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Before: Shri Laliet Kumar & Dr. Mitha Lal Meena
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
Because the appellant, a civil contractor, had to incur incumbent expenditure over building material, wages etc without which the work could not be executed. In the absence of availability of complete vouchers, the comparable reasonableness of percentage of expenditure over receipts ought to have been considered giving due margin for escalation of prices. 4. Because the CIT(A) has erred in disregarding the past history of the case which is relevant for computation of income even if the books of account are rejected and net profit rate is applied. Comparable cases deserve to be considered in such circumstances. 5. Because the Ld.CIT(A) erred in not appreciating the decisions cited before him to support the appellant's case. 6. Because the Ld.CIT(A) has erred in observing that the appellant has accepted the invocation of provisions of section 145(3) and application of net profit rate at 8% in preceding years. 7. Because the addition of Rs.13,65,613/- confirmed by CIT(A), ought to have been deleted and/or modified considering the facts of the case.
The above two appeals were filed by the assessee delayed by 10 days, for
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.
The brief facts of the cases are that the assessee is a civil contractor engaged
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.
Before us, the learned AR of the assessee submitted that where the books are
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
The ld. DR, on the other hand, opposed the contentions made by the ld. AR and
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.
We have heard the rival contentions and perused the record. It is worthwhile
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.
In appeal for A.Y. 2014-15, the assessee has taken one more ground that the
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.
In the result, both the appeals are partly allowed.
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