICE DATED 28.09.2007 HA S BEEN VALIDLY POSTED AND ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 9 THE PRESUMPTION OF ITS SERVICE HAS NOT BEEN REBUTTE D BY ANY COGENT EVIDENCE. THEREFORE IT IS HELD THAT THE NOTICE HAS BEEN DULY SERVED ON THE ASSESSEE. 5. WE NOW TURN TO THE APPEAL OF THE REVENUE. I N THIS APPEAL THERE HAS BEEN A REVERSAL OF THE FINDINGS REGARDING REJE CTION OF BOOKS OF ACCOUNT. CONSEQUENTLY THE ESTIMATION OF PROFIT AT 10% OF THE AMOUNT RAISED IN THE BILLS ON THE NTPC LTD. HAS NOT BEEN ACCEPTED. T HE FACTS MENTIONED IN THIS CONNECTION IN THE ASSESSMENT ORDER ARE THA T THE AUDITORS MADE A NUMBER OF OBSERVATIONS IN RESPECT OF THE ACCOUNTS . THESE OBSERVATIONS HAVE BEEN REPRODUCED IN PARAGRAPH NO. 3 OF THE ASSESSMENT ORDER. IN ORDER TO ENSURE THAT THE LOSS HAS BEEN CORRECTLY DECLA RED THE AO VERIFIED A NUMBER OF EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT WHICH ARE BRIEFLY DISCUSSED HEREUNDER: (I) EXPENSES IN CONNECTION WITH ADDITION TO SITE OFF ICE AT CAMP WERE VERIFIED AND THEREAFTER IT HAS BEEN MENTIONE D THAT THE ASSESSEE IS CONSTRUCTING THE DAM AND NOT THE BUI LDING. ALTHOUGH THE BUILDING IS REQUIRED FOR THE OFFICE LABOUR Q UARTERS STAFF QUARTERS ETC. BUT THE SITE OFFICE CONSTRUCTIO N EXPENSES EXCEEDING RS. NINE CRORE DO NOT APPEAR COMMENSURA TE WITH THE REQUISITE FACILITY. PROPER DOCUMENTS HAVE NOT BE EN MAINTAINED IN RESPECT OF THESE EXPENSES. THEREFORE 50% OF TH ESE EXPENSES AMOUNTING TO RS. 4 71 66 300/- HAVE BEEN DISALLOWE D; (II) PURCHASES AND OUTSTANDING SUNDRY CREDITORS WER E EXAMINED. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSE E IT HAS BEEN ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 10 MENTIONED THAT THE ASSESSEE COULD NOT SUBMIT ST OCK REGISTER IN RESPECT OF DIESEL AND LUBRICANT PURCHASED FROM PARTIES OTHER THAN HPCL AND BHARAT SHELL LTD. PERUSAL OF ACCOUNT OF ASHA ENTERPRISE SHOWS THAT IT RAISED BILLS AGGREGATI NG TO RS. 91 93 697/- OUT OF WHICH ONLY RS. 74 97 195/- HAV E BEEN PAID LEAVING BALANCE PAYABLE AT RS. 16 97 902/-; (III) PURCHASES FROM CENTRAL TYRES WERE ALSO VERIFIED AND IT IS MENTIONED THAT THIS CONCERN RAISED BILLS IN TWO SERIES HAVING INVOICE NUMBERS OF THREE DIGITS AND FIVE DIGIT S. THE SALES-TAX DEPARTMENT WAS AFFIXING ITS STAMP ON THE BILLS AT THE CHECK POST BUT SUCH STAMPS ARE NOT THERE ON ALL THE BILLS. PARTICULARLY THESE STAMPS ARE NOT THERE ON THE INVOICES HA VING THE NUMBER IN FIVE DIGITS. THE GENUINENESS OF EXPENSES HAS NOT BEEN PROVED; (IV) IN VIEW OF THESE OBSERVATIONS 50% OF EXPENDITU RE IN RESPECT OF PURCHASES FROM ASHA ENTERPRISE AND CENTRAL TYRE S ARE HELD TO BE DISALLOWABLE. PURCHASES OF DIESEL FROM SUNDRY SUPPLIERS HAVE ALSO BEEN HELD TO BE DISALLOWABLE. 5.1 THE AO THEREAFTER REFERRED TO VARIOUS COMMEN TS MADE BY THE AUDITORS. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE IT HAS BEEN HELD THAT THE BOOKS ARE NOT COMPLETE IN ALL RESPECTS. A REFERENCE HAS BEEN MADE TO THE METHOD OF COMPUTATION OF PROFIT ADOPTED BY THE ASSESSEE WHICH IS STATED TO BE IN ACCORDANCE WITH AS-7 I SSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. THE ASSESSEE HAS FOLLOWED PERCENTAGE COMPLETION METHOD FOR RECOGNIZING REVENUES. AT THE BEGINNING OF THE PROJECT TOTAL RECEIPTS AFTER TAKING ESCALATIO N CLAIMS INTO ACCOUNT HAVE BEEN FIXED AT RS. 821 01 76 529/-. THIS INCLUDES THE CONTRACT RECEIPTS AS PER AGREEMENT AMOUNTING TO RS. 718 99 91 590/- A ND ESTIMATED ESCALATION ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 11 CLAIMS OF RS. 102 01 84 939/-. THE TOTAL EXPENDI TURE HAS BEEN ESTIMATED AT RS. 951 83 67 460/-. THIS INVOLVES ESTIMATI ON OF LOSS AT THE VERY BEGINNING AT RS. 130 81 90 931/-. THE ASSESSMENTS FOR ASSESSMENT YEARS 2003-04 TO 2005-06 HAVE BEEN COMPLETED ON THE BA SIS OF AFORESAID ESTIMATION OF REVENUES AND EXPENDITURE FROM THE WHOLE OF THE CONTRACT. EXPENDITURE OF RS. 238 78 93 025/- WAS INCURRED I N THE PREVIOUS YEARS RELEVANT TO ASSESSMENT YEARS 2003-04 TO 2004-05. THIS CONSTITUTED 25.09% OF THE TOTAL COST. ACCORDINGLY 25.09% OF TOTAL REVENUE HAS BEEN ACCOUNTED FOR IN THESE THREE YEARS. THUS TOTAL REVENUE OF RS. 88 67 27 527/- HAS BEEN ACCOUNTED FOR IN THESE THR EE YEARS. THEREAFTER REVENUE HAS BEEN RECOGNIZED FOR THIS YEAR ON SIM ILAR BASIS. THE AO DID NOT ACCEPT THE AFORESAID WORKING ON THE GROUND THAT THERE IS NO FIRM DATA REGARDING THE ESTIMATION OF TOTAL COST AT RS. 951 83 67 460/-. IN VIEW OF THIS AND NON-VERIFIABILITY OF EXPENSES MENTIO NED EARLIER THE BOOKS OF ACCOUNT HAVE BEEN REJECTED AND THE PROFIT OF THIS Y EAR HAS BEEN ESTIMATED AT 10% OF THE BILLS RAISED IN THIS YEAR. 6. VARIOUS SUBMISSIONS WERE MADE BEFORE THE LD. C IT(APPEALS). HE CONSIDERED THE FACTS OF THE CASE AND THE SUBM ISSIONS MADE BEFORE HIM. IT IS MENTIONED THAT THE ASSESSEE HAS MAINTAIN ED REGULAR BOOKS OF ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 12 ACCOUNT WHICH ARE AUDITED BY THE ACCOUNTANT AS DEFINED UNDER THE ACT. THE BOOKS OF ACCOUNT MAINTAINED IN THE RE GULAR COURSE OF BUSINESS WHICH HAVE BEEN AUDITED AND THE REPORT DOES NOT CONTAIN ANY ADVERSE REMARK BY THE AUDITOR HAVE NORMALLY BE ACCEPTE D AS CORRECT UNLESS THERE ARE ADEQUATE REASONS TO COME TO THE CONCLUSION THAT THESE ARE INCORRECT OR UNRELIABLE. THE BURDEN TO PROVE THAT SUCH BO OKS ARE INCORRECT OR UNRELIABLE IS ON THE AO. THE AO HAD NOT RECORD ED ANY FINDING THAT THE ASSESSEE HAS NOT MAINTAINED ANY STOCK RECORD OF DIESEL AND LUBRICANT. OTHERWISE ALSO NON-MAINTENANCE OF STOCK REGIST ER OF THESE ITEMS WOULD NOT RENDER THE ACCOUNTS INCOMPLETE AND WOULD NO T BE SUFFICIENT GROUND TO REJECT THE BOOKS U/S 145(3) OF THE ACT. IT IS FURTHER MENTIONED THAT THE AO HAS RECORDED THE FINDING TO THE EFFECT THAT SOME OTHER EXPENSES ARE NOT VERIFIABLE. THIS ALSO DOES NOT CONSTITUTE SUF FICIENT GROUND FOR REJECTION OF ACCOUNT AS IN SUCH A CASE THE EXPENSES MAY BE E STIMATED. THE ASSESSING AUTHORITY HAS TO LOOK INTO THE SUBSTANCE OF THE MA TTER SO AS TO AVOID PUTTING THE ASSESSEE UNDER UNREASONABLE HARDSHIP OR LIAB ILITY. IT IS THE DUTY AS WELL AS THE RIGHT OF THE ASSESSING OFFICER TO CONSIDER WHETHER THE BOOKS DISCLOSE TRUE STATE OF AFFAIRS AND CORRECT INCOME CAN B E DEDUCTED THEREFROM. THESE RIGHTS AND DUTIES HAVE TO BE EXERCISED IN A JUDIC IOUS MANNER BY BRINGING COGENT MATERIAL AND REASONS ON RECORD. IN VIEW OF THESE FINDINGS IT HAS ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 13 BEEN HELD THAT THE AO WAS NOT RIGHT IN REJECTING THE ACCOUNTS. AS A COROLLARY TO THIS FINDING THE APPLICATION OF R ATE OF 10% TO THE REVENUES OF THIS YEAR FOR DETERMINING PROFIT HAS ALSO BEEN REJECTED. THE REVENUE IS IN APPEAL AGAINST THESE FINDINGS. 7. THE LD. DR INITIALLY SUBMITTED IN A BRIEF MAN NER THE METHOD ADOPTED BY THE AO FOR COMPUTATION OF INCOME. IT IS SUBMITTED THAT THE ASSESSEE HAD FOLLOWED PERCENTAGE COMPLETION METH OD FOR DETERMINING THE PROFIT. THIS METHOD HAS BEEN ACCEPTED BY THE AO. HOWEVER HE CHECKED VARIOUS EXPENSES AND FOUND THAT PROPER BILLS WER E NOT MAINTAINED. HE ALSO DID NOT ACCEPT THE METHOD OF COMPUTING PROFIT AS THE VERY INITIAL ESTIMATE WAS A LOSS FOR WHICH NO JUSTIFICATION WAS THERE. FINALLY HE DID NOT MAKE ANY SEPARATE ADDITION IN RESPECT OF EXPENDITURE CHECKED BY HIM. HE REJECTED THE BOOKS OF ACCOUNT U/S 145(3) AND APP LIED THE RATE OF 10% TO THE RECEIPTS OF THIS YEAR FOR DETERMINING THE IN COME. SECTION 44BBB REGARDING SPECIAL PROVISION FOR COMPUTING PROFIT S AND GAINS OF FOREIGN COMPANIES ENGAGED IN THE BUSINESS OF CIVIL CONSTR UCTION ETC. IN CERTAIN TURN-KEY POWER PROJECTS PROVIDES FOR TAXATION @ 10% OF THE AMOUNT PAID OR PAYABLE TO THE ASSESSEE ON ACCOUNT OF CIVIL C ONSTRUCTION ERECTION TESTING OR COMMISSIONING. THE ASSESSEE IS CARRYI NG ON SIMILAR BUSINESS ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 14 AND THUS THE AO ADOPTED THE RATE OF 10%. IT IS FURTHER SUBMITTED THAT THE ASSESSEE ESTIMATED LOSS OF RS. 130 81 90 931/- F ROM THE EXECUTION OF THE PROJECT FOR WHICH NO FIRM BASIS EXISTED. THE F ACT THAT ASSESSMENTS FOR EARLIER THREE YEARS HAVE BEEN COMPLETED ON THIS BASIS IS NOT MATERIAL IN SO FAR AS ASSESSMENT OF THIS YEAR IS CONCERNED BECA USE IN PAST NO DISCREPANCY WAS FOUND IN THE BOOKS. IN THIS YEAR THE AO HA S FOUND DISCREPANCIES AND THEREFORE THE METHOD OF COMPLETING ASSESS MENT IN EARLIER YEARS WAS NOT BINDING FOR COMPUTING PROFITS OF THIS YEAR. IN PARTICULAR HE REFERRED TO THE SITE EXPENSES FOR WHICH THERE WERE NO IN VOICES PURCHASES MADE BY THE ASSESSEE FOR WHICH PAYMENT WAS NOT MADE IN THI S YEAR LEADING TO SUNDRY CREDIT AT THE END OF THE YEAR DISCREPANC Y IN THE SERIAL NUMBER OF THE BILLS FROM CENTRAL TYRES AND THE COMMENTS OF THE AUDITORS. AS MENTIONED EARLIER THESE COMMENTS HAVE BEEN REPR ODUCED ON PAGE NUMBERS 2 AND 3 OF THE ASSESSMENT ORDER. THE LD . DR REFERRED TO THE QUERY RAISED BY THE AO IN RESPECT OF SOME OF THE C OMMENTS. HE ENQUIRED ABOUT THE DOCUMENTS MAINTAINED FOR CONTROL OF IN VENTORY OF MATERIAL CONSUMED AND DEDUCTION OF TAX AT SOURCE FROM WAGE S AND SALARY. NO SATISFACTORY EXPLANATION WAS FURNISHED. THEREFOR E THE AO ISSUED A SHOW CAUSE NOTICE FOR REJECTING THE BOOKS OF ACCOUNT AND THEREAFTER RECORDED FINDINGS IN THIS MATTER. IT IS ARGUED THAT THE A O WAS RIGHT IN REJECTING THE ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 15 BOOKS OF ACCOUNT AND ESTIMATING THE PROFITS. ON THE OTHER HAND THE LD. CIT(APPEALS) MERELY STATED THAT THE BOOKS OF A CCOUNT ARE MAINTAINED IN REGULAR COURSE OF BUSINESS AND THE SAME HAVE BEE N AUDITED. THEREAFTER HE RECORDED THE FINDING THAT EVEN IF THERE WERE SOM E DEFICIENCY IN BOOKS IN REGARD TO MAINTENANCE OF VOUCHERS THE AO COU LD HAVE DISALLOWED UNVOUCHED EXPENSES. NO VERIFICATION WAS MADE OR GOT MADE IN RESPECT OF SUCH EXPENDITURE AND IN FACT THE WHOLE OF THE ADD ITION HAS BEEN DELETED. IT IS URGED THAT IN VIEW OF THE AFORESAID THE MATT ER MAY EITHER BE RESTORED TO THE FILE OF THE AO OR THE LD. CIT(A) FOR DECIDIN G THIS MATTER AGAIN. 8. IN REPLY THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE IS A FOREIGN COMPANY AND IT HAS ENTERED INTO AN AGREEMENT WITH NTPC LTD. FOR CIVIL WORK OF A DAM. IT HAD FILED THE RETURN OF IN COME SHOWING LOSS OF ABOUT RS. 25.70 CRORE. AGAINST THE AFORESAID THE TOT AL INCOME HAS BEEN ASSESSED AT ABOUT RS. 11.68 CRORE. THERE IS A W IDE GAP BETWEEN THE TWO FIGURES FOR APPARENTLY NO REASON. HE REFERRED TO THE FINDING OF THE AO RECORDED ON PAGE NOS. 19 AND 20 REGARDING THE MET HOD ADOPTED BY THE ASSESSEE TO COMPUTE PROFIT OR LOSS. THIS IS BASE D UPON THE INITIAL ESTIMATION OF LOSS OF RS. 130 81 90 931/-. THE ASS ESSMENTS FOR ASSESSMENT YEARS 2003-04 TO 2005-06 HAVE BEEN COMPLETED ON TH E BASIS OF AFORESAID ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 16 ESTIMATION OF LOSS. IN OTHER WORDS THE FIGURE O F ESTIMATED LOSS HAS BEEN ACCEPTED IN EARLIER ASSESSMENT YEARS BY THE AO IN SCRUTINY ASSESSMENTS. THEREFORE THIS FIGURE CANNOT BE OBJECTED TO NOW AS IT WOULD DISTURB THE CONSISTENT METHOD FOLLOWED BY THE ASSESSEE FOR CO MPUTING THE PROFIT OR LOSS. IN ANY CASE THIS LOSS WAS ESTIMATED ON A REASONABLE BASIS AND IT WAS EXPLAINED TO THE AO ALSO. IN THIS CONNECTION OUR ATTENTION HAS BEEN DRAWN TOWARDS PAGE NO. 151 OF THE PAPER BOOK BEI NG THE PART OF SUBMISSIONS MADE BEFORE THE AO IN LETTER DATED 2 2.12.2008 IN WHICH IT IS MENTIONED THAT THE ASSESSEE WAS ASKED TO PROVI DE CALCULATION OF PROVISION OF LOSS WHICH WAS SUBMITTED IN LETTER DATED 17.11.2008. COMPLETE BUDGET/ESTIMATED CALCULATIONS ARE PROV IDED IN ANNEXURE-13 OF THIS LETTER. ON PERUSAL OF THE SAME IT MAY BE OBSERVED THAT COMPLETE BREAK-UP OF THE COST IS PROVIDED IN DETAIL. THER EFORE IT WILL NOT BE JUSTIFIED TO HOLD THAT ESTIMATION OF REVENUE AND COST OF THE PROJECT PREPARED IN ACCORDANCE WITH AS-7 IS WITHOUT ANY BASIS. IT IS FURTHER SUBMITTED THAT BIDDING FOR ANY CONTRACT REQ UIRES DETAILED PROJECTION OF COST EXPECTED TO BE INCURRED IN THE EXECUTION OF THE CONTRACT. IN VIEW OF THE SAME THE COST IS ESTIMATED BEFORE COMMENCE MENT OF THE PROJECT AND IS REVISED REGULARLY ON THE BASIS OF ACTUAL PERFORMA NCE. THEREFORE OBJECTION TO THE TOTAL PROJECT COST ON THE BASIS OF 25% WORK COMPLETED DOES NOT ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 17 HOLD GOOD. AT THIS STAGE WE MAY ALSO REPRODUCE THE CALCULATION SUBMITTED BY THE ASSESSEE AND REPRODUCED BY THE AO ON PA GE NOS. 19 AND 20 OF THE ASSESSMENT ORDER:- COMPUTATION OF REVENUE AS PER ACCOUNTING STANDARD -7 CALCULATION OF REVENUE ON THE BASIS OF PERCENTAGE OF COMPLETION METHOD INFORMATION AVAILABLE AMOUNT (RS.) AMOUNT (RS.) (A) TOTAL FIXED PRICE REVENUE AS PER AGREEMENT - AS AGREED ORIGINALLY (AS PER AGREEMENT )718 99 91 590 - OTHERS-ESCALATION CLAIMS ETC. 102 01 84 939 821 01 76 529 (B) TOTAL ESTIMATED COST 951 83 67 460 951 83 67 460 (C) TOTAL ESTIMATED PROFIT/(LOSS) (130 81 90 931) CALCULATION OF PERCENTAGE COMPLETION (D) COST INCURRED TILL DATE -2003-04 1 04 95 805 -2004-05 87 81 29 885 -2005-06 149 92 67 335 238 78 93 025 (E) COST INCURRED TILL DATE 238 78 93 025 25. 09% TOTAL ESTIMATED COST 951 83 67 460 REVENUE TO BE RECOGNIZED TILL DATE (F) = (A) & (E) 205 97 04 393 REVENUE TO BE RECOGNIZED IN 2005 (G) REVENUE RECOGNIZED TILL LAST REPORT DATE (31/3/2005) 88 67 27 527 (H) ADDITIONAL REVENUE TO BE RECOGNISED FOR THE YE AR 117 29 76 865 (I) LESS: AMOUNT BILLED TONTPC DURING 2005-06 116 82 11 448 (J) REVERSAL OF OPENING UNBILLED REVENUE (25 94 98 2 41) (K) FURTHER UNBILLED REVENUE TO BE RECORDED 26 42 63 658 PROVISION FOR LOSS (L) TOTAL ANTICIPATED LOSS =(C)-(A) 130 81 9 0 931 (M) EXCESS OF COST OVER REVENUE TILL 31 MARCH 2006 =(D)-(F) 32 81 88 632 (N) PROVISION FOR LOSS TO BE RECOGNIZED 98 00 02 299 (O) LESS: RECOGNISED TILL 31 MARCH 2005 (-) 13662497 (P) DIFFERENCE TO BE ACCOUNTED FOR 96 63 39 802 ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 18 8.1 THE LD. COUNSEL REFERRED TO THE REMARKS OF THE AUDITOR REPRODUCED BY THE AO ON PAGE NOS. 2 AND 3 OF THE ASSESSMENT ORDER. THESE WERE DEALT WITH PARA-WISE. THE CASE OF THE LD. COUNSEL IS TH AT NONE OF THE REMARKS HAS ANY BEARING ON THE CORRECTNESS OF THE BOOKS OF A CCOUNT AND THEREFORE REMARKS CANNOT FORM THE BASIS FOR REJECTION OF BOOKS OF ACCOUNT. IN PAST THE BOOKS WERE MAINTAINED IN THE SAME MAN NER WHICH HAD BEEN ACCEPTED. 8.2 COMING TO VERIFICATION OF EXPENSES MADE BY TH E AO IT IS SUBMITTED THAT EXPENDITURE ON ADDITION TO SITE OFFICE AT CAMP HAS BEEN CAPITALIZED BY THE ASSESSEE. SINCE THIS EXPENDITURE HAD NOT BEEN CLAIMED AS REVENUE EXPENDITURE DISALLOWANCE OF ANY PART OF THE EXPEN DITURE IS HIGHLY UNJUSTIFIED. THERE IS ALSO AN ERROR IN CALCULATING THE AMOUNT OF EXPENDITURE AT RS. 9 43 32 601/-. PURCHASE OF LUBRICANT FROM ASHA ENTERPRISES IS DULY BACKED BY THE INVOICES. NO ENQUIRY HAS BEEN MADE TO VERIFY THE GENUINENESS OF THE PURCHASES. THEREFORE THE REM ARKS OF THE AO ARE CONJECTURAL IN NATURE. PURCHASES FROM CENTRAL T YRES WERE ALSO DULY VOUCHED AND PAYMENTS WERE MADE BY WAY OF CHEQUE S. OBVIOUSLY THE ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 19 ASSESSEE CANNOT BE AND IS NOT IN A POSITION TO EXPLAIN AS TO WHY THERE ARE TWO SERIES OF INVOICES BEARING THREE DIGIT NU MBERS AND FIVE DIGIT NUMBERS. THE EXPENDITURE ALSO CANNOT BE HELD TO BE BOGUS SIMPLY BECAUSE ON SOME BILLS STAMP OF SALES-TAX DEPARTMENT HA S NOT BEEN AFFIXED. LOOKING TO ALL THESE FACTS IT IS ARGUED THAT THE AO ERRED IN MAKING DISALLOWANCES AND THEREAFTER COVERING THESE DIS ALLOWANCES BY ESTIMATING INCOME AT 10% OF THE RECEIPTS. ON THE OTHER HAN D THE LD. CIT(APPEALS) HAS PROPERLY APPRECIATED THE FACTS OF THE CASE THAT PROPER BOOKS HAVE BEEN MAINTAINED. THE BOOKS HAVE BEEN DULY AUDIT ED PERCENTAGE COMPLETION METHOD HAS BEEN FOLLOWED FOR ACCOUNT ING REVENUES ON THE BASIS OF THE EXPENDITURE AND THUS NEITHER ANY DI SALLOWANCE COULD HAVE BEEN MADE NOR THE PROFIT COULD HAVE BEEN ESTIMATED. 8.3 AT THIS JUNCTURE WE MAY EXAMINE VARIOUS CASES CITED BEFORE US IN THE COURSE OF HEARING. THE LD. DR RELIED ON T HE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. SAMI R DIAMOND EXPORTS (P) LTD. (1999) 71 ITD 75. IN THIS CASE THE AO H AD NOTED THAT THERE WAS A SHARP DECLINE IN THE GROSS PROFIT RATE FROM 11.7% IN THE IMMEDIATELY PRECEDING YEAR TO 5.99% IN THIS YEAR. THE CONT EMPORANEOUS AND CORROBORATIVE EVIDENCE HAD ADMITTEDLY BEEN DES TROYED. ON THESE FACTS ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 20 THE ACTION OF REJECTION OF BOOKS WAS UPHELD AND THE SUBMISSION OF THE ASSESSEE THAT IT WAS HIS PREROGATIVE TO MAIN BO OKS IN A MANNER IT LIKES AND THE AO COULD NOT REJECT THEM BECAUSE BOOKS H AVE BEEN ACCEPTED IN PAST WAS REJECTED. FURTHER THE LD. DR RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S.N. NAMASIVAYAM CH ETTIAR VS. CIT (1960) 38 ITR 579. IT HAS BEEN HELD THAT THE POWER TO ESTIMATE PROFIT BY REJECTION OF BOOKS OF ACCOUNT ARISES ONLY WHERE THE ASSESSEE HAS NOT FOLLOWED A REGULAR METHOD OF ACCOUNTING OR WHER E THE METHOD IS SUCH THAT PROFITS AND GAINS CANNOT BE PROPERLY DEDUCT ED. IT MEANS THAT THE METHOD ADOPTED BY THE ASSESSEE MUST PRIMA FA CIE PREVAIL WHERE IT IS REGULARLY EMPLOYED. HOWEVER THE AO CAN EXERCI SE THIS POWER WHEN TRUE PROFITS CANNOT BE DETERMINED. HE ALSO RELIED ON THE DECISION IN THE CASE OF BHAI SUNDER DASS SARDAR SINGH (P) LTD. VS. CIT (1972) 84 ITR 106 (DEL). IN THIS CASE THE AO HAD ESTIM ATED THE PROFIT OF THE ASSESSEE IN RESPECT OF A CONTRACT ON ACCOUNT OF LOW PROFIT RATE OF 9%. BY REJECTING THE ACCOUNTS HE APPLIED THE RATE OF 12.5%. BEFORE THE AAC IT WAS ADMITTED THAT FULL QUANTITATIVE DETAILS MI GHT NOT BE AVAILABLE IN RESPECT OF STORES OF THE VALUE OF RS. 1 30 000/- CONSUMED IN EXECUTION OF THE CONTRACT. HE CONSIDERED THE FACTS AND REDUCE D THE ADDITION TO RS. 10 000/-. THE TRIBUNAL ALSO CONSIDERED THE AD DITIONAL MATERIAL THAT NET ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 21 PROFIT FOR THE NEXT YEAR WAS 9.9%. THE ADDITI ON WAS REDUCED TO RS. 6 000/-. THE HONBLE DELHI HIGH COURT HELD THAT TH ERE WAS MATERIAL BEFORE THE TRIBUNAL TO MAKE ESTIMATED ADDITION AND NO QUESTION OF LAW ARISES FROM THE ORDER OF THE TRIBUNAL. THE LD. DR ALSO RELIED ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF A WADHESH PRATAP SINGH ABDUL REHMAN AND BROTHERS VS. CIT (1994) 210 ITR 406. IN THIS CASE THE ASSESSEE HAD NOT MAINTAINED STOCK REGISTER A ND CASH MEMO FOR SALE. THE VOUCHERS FOR EXPENSES WERE ALSO NOT FORT H COMING. THE INCOME RETURNED WAS ABYSMALLY LOW WHEN COMPARED TO A VERY HIGH TURNOVER. THE TRIBUNAL RECORDED A FINDING OF FACT THAT TH E CLAIM FOR SUSTAINING BOOKS OF ACCOUNT WAS NOT MERITORIOUS. THE COURT HELD THAT THIS IS A QUESTION OF FACT AND NO QUESTION OF LAW ARISES T HEREFROM. 9. IN REGARD TO THE AFORESAID THE CASE OF THE LD. COUNSEL IS THAT THE BOOKS ARE AUDITED AND A REGULAR SYSTEM OF A CCOUNTING HAS BEEN FOLLOWED WHICH HAS BEEN ACCEPTED IN PAST. ON REVENUE ACCOUNT THE AO HAS POINTED OUT ONLY MINOR DISCREPANCIES IN R ESPECT OF PURCHASE OF LUBRICANT AND TYRES. IN FACT THESE ARE NOT DI SCREPANCIES BUT ONLY DOUBTS RAISED BY THE AO. IN SUCH A SITUATION THE BOOKS COULD NOT HAVE BEEN REJECTED. ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 22 10. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS ARE THAT THE ASSESSEE IS EXECUTING A TURN-KEY PROJECT INVOLVING CIVIL WORKS FOR CONSTRUCTION OF A DA M. IT HAS MAINTAINED BOOKS OF ACCOUNT ON A REGULAR BASIS IN THE COURSE OF BUSINESS ON THE SAME BASIS AS IN PAST. THESE BOOKS HAVE BEEN DULY AUDITED ALSO. THEREFORE IT IS CLAIMED THAT THE PROVISION CONTAINED IN SECTION 4 4BBB ARE NOT APPLICABLE AND THE INCOME OR LOSS HAS TO BE DETERMINED ON T HE BASIS OF THE BOOKS OF ACCOUNT. WE ARE OF THE VIEW THAT THESE SUBMISSI ONS ARE IN CONFORMITY WITH THE PROVISION CONTAINED IN SECTION 44BBB(2) . THUS THE ASSESSEE CAN CLAIM THAT THE PROFIT OUGHT TO BE ASSESSED ON THE BASIS OF THE BOOKS AND PRESUMPTIVE RATE OF 10% IS NOT APPLICABLE TO THIS CASE. 10.1 FURTHER THE ASSESSEE HAS BEEN ACCOUNTING F OR THE RECEIPTS ON PERCENTAGE COMPLETION BASIS AND THUS IT IS FOLLO WING AS-7. FOR DOING SO THE ASSESSEE HAD WORKED OUT THE ESTIMATE OF RECEIPTS AND EXPENDITURE AT THE BEGINNING OF THE PROJECT. THE ESTIMATE LEADS TO LOSS OF RS. 130 81 90 931/-. RECEIPTS HAVE BEEN TAKEN AS PE R AGREEMENT. THE EXPENDITURE HAS BEEN ESTIMATED. FROM YEAR TO Y EAR BOTH THESE FIGURES ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 23 CAN UNDERGO CHANGE BECAUSE OF ESCALATION IN COST AND CLAIMS MADE ON ACCOUNT OF ESCALATION. HOWEVER THE FACTS SHOW T HAT ALL ESCALATION CLAIMS HAVE NOT BEEN FULLY ACCEPTED LEADING TO FURTHE R LOSS WITH THE PROGRESS OF THE WORK. ON THE AFORESAID BASIS RETURNS HAVE B EEN FILED FOR ASSESSMENT YEARS 2003-04 TO 2005-06. IN THESE RETURNS THE RECEIPTS HAVE BEEN ESTIMATED ON THE BASIS OF ACTUAL EXPENDITURE IN CURRED. FROM THE EXPENDITURE THE PERCENTAGE OF WORK COMPLETED IS ASCERTAINED AND THE REVENUE IS RECOGNIZED ACCORDINGLY. THIS VERY M ETHOD HAS BEEN FOLLOWED IN THIS YEAR. THE AO EXAMINED THE BOOKS. HE REFERRED TO SOME DISCREPANCIES IN THE ACCOUNTING OF EXPENDITURE INCURRED ON ADDITION TO SITE OFFICE AT CAMP. THIS EXPENDITURE IS CAPIT AL IN NATURE AND HAS NOT BEEN CLAIMED BY THE ASSESSEE AS REVENUE EXPENDITURE. THE AVERMENTS MADE BY THE LD. COUNSEL IN THIS BEHALF HAVE NOT BEEN RE SPONDED TO BY THE LD. DR. HE ALSO EXAMINED EXPENDITURE INCURRED IN RESPE CT OF PURCHASE OF LUBRICANT FROM ASHA ENTERPRISES. NINE ITEMS HAVE BEEN MENTI ONED ON PAGE NO. 7 IN RESPECT OF SUCH PURCHASES. HE ALSO EXAMINED PURC HASE OF TYRES FROM CENTRAL TYRES. 22 ITEMS HAVE BEEN LISTED ON PAGE NO. 11. FIVE ITEMS BEAR FIVE DIGITS INVOICE NUMBERS AND THE REST BEAR THREE DIGITS INVOICE NUMBERS. THE EXPENSES LISTED BY THE AO ARE MIN ISCULE COMPARED TO THE OVERALL EXPENDITURE. IT IS ALSO MENTIONED THAT POSITION IN RESPECT OF ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 24 PURCHASES FROM ANKIT ELECTRICALS (P) LTD. AND A LPHA TECHNICAL SERVICES (P) LTD. IS SAME AS IN RESPECT OF CENTRAL TYRE S. HOWEVER THE DETAILS OF PURCHASES FROM THESE PARTIES HAVE NOT BEEN MEN TIONED. THUS THE POSITION WHICH EMERGES IS THAT THE ASSESSEE H AS FOLLOWED REGULAR SYSTEM OF ACCOUNTING OF THE REVENUE AS PER AS-7 THE BOOKS HAVE BEEN MAINTAINED AND AUDITED. THE QUESTION IS-WHETHER THE LD. CIT(APPEALS) WAS RIGHT IN ACCEPTING THE BOOKS OF ACCOUNT? 10.2 AS MENTIONED EARLIER THE AO HAS DOUBTED T HE ESTIMATE OF COST MADE INITIALLY. HOWEVER SUCH ESTIMATION HAS BEE N ACCEPTED IN PAST AND IT FORMS THE BASIS OF ASSESSMENT FOR THREE PRECED ING YEARS. THEREFORE ANY CHANGE IN THIS ESTIMATION WOULD LEAD TO DIST URBING PAST ASSESSMENTS WHICH HAVE BEEN ACCEPTED. NO EVIDENCE HAS BEEN B ROUGHT ON RECORD THAT SUCH ESTIMATION WAS NOT BONA-FIDE. THEREFORE ADOP TING A NEW BASIS OF ASSESSMENT WILL BE AGAINST THE RULE OF CONSISTEN CY. HAVING ACCEPTED A PARTICULAR AMOUNT OF ESTIMATE FOR EXPENDITURE ON THE WHOLE PROJECT IT IS NOT NOW OPEN TO THE REVENUE TO CHALLENGE THIS CO ST AND THEREAFTER FOLLOW A TOTALLY DIFFERENT METHOD FOR ASSESSMENT. THE FACT S OF THE CASE OF SAMIR DIAMOND EXPORTS (P) LTD. (SUPRA) ARE DISTINGUIS HABLE INASMUCH AS THE BOOKS OF ACCOUNT WERE INCOMPLETE AND CORROBORATIV E AND CONTEMPORANEOUS ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 25 EVIDENCE HAD ADMITTEDLY BEEN DESTROYED. THEREFOR E IT WAS HELD THAT THE BOOKS SHOULD BE REJECTED IN THIS YEAR IN SPITE O F THE FACT THAT THE BOOKS WERE ACCEPTED IN PAST. FURTHER THE FACTS OF T HE CASE OF S.N. NAMASIVAYAM CHETTIAR (SUPRA) ARE ALSO DISTINGUIS HABLE BECAUSE THE TRIBUNAL HAD RECORDED A FINDING THAT TRUE PROFIT S CANNOT BE DETERMINED FOR VARIOUS REASONS MENTIONED IN ITS ORDER. SUCH REA SONS DO NOT EXIST IN THIS CASE. THE FACTS OF THE CASE OF BHAI SUNDER DAS S SARDAR SINGH (P) LTD. (SUPRA) ARE ALSO DISTINGUISHABLE BECAUSE THE ASS ESSEE HAD NO EVIDENCE REGARDING CONSUMPTION OF STORES OF THE VALUE OF RS. 1 30 000/-. HOWEVER IT MAY BE STRESSED THAT IN THIS CASE ALSO THE TRIBUNAL HAD TAKEN INTO ACCOUNT THE PAST RESULTS OF THE ASSESSEE FOR E STIMATING THE PROFIT. THE AO HAS NOT DONE SO IN THE CASE AT HAND. THE FACTS OF THE CASE OF AWADHESH PRATAP SINGH ABDUL REHMAN AND BROTHERS (SUPRA) ARE QUITE DISTINGUISHABLE AS STOCK REGISTER WAS NOT MA INTAINED AND PURCHASE AND SALES WERE NOT VERIFIABLE. THESE CIRCUMSTANCES D O NOT EXIST IN THIS CASE. HAVING REGARD TO THE FACTS OF THE AFORESAID CASES WE ARE OF THE VIEW THAT THE AO COULD NOT HAVE REJECTED THE BOOKS OF ACCOUNT AND TAKEN RECOURSE TO THE PROVISION CONTAINED IN SECTION 4 4BBB FOR ESTIMATING THE INCOME ESPECIALLY WHEN THE PROVISION IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 26 10.3 COMING TO THE DISCREPANCIES MENTIONED EXPEN DITURE IN RESPECT OF SITE OFFICE HAS BEEN CAPITALIZED AND THUS NO A DDITION CAN BE MADE. THE AO HAS MADE OBSERVATIONS ABOUT PURCHASES FROM A SHA ENTERPRISES CENTRAL TYRES ANKIT ELECTRICALS (P) LTD. AND ALPH A TECHNICAL SERVICES (P) LTD. THE REMARKS ARE IN THE NATURE OF RAISING SUSPICION. NONETHELESS THE CASE OF THE LD. COUNSEL IS THAT ALL THE BILLS ARE IN POSSESSION OF THE ASSESSEE WHICH CAN BE PRODUCED BEFORE THE AO AT ANY POINT OF TIME. IN VIEW THEREOF WE RESTORE THE LIMITED ISSUE OF VERIFI CATION OF PURCHASES FROM THE AFORESAID PARTIES TO THE FILE OF THE AO AND DEC IDE WHETHER ANY PURCHASE FROM THESE PARTIES IS NOT GENUINE. IF IT IS F OUND SO HE MAY MAKE DISALLOWANCE ONLY IN RESPECT OF PURCHASES WHICH A RE FOUND TO BE NON- GENUINE. 10.4 BEFORE PARTING WE MAY ALSO MENTION THAT ALTHOUGH THE AUDITORS HAVE MADE A NUMBER OF NOTES TO THE ACCOUNTS TH E CASE OF THE LD. COUNSEL IS THAT NONE OF THE NOTES HAS ANY REFLECTION ON AUTHENTICITY OF BOOKS OR THE SYSTEM OF ACCOUNTING. THIS SUBMISSION HAS N OT BEEN CONTROVERTED BY ITA NO. 3310(DEL)/2011& C.O.NO.288(DEL)/2011 27 THE LD. DR IN ANY MANNER. THEREFORE WE ARE OF THE VIEW THAT NO ADVERSE CONCLUSION CAN BE DRAWN FROM THESE NOTES. 11. IN THE RESULT THE APPEAL IS TREATED AS PA RTLY ALLOWED AS DISCUSSED ABOVE AND THE CROSS OBJECTION IS DISMISSED. SD/- SD/- ( C.L. SETHI ) ( K.G. B ANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY FORWARDED TO:- 1. M/S ITALIAN THAI DEVELOPMENT PUBLIC COMPANY LIMITED 301-302 3 RD FLOOR SAGAR TOWER DISTRICT CENTRE JANAKPURI NEW DELHI-58. 2. ASSTT. DIRECTOR OF INCOME-TAX CIRCLE 1(2) (INTL. TAX.) NEW DELHI. 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. ASSISTANT REGISTRAR.