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Income Tax Appellate Tribunal, JODHPUR BENCH,
Before: SHRI SANDEEP GOSAIN & SHRI MANOJ KUMAR AGGARWAL
IN THE INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH, JODHPUR BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER ITA No. 111 & 112/JODH/2020 (Assessment Years 2013-14 & 2014-15) Shri Subhash Chand Jain, Vs. Assistant Commissioner 4th, Central School Scheme, of Income Tax, Jodhpur. Circle-1, Jodhpur. PAN No. AAUPJ 3992 J Assessee by Shri Ajay Moondra Revenue by Shri K.C. Badhok, CIT-DR Date of Hearing 03.11.2020 Date of Pronouncement 29/01/2021
O R D E R PER: BENCH These two appeals filed by the assessee against the separate orders of the ld. CIT(A)-1, Jodhpur dated 23/10/2018 for the AY. 2013-14 & 2014- 15 respectively.
The hearing of the appeals was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.
Since common issues are involved in both these appeals, therefore, we proceed to dispose them off by this consolidated order for the sake of convenience.
2 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT 4. Firstly, we take ITA No. 111/Jodh/2020 for the A.Y. 2013-14, in this appeal, there is delay of 487 days in filing the present appeal for which the assessee has filed an application for condonation of delay alongwith affidavit. In the condonation application, the assessee has stated as under:
“That I am the appellant in the present case, and that I am filling the above mentioned before your Honor.
That the above appeal is against the order U/s 250 passed by the Hon'ble C1T (A), Jodhpur vide order dated 23.10.2018, received on 03.01.2019.
That the appeal ought to be filled till 03.06.2020, Our consul has advise to file the appeal before Hon'ble Tribunal against the order passed by Hon'ble CI (A), but as my wife is suffering from brain tumor and was continue serious, hence I was not in full state of mind to understand the consequence and to file the appeal on time, hence I have filed all the papers in file and could not file the appeal on time. Now, I come to know about the order only when I received the recovery notice, under such circumstances I could not file the appeal on or before the due date.
That on perusal of the contents of appeal, its grounds and the documents on record it is evident that the applicant has a plausible case in his favour and the balance of convenience is also in favour of the applicant. The appeal is likely to succeed.
That however, there has been delay in filing the appeal due to the reasons stated above. But for these good and sufficient reasons, and
3 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT there is no harm or prejudice will be caused to the respondent if the delay in filing the appeal is condoned in the interest of justice.
It is, therefore, most humbly prayed that the present application may kindly be allowed and the delay in filing the OA may kindly be condoned in the interest of justice. Such other order may also be passed as deemed fit and proper in the facts and circumstances of the case.”
On the basis of above, the assessee prayed to condone the delay of 74 days in filing the present appeal.
On the other hand, the ld DR has vehemently opposed the prayer for condonation of delay and submitted that the averments made in the application for condonation of delay as well as in the affidavits are not factually correct. The ld DR has further contended that adopting a liberal view in condoning the delay is one of the guiding principles but liberal approach cannot be equated with a license to file the appeals at will- disregarding the time limits fixed by the statute. The sufficient cause of delay must establish that because of some event or circumstances arising before limitation expired prevented the assessee to file the appeal in time. Inaction and negligence of the assessee are no reason which can be considered as sufficient cause for filing belated appeals.
4 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT 6. We have considered the rival submissions as well as relevant material on record. As regards the sufficiency of cause for filing the appeals belatedly, it is settled principles of law that the Courts have to take liberal approach while interpreting the expression ‘sufficient cause’ for condonation of delay. In case of Collector, Land Acquisition Vs. Mst. Katiji (1987) 167 ITR 471, the Hon’ble Supreme Court has laid down the principle that the power to condone the delay provided under the statute is to enable the Courts to do substantial justice to the parties by disposing of the matter on merits, therefore, while considering the matters for condonation of delay, the law must be applied in a meaningful manner which subserves ends of justice and technical considerations should not come on the way of cause of substantial justice. There is no quarrel that the explanation and reasons explained for delay must be bonafide and not merely a device to cover an ulterior purpose such as laches on the part of the litigant or an attempt to save limitation in the underhand way. If the party who is seeking condonation of delay has not acted in malafide manner and reasons explained are factually correct then the Court should be liberal in construing the sufficient cause and lean in favour of such party. A justice-oriented approach has to be taken while deciding the matter for condonation of delay. However, this does not mean that a litigant gets free right to approach the court at its will. In its condonation application, the assessee
5 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT has stated that due to brain tumor of wife of assessee, he was not in full state of mind and due to which he could not file the appeal within the prescribed time limit. The assessee has also filed an affidavit affirming the facts mentioned in the condonation application. In view of the above facts and circumstances and considering the fact that there is no laches on the part of assessee. Due to severe illness of wife of the assessee, there was delay in filing the present appeal. The Hon’ble Supreme Court has laid down the principle that the power to condone the delay provided under the statute is to enable the Courts to do substantial justice to the parties by disposing of the matter on merits, therefore, while considering the matters for condonation of delay, the law must be applied in a meaningful manner which subserves ends of justice and technical considerations should not come on the way of cause of substantial justice. Considering the totality of facts and circumstances, we condone the delay of 487 days in filing the present appeal and admit the same for hearing.
In this appeal, the assessee has raised the following grounds of appeal:
“1. That under the facts and circumstances of the case, the ld CIT(A) has erred in sustaining the NP rate of 10.16% subject to Depreciation and Interest to third parties on total work receipt as against the NP rate of 12.50% applied by the AO subject to depreciation and interest to third party on gross work.
6 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT 2. That under the facts and circumstances of the case, the ld CIT(A) has erred in sustaining in calculating the LTCG on sale of land by adopting wrong fair market value of the property. 3. That under the facts and circumstances of the case, the ld CIT(A) has erred in sustaining in disallowance of interest of Rs. 36,111.00 U/s 40(a)(ia) on account of non deduction of TDS. Though there is no separate addition was made on this account.” The 1st ground raised by the assessee in his appeal is against applying 8. NP rate of 10.16% subject to depreciation as against the 12.50% subject to depreciation and interest applied by the AO against as declared by the assessee at 3.07% after depreciation and interest. Briefly stated the facts of the case are that the assessee had shown gross receipt of Rs. 7,47,91,674.00 with gross profit rate of 14.49% and Net Profit rate of 3.51% as against the GP rate of 11.63% and NP rate of 3.07% for the immediately preceding year. The AO observed that the books of accounts were maintained in the same manner as in the immediately preceding year. He noted the reasons, at 5 and 6 of the assessment order, for rejection of the books results. The AO rejected the books of account and applied profit rate of 12.50% subject to depreciation and interest to third parties. The Ld CIT (A) has sustained the rejection of books of accounts and also directed to apply NP rate of 10.16% subject to depreciation.
We have heard both the sides and perused the relevant material on record. The facts noted by the AO, in our considered opinion are sufficient
7 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT enough to justify the rejection of the books of account. We, therefore, hold that the Ld CIT (A) was justified in upholding the application of section 145 (3) of the Income Tax Act, 1961 (in short, the Act). Now we turn to the application of the profit rate. There is no dispute about the fact that the profit rate declared by the assessee in the instant case is better than all the preceding years be it GP or NP rate. The Coordinate Jodhpur Bench of the Tribunal has held in several cases that in the absence of any justifiable reason, the AO should be guided by the profit rate of the immediately preceding year for application in the instant year which the books of account are rejected. The Ld AR of assessee has referred to order of Jodhpur bench of ITAT in assessee’s own case for AY 2003-04 and 2004-05, in which the Bench has held in Para No 7 of the order “since the assessee has decaled profit rate at 11.16% in this year, which is certainly better than 11.03% (the maximum rate that can be applied in the immediately year subject to verification by the AO), we are of the considered opinion that the profit rate to be applied in this year cannot be allowed to exceed the declared rate, which is better than that of the earlier year. By overturning the impugned order on this score we order for the deletion of addition, sustained by ld CIT (A) by ordering the application of the profit rate of 11.50%.”
We have heard both the sides and perused the relevant material on record, the fact of this year are mutatis mutandis similar to that of
8 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT preceding year and AY 2003-04 and 2004-05. We have observed that in the immediate year the profit rate declared is GP rate of 14.49% and NP rate of 3.51% as against the GP rate of 11.63% and NP rate of 3.07% for the immediately preceding year. Since the assessee has declared Gross Profit rate of 14.49% subject to depreciation and interest to third parties and Net Profit rate of 3.51% in this year, which is certainly better than 11.63% subject to depreciation and interest to third parties and 3.07% as declared by assessee himself in just preceding year, we are of the considered opinion that the profit rate cannot be allowed to exceed the declared rate, which better than that of the earlier year, accordingly we order for the deletion of addition, sustained by the ld CIT (A) by the application of the profit rate of 10.16%.
The second ground of the appeal is regarding sustaining the LTCG on sale of Land by adopting wrong fair market value as on 01.04.1981 of the property. Briefly stated the fact of the case is that the assessee has sold property and had declared LTCG of Rs. 5,48,480/- taking fair market value as on 01.04.1981 of Rs. 49,46,000/- on the basis of valuation report obtained from valuer Shri A. P. Saxena. The valuer estimated total value of Rs. 49,46,000/- of property measuring 422 Sq Yards as on 01.04.1981 situate at CB-Narena, Ring Road, Delhi Cant. The AO taken the fair market value of property at Rs. 12,36,000.00 on the basis of the value adopted in
9 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT probate case No 335/85 of District Judge. Accordingly, the AO has computed LTCG at Rs. 3,49,62,580/- taking indexed cost at Rs. 1,05,30,720/- and difference amount of Rs. 3,44,20,800/- was added back to the total income of the assessee. The ld CIT (A) has referred the matter to AO to make a reference to the DVO and submit his report. The AO vide letter dated 04.09.2018 submitted the DVO report along with his comments. The DVO has calculated fair market value as on 01.04.1981 at Rs. 34,25,000/-. Accordingly, the ld CIT (A) has directed to apply FMV at Rs. 34,25,000/- as against the value adopted by AO of Rs. 12,36,000/-
The AR of the assessee submitted that the AO has arbitrary adopted the FMV at Rs. 12,36,000/- without any basis whereas the assessee has taken the FMV at Rs. 49,46,000/- on the basis of expert’s opinion i.e. registered valuers report. The assessee has explained before the AO that estimated value mentioned in probate at Rs. 12,36,000/- as there is no dispute regarding will of late Shri Madan Mohan Jain father of the assessee hence the value mentioned in the probate case is on estimate basis and to reduce the court fees only. The AR further pointed out the discrepancies in DVO report. The DVO has taken the construction area of ten shops and veranda at 250 SQM and valued the cost of construction @ Rs 1000.00 per Sqm, accordingly total Value of Construction comes to Rs. 2,50,000.00, the calculation is at Page No 28 of Paper Book. Actually, total construction is
10 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT 3800 Sq Ft i.e. 353 Sq Mt. Further, the DVO has not mentioned whether he has adopted the land value as commercial property or residential. This is undisputed fact that the said property is commercial property, the property is situated at main commercial area i.e. 100 mtr Ring Road, Narayan, New Delhi, 10 shops are already constructed in year 1981, which itself proved that the said property is commercial property. The DVO has accepted in its valuation report at Point No 6.3 that the property is situated on Main Ring Road, Naryana, Delhi Cantt, New Delhi, accordingly he has calculated the value by taking normal/residential rate than added 50% factors for location/situation and 25% for property having three side roads and use as commercial having 10 shops. The details of the calculation have been mentioned at Page No 26-27 of paper book. The DVO has taken the land value at Rs. 4800.00 Per Sqm than add the adjustment factor 50% for Location/Situation due to property is being situated on 100 Mtr wide Ring Road With 44’0” wide front hence, accordingly added Rs. 2400.00 Per Sqm to the total value of Rs. 4800.00 Per Sqm. Further, the DVO has also add the adjustment factor 25% for property having three side road and in use as commercial having 10 shops Due to separate commercial shops property can be sold in parts, so he has taken the total land value of Rs. 9000.00 per Sqm, the total land value comes to Rs. 31,75,000.00 (352.792 X 9000.00). The total value of the property including land and 10 shops comes to Rs.
11 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT 34,50,000.00 (Rs. 31,75,000.00 + Rs. 2,50,000.00). The AR of the assessee also submitted that the report of the DVO should not be taken as the basis for calculating the cost of acquisition and resultant capital gain, the valuation adopted by the DVO has serious defect. The AR of the assessee has pointed out the various defects such as on a perusal of valuation report, however, the valuation by the DVO has placed too much of emphasis on the assessment or valuation by the schedule rate of Market rates of land notified by Ministry of works and Housing (Land Division GOI) Vide notification no J- 22011/3/80-LD (DOI) dated 21.10.1981. This is neither desirable nor permissible. The reason is that the circle rates adopt uniform rate of land for an entire locality, which inherently disregards peculiar features of a particular property. Even in a particular area, on account of location features and possibilities of commercial use, there can be wide variations in the prices of land. However, circle rates disregard all these factors and adopt a uniform rate for all properties in that particular area. If the circle rate fixed by the stamp valuation authorities was to be adopted in all situations, there was no need of reference to the DVO under Section 50C(2). The Ld. DVO has taken (+)50% as factor of adjustment on account of Location/Situation addition due to property situated on 100 mtr wide Ring Road With 44’0” wide front, he has not even considered the concept of commercial potential and ascertained the FMV based on the land used reported by him.
12 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT Furthermore, while making the comments in Para 6.3 of the report, the Ld. DVO mentioned that the property situated on main 100 Mtr wide Ring Road surrounded by Commercial. This fact shows that in the case of the appellant, while determining the FMV, the concept of probable use in the most advantageous manner has not been considered and also the activities in surroundings have not been taken care. The said property is situated on a road having width of 100 Mtr. It is important to note that while assigning the factor on account of location, the width of the road has been not been considered properly only 50% factor has been given, whereas, in the case of Appellant, on account of width and location the 100% factor adjustment is to be given. It is clear that over all potentiality to use the plot has not been considered. Accordingly, the Property having enough wide roads, situated on corner of the road and having three side road has better potentiality of use. Therefore, the appellant deserves for 100% adjustment on this account instead of 50% allowed by the DVO. If the 100% factor adjustment has been allowed the total value of land comes to Rs. 12000 per Sqm instead of taken Rs. 9000 per Sqm taken by the DVO and Rs. 11000.00 per Sqm taken by the registered valuer. Similarly, the cost of construction has also not been calculated properly by DVO, as actual construction area is 3800 Sq Ft i.e. 353 Sqm, the DVO has taken total construction area is 250 and if we value the actual construction with the value taken by the DVO
13 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT than it should have been Rs. 3,53,000.00 instead to Rs. 2,50,000.00 taken by the DVO.
The AR further stated that looking to the above facts, it is clear that while ascertaining the FMV, the Ld. DVO did either not acted judiciously or made the report in haste without considering the facts properly. Therefore, the report of the DVO deserves to be rejected and the report of a Registered Valuer should be accepted. It was accordingly submitted that the report of the DVO should not be taken as the basis for calculating the cost of acquisition and resultant capital gain. The on the other hand the Ld DR has relied on DVO report and order of ld CIT (A).
The AR of the assessee has also drawn our attention towards the fact that the AO has not referred the matter to DVO, infect in the instant case referred the matter to DVO by the Ld CIT (A) and we have not given the proper opportunity to raised our objection regarding serious defects as discussed in forgoing paras. Further, the DVO has given the basis for adjustments made by him as against the adjustments made by the registered valuer, which was on a very higher side."
On the other hand, the ld CIT-DR has relied on the orders of the authorities below.
14 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT 16. We have heard the rival contentions and pursued the material available on record. In view of the various defect pointed out by the AR most important question arises whether that valuation report so obtained from DVO can be used as reliable piece of evidence or not. Therefore, it needs to be examined whether in the facts and circumstances of the present case, the valuation report takes into consideration the various factors effecting the FMV of the property under consideration or not and can be used by the CIT (A). Firstly, it is not clear from the valuation report that the land under consideration is residential or commercial. This is undisputed fact that the property is situated at very prime commercial area at 100 Mtr Ring Road, the DVO himself has accepted this fact in his valuation report. We therefore, find at the relevant point in time i.e. on 01.04.1981, there is commercial activities carried out not only at nearby but also at the property under consideration itself as there is 10 shops has constructed at the property under consideration itself. The Ld. DVO has appreciated fact in the valuation report but has taken (+)50% only as factor of adjustment on account of Location/Situation addition. He has not even considered the concept of commercial potential and ascertained the FMV based on the land used reported by him. Furthermore, while making the comments in Para 6.3 of the report, the Ld. DVO mentioned that the property situated on main 100 Mtr wide Ring Road surrounded by Commercial. This fact shows that in
15 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT the case of the appellant, while determining the FMV, the concept of probable use in the most advantageous manner has not been considered and also the activities in surroundings have not been taken care. The said property is situated on a road having width of 100 Mtr. It is important to note that while assigning the factor on account of location, the width of the road has been not been considered properly only 50% factor has been given. Similarly, the DVO has taken the total construction are of 10 shops of 250 Sq Mt whereas actually the total construction are of 10 shops is 3800 Sq Ft i.e. 353 Sq Mt. Further, the ld. AR has pointed out various discrepancies in terms of non-consideration of the frontage, locality surroundings and FAR of the property which again put a question mark on the value so determined by the Valuation Officer. The AR has rightly pointed the DVO has placed too much of emphasis on the assessment or valuation by the schedule rate of Market rates of land notified by Ministry of works and Housing (Land Division GOI) Vide notification no J-22011/3/80-LD (DOI) dated 21.10.1981. This is neither desirable nor permissible. The reason is that the circle rates adopt uniform rate of land for an entire locality, which inherently disregards peculiar features of a particular property. If we consider all the discrepancies as pointed out the value of the land comes to Rs. 12000 Per Sq Mtr as against the Rs. 9000.00 per Sq Mtr taken by the DVO and value of land determined of Rs. 11000.00 per Sq Mtr
16 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT by registered valuer. Accordingly, we direct to adopt the fair market value as determined by the Registered Valuer as on 01.04.1981 of Rs. 49,46,000/- . In the result, the ground No 2 taken by the assessee is allowed.
The 3rd ground raised by the asseseee in the appeal is regarding 17. sustaining the disallowance of interest of Rs. 36111 u/s 40 (a) (ia) on account of non deduction of TDS. The brief fact is that assessee has made interest payment of Rs. 1,20,370.00 to Smt Mona Jain but TDS has not been deducted. The assessee is liable to deduct TDS U/s 194A of the IT Act 1961 but same was not done by the assessee, hence the AO disallowed the interest of Rs. 1,20,370.00 u/s 40 (a)(ia). The ld CIT (A) has discussed this issue at page No 11 of the appeal order and restricted this addition to Rs. 36111.00. The AR of the assessee submitted that the depositor has submitted form No 15H for non deduction of TDS on interest payments accordingly the TDS has not been deducted on interest paid the Smt Mona Jain. The AR has further stated that the fact has specify stated in reply to AO which placed in paper book page No 2 and copy of form No 15H has been submitted. Further, the fact has also been stated before the ld CIT (A), the ld CIT (A) has appreciated the fact in its order but restricted the addition to 30% of Rs. 120370.00.
17 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT 18. We have heard both the parties and perused the relevant material on record, we observed that as per the act if a declaration in form No 15H/15G is submitted under Section 197A by the recipient to the payer along with his/her PAN, then no tax is deductible if the conditions as laid down are satisfied. In the instant case admittedly the recipient i.e. Smt Mona Jain has submitted declaration in Form No 15H for non deduction of TDS on interest paid to her. The assessee has submitted the copy of letter with whom this declaration submitted to Income Tax department well within time before the AO, then he is not required to deduct TDS on interest paid to Smt Mona Jain. In view of the provisions of the Act, we are of the considered opinion that no disallowance is required to be made and sustained u/s 40 (A) (ia) of the Act on account of interest paid. Hence, we direct to delete the same.
Now we take ITA No. 112/Jodh/2020 for the A.Y. 2014-15. In this appeal also, there is delay of 487 days in filing the appeal, for which, the assessee has filed an application for condonation the delay mentioning the fact as agitated in the application for A.Y. 2013-14. Hence, in view of the above facts and circumstances and considering the facts mentioned in application for condonation of delay for the A.Y. 2013-14, we condone the delay of 487 days in filing the appeal and admit the appeal for hearing.
18 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT 20. In this appeal, the assessee has raised the following grounds of appeal:
“1. That under the facts and circumstances of the case, the ld CIT(A) has erred in sustaining the NP rate of 10.16% subject to Depreciation and Interest to third parties on total work receipt as against the NP rate of 11.50% applied by the AO subject to depreciation and interest to third party on gross work. 2. That under the facts and circumstances of the case, the ld CIT(A) has erred in not allowing the interest to third parties from the net profit rate so sustained. 3. That under the facts and circumstances of the case, the ld CIT(A) has erred in sustaining in not following the decision of Hon’ble ITAT Jodhpur Bench in assessee’s own case.” 21. The ground No 1 raised by the assessee in his appeal is against the substance of NP rate of 10.16% subject to Depreciation as against the NP rate of 11.50% subject to Depreciation on Gross work receipt. Briefly stated the fact of the case are that the assessee had shown 13.06% Gross profit rate on total work receipt of Rs. 11,35,80,573.00 as against 14.49% for the immediately preceding year. The AO observed that the books of account were maintained in the same manner as in the immediate preceding year. He noted the reasons, at page No 2 to 8 of the assessment order, for the rejection of the books results. On being show cause the assessee gave reason for decline in the profit rate, which has incorporated on 3 to 5 of the
19 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT assessment order. The AO rejected the books of accounts and applied profit rate of 11.50%. The CIT (A) to follow his action of the earlier year and sustained the rejection of books of accounts and also directed to apply NP rate of 10.16%. The AO while giving appeal effect only allowed depreciation from the NP rate of 10.16% as directed to apply by the ld CIT (A).
We have heard the rival contentions and perused the relevant material on record. The facts noted by the AO in our considered opinion are sufficient enough to justify the rejection of the books of accounts. We, therefore, hold that the ld. CIT (A) was justified in upholding the application of section 145 (3) of the Act. Now we turn to the application of the profit rate. There is no dispute about the fact that the profit rate declared by the assessee in the instant year has shown a declining trend from 14.49% to 13.06%. The Jodhpur bench of the tribunal has held in several cases that in the absence of any justifiable reason, the AO should be guided by the profit rate of the immediately preceding year for application in the instant year when the books of account are rejected. The Ld AR of the assessee had given such reasons to the AO also which were not at all considered. We find force in the submissions of the ld AR for the reason that the AO has recorded the submissions made on behalf of the assessee from page 3 to 5 of the assessment order, which are stated to be the reason for decline in the profit rate, on which no comment has been made by the AO. In our
20 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT considered opinion the application of the profit rate by the AO at 11.50% is totally unjustified. The Ld CIT (A) held to adopt NP rate of 10.16% without considering the profit rate in the preceding year and the reasons given by the assessee for fall in such profit. We, therefore, hold that the authorities below were not justified in not considering the reasons given by the assesseee for fall in the NP rate. This also noted that the Net Profit rate in the immediate year is 3.56% as against the Net Profit rate of 3.51% declared in the preceding year is hearing than all the preceding years.
Considering all relevant fact and material on record as narrated above we are of the considered opinion that the profit rate cannot be allowed to exceed the declared rate, accordingly we order for the deletion of entire addition, sustained by the ld CIT (A) by the application of the profit rate of 10.16%.
The ground no 2 and 3 raised by the assessee in this appeal is interrelated to not allowing of interest to third parties and not following the decision of ITAT Jodhpur Bench in assessee’s own case. The brief fact of the case are that the AO has applied 11.50% subject to depreciation only and the ld. CIT (A) has directed to apply Net Profit rate at 10.16% on total work receipt, the AO while giving appeal effect allowed only Depreciation only from the Net Profit so applied as per the direction of the ld. CIT (A). The
21 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT grievance of the assessee is that in view of the order of the Jodhpur bench of ITAT in assessee own case for AY 2003-04 and 2004-05 in which the Tribunal has directed to allow the Depreciation and Interest to third Parties from the Net Profit rate of 10.16%. The AR has further pointed out that in AY 2013-14 the AO himself has allowed the interest to third parties from the Net Profit rate so applied.
25 We have heard both the parties and case law relied by AR in the case of CIT v/s Jain Construction Co. reported in 257 ITR page 753 (Raj), and CIT v/s Bhavan Va Path Nirman (Bohra) & Company reported in 258 ITR 431. SLP against this order stood rejected in 264 ITR (ST) 36. The ITAT Jodhpur Bench is regularly following decision of Hon’ble Rajasthan High court. The Jodhpur Bench of ITAT in case of Shri Devki Nandan Golyan ITA No. 86/Jodh/2013 held as under:
We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the Ld. CIT(A) directed the Assessing Officer to allow the interest paid to third parties out of gross profit rate determined by keeping in view the ratio laid down by the Hon'ble jurisdictional High Court in the case of CIT v/s Bhawan Va Path Nirman (Bohra) & co. reported in 258 ITR 341 (Raj.) and the SLP against the said decision has been rejected by the Hon'ble Supreme 10 Court. We, therefore, do not see any
22 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT valid ground to interfere with the findings given by the Ld. CIT(A) on this issue, accordingly, do not see any merit in this ground of the departmental appeal.
We are of the considered opinion that the interest paid to third parties is deductible from the profit arrived after application of net profit rate in light of decision of Hon'ble Rajasthan High Court and various judgment of this Bench. We have already directed that no addition is required to made in the declared results. Accordingly, ground No 2 and 3 of the appeal are allowed.
In the result the appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962 by placing the details on the notice board.
Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Jodhpur Dated 29/01/2021 *Ranjan Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT (A) 5. The DR 6. Guard File
23 ITA 111 & 112/Jodh/2020 Subhash Chand Jain. Vs ACIT Assistant Registrar Jodhpur Bench