SH. JUGENDRA SINGH YADAV,AGRA vs. ACIT, AGRA

In the Income-Tax Appellate Tribunal, Agra Bench, Agra

Before : Shri Laliet Kumar, Judicial Member And Dr. Mitha Lal Meena, Accountant Member

ITA Nos. 388 & 389/Agr/2018 Assessment Years: 2013-14 & 2014-15

Jogendra Singh Yadav, Kua Khera, vs. ACIT, Circle 1(1)(1), Kalal Kheria, Fatehabad Road, Agra Agra. PAN-AZHPS7182F (Appellant) (Respondent)

Appellant by Sh. K.K. Jain, Advocate Respondent by Sh. Waseem Arshad, Sr. DR

Date of Hearing 19.07.2019 Date of Pronouncement 30.07.2019

ORDER Per Laliet Kumar, J.M.: These two appeals for the assessment years 2013-14 and 2014-15 are filed by the assessee being aggrieved by the orders of the ld. CIT(A). The issue involved

and the grounds raised in both the appeals are common. The grounds raised in appeal for A.Y. 2013-14 are as under : 1. Because the books of account of the appellant were duly audited u/s 44AB and the audit report was duly submitted before the AO, the application of net profit percentage of 8% by invoking the provisions of section 145(3) is wrong and unwarranted. 2. Because in the absence of any error or omission in the regularly kept books of account, the CIT(A) erred in confirming its rejection simply for non maintenance of stock register and inadequacy of bills and vouchers which by itself would not be sufficient to hold that true profits of the business cannot be ascertained.

ITA Nos. 388 & 389/Agr/2018 2

which the assessee has filed condonation applications, stating that a notice u/s.

142(1) for A.Y. 2016-17 was sent by AO on 20.03.2018 and the impugned orders

were also uploaded from the office of ld. CIT(A) showing the date of uploading as

09.03.2018 on the web mail of assessee’s auditors M/s. Ankur Jain & Co. despite the

attending advocate Shri K.K. Jain had given his web mail on Form No. 35. It is

submitted that owing to miscommunication of the date of receipt of impugned

orders as 20.03.2018 instead of 09.03.2018, the appeals could be filed with a delay

of 10 days. In support, an affidavit of Shri Mahesh Kumar Garg, partner of the

ITA Nos. 388 & 389/Agr/2018 3

auditor firm is placed on record, which stands uncontroverted on behalf of the

Revenue. We, therefore, condone the nominal delay of 10 days occurred in filing the

appeals, as there was reasonable cause, which prevented the assessee to file the

same within the period of limitation.

in executing works contract for Agra Development Authority, Mathura Vrindavan

Development Authority etc. The assessee had declared net profits of Rs.25,50,231/-

and Rs.49,09,822/-, giving NP rates of 5.09% & 5.13% respectively for A. Yrs. 2013-

14 and 2014-15 on gross receipts of Rs. 5,00,21,444/- and Rs.9,56,99,497/-

respectively inclusive of VAT. The Assessing Officer applied the net profit rate of 8%

on the contract receipts after rejecting the books of account u/s. 145(3) of the Act.

3.1. The case of the assessee was that the provisions of section 145(3) were not

applicable without pointing out any defects in the audited books of accounts and

that the expenditure incurred is supported by self made vouchers. The assessee had

also submitted comparative rates of various raw materials and labor to support the

net profit rate declared by it.

ITA Nos. 388 & 389/Agr/2018 4

3.2 The Assessing Officer was not convinced by the reply of assessee and after

resorting to the provisions of section 145(3), he rejected the book version of the

assessee on the premise that the assessee did not keep adequate vouchers for

expenses incurred in cash and that the self made vouchers were not open for

verification and non-maintenance of stock register. The Assessing Officer applied

the net profit rate of 8% on the contract receipts of Rs. 4,89,48,054/- and

Rs.9,19,34,759/- respectively after reducing VAT from the gross receipts. Thus, the

AO determined the net profits of Rs.39,15,844/- and Rs.73,54,781/- for A.Yrs. 2013-

14 and 2014-15, thereby making additions of Rs.13,65,613/- and Rs.24,44,959/-

respectively.

3.3. Feeling aggrieved by the additions made by the Assessing Officer, the assessee

preferred appeals before the ld. CIT(A), who confirmed the action of the Assessing

Officer vide impugned orders. Now, feeling aggrieved by the orders of ld. CIT(A), the

assessee is in appeals before us.

rejected u/s 145(3), it was incumbent upon the authorities below to determine the

logical profit based on some material on record. The net profit rate determined by

the authorities below neither commensurate to assessee’s own past history nor

ITA Nos. 388 & 389/Agr/2018 5

based on any comparable case of identical business activities. The ld. Counsel for the

assessee has also given a chart showing comparable figures of assessee’s own cases

to the following effect :

Assessment Gross Receipts Net Profit Rate shown Rate applied by year by the Hon'ble ITAT Agra appellant Bench 2012-13 4,55,02,047 22,99,020 5.05% 5.25% in ITA No.111/Agra/2017 and corrigendum 2013-14 5,00,21,444 25,50,021 5.09% Year under appeal

2014-15 9,56,99,497 49,09,822 5.13% Year under appeal

The ld. AR has also given the instances of other contractors’ results to the following effect :

ITA No Asstt.year Name Rate Receipts Rate finally shown applied by ITAT 368/Agra/2013 2010-11 Om Construction 2.49 8.89 crores 4% Co vs JCIT 266/Agra/2011 2004-05 ITO vs Atul 1,44% 3.35 crores 2% Construction Co. Mathura 567/Agra/2012 2009-10 Naresh Katare vs 1.53% 13.54 crores 3% ACIT 2673/Del/2012 2006-07 ACIT vs SK 4.17% 13.5 crores 4.17% Sharma Contractor

It is further submitted that in view of the decision of Co-ordinate Bench for A.Y.

2012-13 in assessee’s own case in the identical facts and circumstances, the net

profit rate of 8% assessed by the authorities below is not sustainable.

ITA Nos. 388 & 389/Agr/2018 6

submitted that the expenditures were made in cash and the self made vouchers

were not open for verification. Therefore, the ld. Authorities below were justified in

rejecting the books of accounts and applying the net profit rate of 8% on the

contract receipts. He urged for sustenance of the impugned order.

to note here that the best judgment assessment even after rejection of books of

account cannot be used as a tool to harass any tax payer. In fact, the best judgment

assessment cannot be made on the basis of whims and fancies, but it must have

some reasonable nexus to the available material on record and attending

circumstances of the case, which is lacking in the present case. The ld. Authorities

below while adopting the profit rate of 8% have neither taken into account the past

history of assessee nor this profit rate was supported by any comparable instance or

any other material available on record. It is also born out on record that the

Coordinate Bench of this Tribunal, in the case of assessee itself for preceding

assessment year 2012-13 had applied the net profit rate of 5.25% in the identical

facts and circumstances of the case. Keeping in view the past history of the assessee,

comparable instances as submitted by the ld. AR and the decision of co-ordinate

Bench of this Tribunal in assessee’s own case for preceding assessment year 2012-

ITA Nos. 388 & 389/Agr/2018 7

13, we are of the opinion that the profit rate of 8% adopted by both the authorities

below is not reasonable. Considering the totality of facts and circumstances and the

material available on record, we, therefore, think it appropriate to estimate the net

profit rate of 5.25% on the contract receipts in both the cases, as done by the

Tribunal in assessee’s own case for A.Y. 2012-13. The assessee is given relief

accordingly.

ld. CIT(A) has erred in not allowing depreciation claimed at Rs.17,69,805/-. Once,

the income of the assessee is assessed after estimating the net profit rate, this

ground of appeal does not hold good and is required to be dismissed.

Order pronounced in the open court.

Sd/- Sd/-

(Dr. Mitha Lal Meena) (Laliet Kumar) Accountant Member Judicial member

Dated: *aks* Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Agra Bench, Agra