COMM.OF I.T.,BILASPUR C.G. vs. R.K.GROUPS,DHURKOT,BILASPUR C.G.

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ITA/56/2002HC ChhattisgarhCGHC01000822200216 September 2013Bench: HON'BLE THE CHIEF JUSTICE,HON'BLE SHRI JUSTICE R.S. SHARMA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the first and second appellate authorities (CIT-A and Tribunal) were justified in their findings. The CIT-A noted that merely because work-in-progress was not properly verifiable, the AO was not justified in rejecting the books of account, especially when no evidence suggested higher profits than declared. The Tribunal upheld this, observing that the AO had not recorded any finding that work-in-progress was improperly valued. The Court found no illegality in these findings. Consequently, all questions were answered against the Department and in favour of the Assessee. The appeal was dismissed.

What were the facts?

The assessee, R.K. Groups, a civil contractor, filed its Income Tax Return for AY 1994-1995 declaring a total income of Rs. 17,49,100/-, representing a gross profit of 9.86%. The Assessing Officer (AO) questioned the fall in the profit rate. The assessee revised its return, increasing the income to Rs. 23,49,100/-. However, the AO, dissatisfied with the accounting method, rejected the books of account and increased the gross profit to 13.61% (as in the previous year), assessing the income at Rs. 48,35,650/-. The Commissioner of Income Tax (Appeals) (CIT-A) partly allowed the assessee's appeal, accepting the revised return's GP and deleting the AO's addition of Rs. 28,99,905/-. The Income Tax Department appealed to the Tribunal, which dismissed the appeal.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the first and second appellate authorities were justified in holding that the rejection of books of account and application of Section 145 by the Assessing Officer were not justified in determining the income of the assessee for AY 1994-1995? (Mixed question of law and fact, concerning Section 145 of the Income Tax Act, 1961). Assessee's Contention: The assessee argued that the Tribunal and CIT-A were justified in their findings. The CIT-A accepted the assessee's revised return and deleted the addition made by the AO. The Tribunal upheld the CIT-A's order. Revenue's Contention: The revenue contended that the AO was justified in rejecting the books of account and applying Section 145. The revenue's appeal was dismissed by the Tribunal, implying their arguments were not accepted.

Which sections of the Income-tax Act were involved?

Section 145,Section 260A

AI-generated summary — verify with the full judgment below

HIGHCOURT OF CHHATTISGARH AT BILASPUR D.B.: Hon'ble Shri Justice Yatindra Sinah. C.J. and Hon'ble Shri Justice Radhe Shyam Sharma. J. LT.ANo. 56 of 2002 Appellant Respondent Commissioner, Income Bilaspur (Chhattisgarh) Tax, versus R.K. Groups, Dhurkot, District Bilaspur (Chhattisgarh) Civil Appeal under Section 260A of the Income Tax Act. 1961. Appearance: Shri Anand Dadariya, counsei for the appellaht. Shri SanjayAgrawal, counsel for the respondent. JUDGMENT (17thSeptember,2013) 1. This is a tax appeal appeal fil^d under Section 260 A of the Income TaxAct, 1961(theAct) against the order dated 19.04.2002. passed by the Income Tax Appellate Tribunal, Nagpur Bench, Nagpur (the Tribunal), in I.T.A. No. 668/1997 in respect of the Assessment Year (AY 1994-1995). THE FACTS 2. The R.K. Groups, Dhurkot, District Bilaspur (the Assessee) is a civil contractor and had filed Income Tax Return for the AY1994- 1995 on 29.06.1994 declaring total income of Rs. 17,49,100/-. This gives the gross profit to 9.86% ofthe receipts. 3. On processing the return of the Assessee, Assessing Officer •f

^ ^ '^m^^s^ •t 'R ^ !li?»- "^s^^ (the AO) called upon it to explain the fall in the rate of profit. + 4. TheAssessee filed a revised return on 20.10.1995 increasing its income by Rs. 6,00,000/- and showing the income to Rs. 23,49,100/-. 5 . The AO was not satisfied with the method of accounting employed by the Assessee. He, by his order dated 07.03.1997 increased the GP to 13.61% as was last year and the assessed the income of the Assessee to Rs.48,35,650/-. 6. Aggrieved by the aforesaid order the Assessee filed an appeal before the Commissionerlncome Tax (Appeals) (the CIT-A). It was partly allowed on 26.09.1997 and the GP shown by the Assessee on the revised return was accepted. He deisted the addition of Rs. 28,99,905/-bytheAO. 7. Aggrieved by the order of CIT-A, the Income Tax, Department (the Department) filed an appeal which was dismissed by the Tribunal on 19.04.2002. Hence, this appeal. THE DECISION 8. We have heard counsel for the parties. 9. This appeal was admitted on 16.07.2010 on the following substantial question of law: i. whether on the facts and in the circumstances of the case, the first and second appellate authorities were justified on facts and in law in holding that rejection of books results and application of provisions of Section 145 by theAssessing Office; ":ir determining income of

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-<.. ^7) book results and application provisions ofSection 145 of thelncomeTaxAct, 1961? We do so and accordingly proceed to hear the appeal. 11. The appeal has been admitted on three questions, however, they are only on one aspect namely deletion by the CIT-A of the addition made by theAO. 12. The CIT-A has mentioned in his order that this was the case of a civil contractor and merely because work-in-progress was not properly verifiable, the AO was not justified in rejecting the book results, and as no evidence or material was brought on record to show that the appellant had made higher profit than that declared by it; there was no justification to reject the books of account urider Section 145(1). 13. The aforesaid finding of the CIT-A has been uphetd by the Tribunal with an observation that no finding was recorded by the AO that work-in-progress were not properly valued. There is no illegality in thefinding. 14. In view of above, all the questions are answered against the Department and in favour of the Assessee. Accordingly, the appeal is dismissed. A Sd/- Chief Justice Aadil/Santosh Sd/- R.S. Sharma Judge

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