The ACIT(OSD)Circle-9,, Ahmedabad v. Shri Vineet C.Deorai, Ahmedabad

ITA 60/AHD/2010 | 2006-2007
Pronouncement Date: 11-11-2011 | Result: Dismissed

Appeal Details

RSA Number 6020514 RSA 2010
Assessee PAN AAPPD7209R
Bench Ahmedabad
Appeal Number ITA 60/AHD/2010
Duration Of Justice 1 year(s) 10 month(s) 4 day(s)
Appellant The ACIT(OSD)Circle-9,, Ahmedabad
Respondent Shri Vineet C.Deorai, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 11-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 11-11-2011
Assessment Year 2006-2007
Appeal Filed On 06-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD .!' !' #$ BEFORE SHRI MUKUL KUMAR SHRAWAT JUDICIAL MEMBER AND SHRI A MOHON ALANKAMONY ACCOUNTANT MEMBER . / ITA NO.60/AHD/2010 ' % &% / ASSESSMENT YEAR:- 2006-07 ASSTT. CIT(OSD) CIRCLE-9 AHMEDABAD ' ' ' ' / V/S . SHRI VINEET C DEORARI PROP. OF M/S. QUALITY CONSTRUCTION 29-A CIRCLE- 8 3 RD FLOOR ABOVE PAKWAN- II JUDGES BUNGALOWS ROAD BODAKDEV AHMEDABAD PAN NO.AAPPD7209R ()/ APPELLANT .. *+()/ RESPONDENT () - # / BY APPELLANT SHRI. B.L. YADAV DR *+() - # / BY RESPONDENT SHRI PRAMOD KEDIA AR '. $ / DATE OF HEARING 01/11/2011 /!& $ / DATE OF PRONOUNCEMENT 11/11/2011 #0 #0 #0 #0 / // / O R D E R .!' !' #$ /PER A.MOHAN ALANKAMONY ACCOUNTANT MEMBER:- THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY T HE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV AHMEDABAD IN APPEAL NO. CIT(A) XV/DCIT(OSD)CIR.9./342/08-09 DATED 30-10-2009 FOR ASSESSMENT YEAR 2006-07. ITA NO.60/AHD/2010 A.Y. 2006-07 ACIT (OSD) CIR-9 ABD V. SH. VINEET C DEORARI PAGE 2 2. THE REVENUE HAS RAISED THREE GROUNDS IN ITS APPE AL WHEREIN GROUND NO.2 AND 3 ARE GENERAL IN NATURE AND DO NOT SURVIVI NG FOR ADJUDICATION. GROUND NO.1 IS REPRODUCED HEREINBELOW:- 1) THE LD. COMMISSIONER OF INCOME-TAX(A)-XV AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1299662/- MADE ON ACCOUNT OF NET PROFIT ESTIMATION @ 5% BY REJECTING BOOKS OF ACCOUNTS U/S.145. 3. THE ASSESSEE IS AN INDIVIDUAL RESIDENT ENGAGED I N THE BUSINESS AS CONSTRUCTION CONTRACTOR FILED HIS RETURN OF INCOME ON 30-12-2006 DECLARING A TOTAL INCOME OF RS.27 51 128/-. THEREAFTER THE ASSE SSEE FILED REVISED RETURN ON 20-02-2007 DECLARING THE SAME AMOUNT AS HIS INCOME. INITIALLY THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME-TAX ACT 1961 (H EREINAFTER REFERRED AS THE ACT) ON 29-03-2008. THEREAFTER A CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 2 9-12-2008 BY MAKING AN ADDITION OF RS.12 99 652/- ON THE BASIS OF ESTIMATE D NET PROFIT. 4. THE LD. ASSESSING OFFICER AFTER VERIFYING THE PR OFIT AND LOSS ACCOUNT OF THE ASSESSEE WAS OF THE VIEW THAT NET PROFIT RATIO OF THE ASSESSEE WHICH WORKED OUT TO 3.34% WAS ON THE LOWER SIDE. FURTHER THE LD. AO NOTICED THAT IN THE STATUTORY AUDIT REPORT U/S.44AB OF THE ACT THE AUDITOR HAD QUALIFIED STATING THAT THE ASSESSEE HAD NOT PRODUCED QUANTITATIVE DET AILS AND THEREFORE THE SAME COULD NOT BE ANNEXED TO FORM NO.3CD OF THE AUD IT REPORT AS REQUIRED UNDER THE ACT. CITING THE ABOVE TWO REASONS LD. AO REJECTED THE BOOKS OF ACCOUNTS WITH A FINDING THAT THE ASSESSEE HAS FAILE D TO COMPLY WITH THE REQUIREMENTS OF SECTION 145 OF THE ACT. THEREAFTER THE LD. AO ESTIMATED THE INCOME OF ASSESSEE WITH THE FOLLOWING OBSERVATIONS: - 2.9 IN VIEW OF ALL THESE FACTS AND KEEPING IN VIEW THE LEGISLATIVE EXPECTATION FROM AN HONEST BUSINESSMAN AND AT THE S AME TIME PRINCIPLES OF NATURAL JUSTICE IN FAVOUR OF THE ASSE SSEE. I HOLD THAT THE NET PROFIT OF THE ASSESSEE SHOULD NOT BE LESS THAN 5%. THIS IS PARTICULARLY SO SINCE THE ASSESSEE IS NOT MAINTAINING ANY QUANT ITATIVE DETAILS THE NET PROFIT DECLARED BY THE ASSESSEE CANNOT BE VERIF IED. THEREFORE LOOKING ALL ASPECTS OF THE CASE I ESTIMATE THE NET PROFIT OF THE ASSESSEE @ 5% OF ITS GROSS RECEIPT I.E. RS.7 84 83 672/- WH ICH WORKS OUT TO ITA NO.60/AHD/2010 A.Y. 2006-07 ACIT (OSD) CIR-9 ABD V. SH. VINEET C DEORARI PAGE 3 RS.39 24 183/-. HENCE AFTER REDUCING THE NET PROFIT SHOWN BY THE ASSESSEE IN ITS RETURN OF RS.26 24 521/- FROM NET P ROFIT ESTIMATED @ 5% AS ABOVE AT RS.39 24 183/- THE DIFFERENCE OF NET P ROFIT OF RS.12 99 662/- IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 5. THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A PPEALS) AND LD. CIT(A) AFTER GOING THROUGH THE ISSUES IN DETAILS D ELETED THE ADDITION MADE BY LD. ASSESSING OFFICER. THE RELEVANT PARA OF THE LD. CIT(A)S ORDER IS REPRODUCED HEREINBELOW:- 7. AFTER GOING THROUGH RIVAL SUBMISSIONS IT IS SEE N THAT THE AO HAS REPRODUCED SELECTIVE PORTIONS OF THE APPELLANTS RE PLY AND HA SNOT EVEN MENTIONED ABOUT THE QUANTITATIVE DETAILS FURNISHED. EVEN FOR REJECTING BOOKS OF ACCOUNTS HE HAS MENTIONED THE REASON TO BE NON-MAINTENANCE OF STOCK REGISTER WITHOUT ELABORATING ANYTHING ELSE . CASH PAYMENTS TO LABOURERS WITHOUT POINTING OUT ANY SPECIFIC VOUCHER S FOUND DEFECTIVE OR UNVERIFIED CANNOT BE MADE THE BASIS FOR REJECTION O F BOOKS OF ACCOUNTS. SIMILARLY THE TOTAL GROSS RECEIPTS OF THE APPELLANT EXCEED 7 CRORE THEREFORE THE NP RATE PRESCRIBED IN SECTION 40AD IS NOT APPLICABLE IN THE CASE OF THE APPELLANT BECAUSE IT IS FOR THE CASES W HERE TOTAL GROSS RECEIPTS DO NOT EXCEED RS.40 LACS. LAST BUT NOT THE LEAST CIT(A)-II SURATS ORDER DATED 20.4.2005 IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE APPLICATION OF NP RATE OF 5% WAS UPHELD PRI MARILY BECAUSE OF THE NON-MAINTENANCE AND NON-FURNISHING OF QUANTITAT IVE DETAILS OF THE MATERIAL CONSUMED TO THE AO. RELEVANT PORTION OF CI T(A)-II SURATS ORDER IS QUOTED BELOW:- THE DETAILS SOUGHT BY THE AO WOULD NECESSARILY HAV E TO INCLUDE A TALLY OF THE PURCHASES THE CONSUMPTION AND THE FIN AL OUTPUT. INSTEAD OF MERELY PRODUCING REQUISITION SLIPS THE TOTAL TALLY SHOULD HAVE BEEN PREPARED AND FURNISHED BY THE ASSESSEE. T HIS WAS NOT DONE. IT WAS NOT FOR THE AO TO TALLY SUCH REQUISITI ON SLIPS AGAINST EACH PURCHASE ESPECIALLY WHEN NO RECORD OF CONSUMP TION WAS MAINTAINED. IF THE REQUISITION SLIPS COULD HAVE BEE N PRESERVED THE ASSESSEE COULD HAVE EASILY PREPARED THE DETAILS FOR CONSUMPTION OF MATERIALS AND COULD HAVE TALLIED THEM WITH PURCH ASES AND THE FINAL PRODUCT(S). IN SUCH A SITUATION IT IS ABSOLU TELY CLEAR THAT IT WAS NOT POSSIBLE FOR THE AO TO VERIFY EITHER THE WI P OR THE INCOME DISCLOSED BY THE ASSESSEE. 8. IN VIEW OF THE AFOREMENTIONED FACTUAL POSITION I AM UNABLE TO UPHOLD REJECTION OF BOOKS OF ACCOUNTS AND APPLICATION OF N P RATE OF 5%. THE AO IS DIRECTED TO DELETE THE ADDITION. ITA NO.60/AHD/2010 A.Y. 2006-07 ACIT (OSD) CIR-9 ABD V. SH. VINEET C DEORARI PAGE 4 6. LD. AR SUBMITTED BEFORE US THAT THE ASSESSEE HAD MAINTAINED PROPER BOOKS OF ACCOUNTS THOUGH HE HAS NOT MAINTAINED STO CK REGISTER FOR CONSUMPTION OF MATERIALS. LD. AR FURTHER SUBMITTED THAT ALL THE RAW MATERIALS WERE CONSUMED FOR THE CONSTRUCTION WORK DURING THE PREVIOUS YEAR AND MOST OF THE CONTRACT RECEIPTS WAS FROM RELIANCE RURAL DE VELOPMENT TRUST UNDER THE GOKUL GARM YOJNA OF THE GOVERNMENT OF GUJARAT. THES E CONTRACT WORKS DID NOT HAVE MUCH PROFIT MARGIN AS COULD BE EXPECTED FR OM ANY OTHER CONTRACTS FROM PRIVATE PARTIES. THE ASSESSEE FURTHER SUBMITTE D THAT THE HE HAD MAINTAINED PROPER ACCOUNTS FOR ALL THE MATERIALS PU RCHASED AND THE SAME WAS CONSUMED BY HIM. ALL THE TRANSACTIONS WAS ACCOUNTED AND DOCUMENTED AND WERE DULY AUDITED BY CHARTERED ACCOUNTANT U/S.44AB OF THE ACT AND FORM NO.3CB AND 3CD WERE ALSO FILED ALONG WITH RETURN OF INCOME. LD. AR HUMBLY PRAYED THAT KEEPING IN VIEW OF THE NATURE OF THE CO NSTRUCTION WORK RENDERED BY THE ASSESSEE THE ADDITION MADE BY AO MAY BE DELETE D. 7. LD. DR STRONGLY OPPOSED TO THE SUBMISSION OF LD. AR AND ARGUED THAT ASSESSEE HAD WHOPPING TURNOVER OF RS.7 84 83 677/- WHEREIN HE HAS DECLARED A MEAGER NET PROFIT OF RS.26 24 521/- WHICH IS TOO LOW AND UNBELIEVABLE. LD. DR RELIED UPON THE ORDER OF LD. AO AND PRAYED THAT ORDER OF AO MAY BE SUSTAINED. 8. WE HAVE HEARD THE RIVAL SUBMISSION AND CAREFULLY PERUSED THE MATERIAL FURNISHED BEFORE US. FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE ASSESSEE HAD MAINTAINED REQUISITE BOOKS OF ACCOUNTS AND FURTHER OBTAINED AUDITORS CERTIFICATE U/S.44AB OF THE ACT ALONG WIT H THE REQUISITES FORMS 3CB AND 3CD. THE ONLY FLAW IN THE ACCOUNTS IS THAT THE ASSESSEE HAD NOT MAINTAINED STOCK RECORDS. HOWEVER ASSESSEE CLAIMED THAT THE ENTIRE MATERIALS PURCHASED DURING THE PREVIOUS YEAR HAD BE EN CONSUMED. IT IS ALSO NOT DISPUTED THAT THE MAIN CONTRACT WORK RENDERED B Y THE ASSESSEE IS WITH RESPECT TO GOVERNMENT PROJECTS WHEREIN HIGH MARGIN OF PROFIT CANNOT BE EXPECTED AS IN THE CASE OF PRIVATE CONTRACTS. LD. C IT(A) HAS ALSO REJECTED THE ITA NO.60/AHD/2010 A.Y. 2006-07 ACIT (OSD) CIR-9 ABD V. SH. VINEET C DEORARI PAGE 5 ORDER OF LD. ASSESSING OFFICER STATING THAT THE REJ ECTION OF BOOKS OF ACCOUNTS ON THE BASIS OF NON-MAINTENANCE OF STOCK REGISTER W ILL NOT BE APPROPRIATE. FROM THE FACTS OF THIS CASE IT WAS ALSO OBSERVED B Y THE LD. CIT(A) THAT CASH PAYMENTS MADE TO LABOURERS CANNOT BE DISPUTED WITHO UT POINTING OUT ANY SPECIFIC VOUCHER TO BE DEFECTIVE OR UNVERIFIABLE. T HEREFORE CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE O F THE OPINION THAT THE ORDER OF LD. CIT(A) HAS NOT SUFFERED FROM ANY DEFIC IENCY. THEREFORE WE CONFORM THE ORDER OF LD. CIT(A). 9. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. 1 #0 /!& 2'3 11 / 11 /2011 ! $# 7 8. THIS ORDER PRONOUNCED IN OPEN COURT ON 11/11/ 2011 . SD/- SD/- ( ) ( .!' !' ) ( ) ( #$ ) (MUKUL KUMAR SHAWART) A. MOHAN ALANKAMONY (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) 2'3- /11/2011 DKP* #0 #0 #0 #0 *: *: *: *: ;#:& ;#:& ;#:& ;#:& / COPY OF ORDER FORWARDED TO:- 1. () / APPELLANT 2. *+() / RESPONDENT 3. = / CONCERNED CIT 4. =- / CIT (A) 5. :@8 *' / DR ITAT AHMEDABAD 6. 8% B1 / GUARD FILE. BY ORDER/ #0 # /TRUE COPY/ C/ D ITA NO.60/AHD/2010 A.Y. 2006-07 ACIT (OSD) CIR-9 ABD V. SH. VINEET C DEORARI PAGE 6