DEEP JYOTI COMPANY, Jaipur v. DCIT, Jaipur

ITA 44/JPR/2015 | 2007-2008
Pronouncement Date: 31-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 4423114 RSA 2015
Assessee PAN AAAFD7795H
Bench Jaipur
Appeal Number ITA 44/JPR/2015
Duration Of Justice 1 year(s) 9 month(s) 15 day(s)
Appellant DEEP JYOTI COMPANY, Jaipur
Respondent DCIT, Jaipur
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 31-10-2016
Assessment Year 2007-2008
Appeal Filed On 15-01-2015
Judgment Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCHES (SMC) JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 44/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 M/S. DEEP JYOTI COMPANY B-219 JANTA COLONY JAIPUR CUKE VS. THE DCIT CIRCLE- 5 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAAFD 7795 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI S.L. PODDAR ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY :SHRI R.A. VERMA ADDL CIT-. DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 20/10/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 31 /10/2016 VKNS'K@ ORDER PER BHAGCHAND AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-2 JAIPUR DATED 24-11-2014 FOR THE ASSESSM ENT YEAR 2007-08 RAISING THEREIN FOLLOWING GROUND:- 1. THAT THE LD. CIT(A) JAIPUR HAD NOT GIVEN ANY RELIEF ON NET PROFIT ON CONTRACT RECEIPT OF THE ASS ESSEE FIRM OF RS. 52 89 163/- TAKEN BY THE AO AGAINST THE ASSESSE E FIRM SHOWN OF RS. 33 34 022/- I.E. HE MADE ADDITION OF R S. 19 55 141/-. ITA NO. 44/JP/2015 M/S. DEEP JYOTI COMPANY VS. DCIT CIRCLE- 5 JAIPUR . 2 2.1 THE BRIEF FACTS OF THE CASE AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS REPRODUCED AS UNDER:- DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN THE GROSS CONTRACT RECEIPTS OF RS. 6 27 26 19 7/- GIVING NET PROFIT OF RS. 32 89 673/- AND NET PROFIT RATE OF 5. 24% AS AGAINST THE CONTRACT RECEIPTS OF RS. 5 74 36 437/- GIVING NET P ROFIT OF RS. 20 16 842/- AND NET PROFIT RATE OF 3.51% IN THE IM MEDIATELY PRECEDING YEAR. DURING THE ASSESSMENT PROCEEDINGS IT WAS FOUND THA T THE ASSESSEE HAS CLAIMED HUGE EXPENSE UNDER THE HEA D LABOUR EXPENSES DIESEL EXPENSES AND OTHER DIRECT EXPENSES IN THIS YEAR ALSO. ON VERIFICATION OF DETAILS FILED BY THE ASSES SEE IT WAS NOTICED THAT THE ASSESSEE WAS NOT HAVING PROPER VOUCHER/BIL L ETC. FOR LABOUR & WAGES EXPENSES EXPENSES INCURRED TOWARDS DIESEL EXPENSE AND OTHER DIRECT EXPENSES ETC. THE ASSESSEE MADE PAYMEN TS THROUGH KACHHA BILLS OR SELF MADE VOUCHERS. MOST OF THESE P AYMENTS WERE MADE IN CASH WHICH IS ALSO NOT OPEN FOR VERIFICATI ON. THEREFORE A.R. OF THE ASSESSEE WAS ASKED TO SHOW CAUSED WHY T HE BOOKS OF ACCOUNT MAY NOT BE REJECTED AND PROVISIONS OF SECTI ON U/S 145(3) OF THE I.T. ACT 1961 MAY NOT BE APPLIED. IN RESPONSE THE A VIDE HIS LETTER DATED 10-01-2013 HAS STATED THAT THE ASSESSE E MAINTAINED PROPER BOOKS OF ACCOUNT AND VOUCHERS EVEN THE MAJOR EXPENSES PAID BY THE FIRM THOUGH ACCOUNT PAYEE CHEQUE HENCE THE PROVISIONS OF SECTION 145(3) IS NOT APPLICABLE. THE CONTENTION OF THE ASSESSEE CONSIDERED CAREFULLY AND FOUND NOT CON VINCING FOR THE REASONTHAT THE ASSESSEE IS NOT MAINTAINING SITEWISE DETAILS OF STOCK REGISTER OF RAW MATERIAL PURCHASED. MOSTLY EXPENSES ARE PAID IN CASH ON SELF MADE VOUCHERS. SO IN ABSENCE OF ANY VE RIFICATION THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE THEREFORE THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REJECTED BY IN VOKING THE PROVISION OF SECTION 145(3) OF THE I.T. ACT 1961. IN VIEW OF THE FACTS AS DISCUSSED ABOVE AND CIRCUMS TANCES OF THE CASE PROVISIONS OF SECTION 145(3) OF THE I.T. A CT 1961 HAS BEEN APPLIED AND BOOKS OF ACCOUNTS ARE REJECTED. THE NET PROFIT RATE OF ITA NO. 44/JP/2015 M/S. DEEP JYOTI COMPANY VS. DCIT CIRCLE- 5 JAIPUR . 3 8% HAS BEEN APPLIED ON GROSS CONTRACT RECEIPTS TAKE N AT RS. 6 61 14 548/- (RS. 6 27 26 197+33 88 351/-(AS DISCU SSED IN PARA 2 OF ASSESSMENT ORDER). THUS THE NET PROFIT HAS BEEN WORKED OUT AT RS. 52 89 164/- (EXCLUDING INTEREST INCOME ON FDRS AND INCOME TAX REFUND ETC.) AGAINST THE NET PROFIT OF RS. 32 8 9 673/- DECLARED BY THE ASSESSEE. RELIANCE IS PLACED ON THE HON'BLE SUPREME COURT JU DGEMENT IN THE CASE OF CIT VS. BRITISH PAINTS INDIA LTD. 18 8 ITR 4 WHICH READS AS FOLLOWS:- THE QUESTION TO BE DETERMINED BY THE ASSESSING OFFICER IN EXERCISE OF HIS POWER U/S 145 IS WHETHER OR NOT INCOME CAN PROPERLY BE DEDUCTED FROM THE ACCOUNTS MAINTAINED BY THE ASSESSEE EVEN IF THE ACCOUNTS AR E CORRECT AND COMPLETE TO THE SATISFACTION OF THE OFFICER AND INCOME HAS BEEN COMPUTED IN ACCORDANCE WITH THE METHOD REG ULARLY EMPLOYED BY THE EMPLOYER. IT IS NOT ONLY THE RIGHT BUT THE DUTY OF THE AO TO CONSIDER WHETHER OR NOT THE BOOKS DISCLOSE THE TRUE STATEMENT OF ACCOUNTS AND CORRECT INCOME C AN BE DEDUCTED THEREFROM. IT IS INCORRECT TO SAY THAT THA T THE OFFICER IS BOUND TO ACCEPT THE SYSTEM OF ACCOUNTING REGULAR LY EMPLOYED BY THE ASSESSEE THE CORRECTNESS OF WHICH HAS NOT BEEN QUESTIONED IN THE PAST. THERE IS NO ESTOPPELS IN THESE MATTERS AND THE OFFICER IS NOT BOUND BY THE METHOD FOLLOWED IN THE EARLIER YEARS. 2.2 IN FIRST APPEAL THE LD. CIT(A) HAS CONFIRMED T HE ACTION OF THE AO AS TO REJECTION OF BOOKS ACCOUNTS U/S 145(3)OF THE ACT AS WELL AS THE NET PROFIT RATE AT 8% BEFORE DEPRECATION REMUNERATION AND INTEREST TO THE PARTNERS ON THE RECEIPTS AS DETERMINED IN OTHER GRO UNDS OF APPEAL. THE OBSERVATION OF THE LD. CIT(A) AT PARA 4.3 OF HIS OR DER IS REPRODUCED AS UNDER:- ITA NO. 44/JP/2015 M/S. DEEP JYOTI COMPANY VS. DCIT CIRCLE- 5 JAIPUR . 4 4.3 I HAVE PERUSED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS BY POINTING OUT SPECIFIC DEFE CTS IN ITS BOOKS OF ACCOUNT VIZ- PAYMENTS MADE FOR LABOUR MATERIAL & DIESEL ARE IN CASHON SELF MADE VOUCHERS ASSESSEE NOT MAINTAINING SITEWISE DETAILS OF STOCK OF RAW MATERIAL. THE APPELLANT HAS CONTESTED THAT PURCHASES OF MATERIAL ARE PRIMARILY BY CHEQUE AND H AS GIVEN COPY OF ACCOUNTS TO SUBSTANTIATE HIS CONTENTION. HOWEVER THE APPELLANT HAS NOT BEEN ABLE TO FURNISH A SATISFACTORY EXPLANA TION WITH RESPECT TO OTHER DEFECTS POINTED OUT BY THE ASSESSING OFFIC ER. THEREFORE THE ACTION OF THE ASSESSING OFFICER IN REJECTING TH E BOOKS OF ACCOUNT U/S 145(3) IS UPHELD. AS REGARDS ESTIMATION OF NET PROFIT RATE OF 8% MADE BY THE ASSESSING OFFICER THE APPEL LANT HAS STATED THAT ITS GROSS PROFIT RATE IS PROGRESSIVE. I HAVE E XAMINED THE ABOVE CONTENTION AND FIND IN THE PRECEDING YEARS SCRUTIN Y U/S 143(3) HAD NOT BEEN CONDUCTED. I FIND THAT THE ESTIMATE OF NET PROFIT (BEFORE DEPRECIATION REMUNERATION AND INTEREST TO PARTNERS) MADE BY THE ASSESSING OFFICER AT 8% IS FAIR AND REASONABLE. THE REFORE THE TRADING ADDITION IS TO BE DETERMINED BY APPLYING A NET PROFIT RATE OF 8% BEFORE DEPRECIATION REMUNERATION AND INTEREST T O PARTNERS ON THE RECEIPTS AS DETERMINED IN OTHER GROUNDS OF APPE AL. 2.3 DURING THE COURSE OF HEARING THE LD. AR OF THE ASSESSEE PRAYED THAT THE ASSESSEE HAD SHOWN A GROSS CONTRACT RECEIPTS OF RS. 6 27 26 197/- AND AGAINST THIS THE NET PROFIT IS SHOWN AT RS. 33 34 022/- GIVING THE NET PROFIT RATE OF 5.24%. THE LD. AR FURTHER SUBMITTED THAT TH E AO REJECTED THE RESULTS DECLARED FOR THE REASON THAT THE ASSESSEE WAS NOT MAINTAINING SITE- WISE DETAILS OF STOCK REGISTER OF RAW MATERIAL PURC HASED AND THAT MOST EXPENSES WERE PAID IN CASH ON SELF MADE VOUCHERS. T HE LD. AR OF THE ASSESSEE SUBMITTED THAT AO INVOKED THE PROVISIONS O F SECTION 145(3) OF ITA NO. 44/JP/2015 M/S. DEEP JYOTI COMPANY VS. DCIT CIRCLE- 5 JAIPUR . 5 THE ACT AND APPLIED A NET PROFIT RATE OF 8%. THE LD . AR OF THE ASSESSEE SUBMITTED THE CHART OF NET PROFIT GROSS RECEIPT AN D NET PROFIT RATE OF THE ASSESSEE FOR THE FOLLOWING ASSESSMENT YEARS. A.Y. NET PROFIT GROSS RECEIPT NET PROFIT RATE (%) 2007-08 3334022 62726197 5.32 2006-07 2110662 57436437 3.37 2005-06 1162413 23566057 4.93 THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT I T IS EVIDENT FROM THE ABOVE CHART THAT THE ASSESSEE HAD BEEN SHOWING CONS IDERABLE INCREASE IN NET PROFIT RATE. THUS THE NET PROFIT RATE DECLARED DO NOT CALL FOR ANY ADDITION / ALTERATION EVEN IN THE EVENT THAT THE BO OKS OF ACCOUNT ARE REJECTED. THE LD. AR OF THE ASSESSEE FURTHER THAT I TAT JAIPUR BENCH HAD ACCEPTED THE NET PROFIT RATE RANGING FROM 1.4% TO 5 .4% IN FOLLOWING CASES. S.N. ITA NO. NAME OF PARTY 1. 457/JP/2004 BHAGAT CONTRACTOR KARAULI 2. 400/JU/2005 PREM KUMAR 3. 1452/JP/1993 MAHENDRA KUMAR SETHI 4. 217/JP/2000 DHARAMCHAND JAIN THE LD. AR OF THE CONCLUSIVELY SUBMITTED THAT THE N ET PROFIT RATE DECLARED BY THE ASSESSEE IS WITHIN THE ACCEPTED RANGE AND EX ORBITANT ESTIMATION AT 8% NET PROFIT RATE IS UNWARRANTED AND UNCALLED FOR. 2.4 THE LD. DR RELIED ON THE ORDERS OF THE LOWER AU THORITIES. ITA NO. 44/JP/2015 M/S. DEEP JYOTI COMPANY VS. DCIT CIRCLE- 5 JAIPUR . 6 2.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS OBSERVED FROM THE RECORD THAT THE ASSESSEE DERIVES INCOME FROM CIVIL CONTRACTOR. IT IS NOTICED THAT THE LOWER AUTHORITIES HAVE APPLIED THE NET PROFIT RATE OF 8% BY REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. IT IS ALSO NOTICED FROM TH E SUBMISSIONS OF THE LD. AR OF THE ASSESSEE THAT THE NET PROFIT RATE OF THE ASSESSEE IS AT 5.32% DURING THE YEAR AND THE LOWER AUTHORITIES HAVE APPL IED THE NET PROFIT RATE AT 8% IN HIS ORDER. THE CHART OF THE ASSESSEE DEPICTIN G NET PROFIT RATE FOR THE LAST YEAR THREE YEARS IS AS UNDER:- A.Y. NET PROFIT RATE GROSS RECEIPT NET PROFIT RATE (%) 2007-08 3334022 62726197 5.32 2006-07 2110662 57436437 3.37 2005-06 1162413 23566057 4.93 ALTHOUGH THE NET PROFIT RATE DECLARED BY THE ASSESS EE FOR THE YEAR UNDER CONSIDERATION IS HIGHER THAN EARLIER YEARS YET THE AO NOTICED THAT THE ASSESSEE WAS NOT HAVING PROPER VOUCHERS AND BILLS F OR LABOUR WAGES DIESEL EXPENSES AND OTHER DIRECT EXPENSES. THE PAYM ENTS ARE MADE IN CASH THROUGH KACHHA BILLS AND SELF MADE VOUCHERS. THESE EXPENSES ARE NOT SUBJECT TO OPEN VERIFICATION. THEREFORE IN MY CONS IDERED VIEW SOME ADDITION IS NECESSARY FOR WANT OF VERIFICATION OF T HESE CASH EXPENSES ITA NO. 44/JP/2015 M/S. DEEP JYOTI COMPANY VS. DCIT CIRCLE- 5 JAIPUR . 7 DEBITED AND NOT SUPPORTED BY PROPER BILLS IN THE BO OKS OF ACCOUNT. THEREFORE FOR THESE REASONS I UPHOLD THE ADDITION TO THE EXTENT OF RS. 2.00 LACS TO COVER UP SUCH LAPSES ON THE PART OF TH E ASSESSEE. THUS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 3.0 IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 /10/2 016 SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31 /10/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. DEEP JYOTI COMPANY JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT CIRCLE- 5 JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR ITAT JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 44/JP/2015) VKNS'KKUQLKJ@ BY ORDER LGK;D IATHDKJ @ ASSISTANT. REGISTRAR