Jain And Rai Constructio Co. Thr. vs. Commissioner Of Income Tax

1 THE HIGH COURT OF MADHYA PRADESH I.T.A. No. 99/2018 Jain & Rai Construction Co. Vs. Commissioner of Income Tax, Gwalior Gwalior, 18/09/2018 None for the appellant. Perused the case. This appeal under Section 260A of the Income Tax Act, 1961 against the judgment/ order dated 25/01/2018 passed by the Income Tax Appellate Tribunal, Agra in I.T.A. No. 344/AGR/2015 on the following proposed substantial question of law:- “(i) Whether the order passed by learned Income Tax Appellate Tribunal holding the provisions of section 145(3) of the Income Tax Act having correctly applied is perverse, erroneous in law as well as contrary to the established judicial principles. (ii) Whether in the absence of any material evidence, Ld. ITAT was correct in law in reviving the order of Assessing Officer even if provisions of Sec 145(3) were applicable. (iii) Whether the impugned Judgment/ order passed by learned Income Tax Appellate Tribunal is perverse as well as erroneous in not adjudicating the issue in accordance with the propositions laid down by Hon'ble Apex Court and Hon'ble High Court. (iv) Whether the learned Income Tax Appellate Tribunal can pass an order by ignoring the percentage of net profit ratio for previous Assessment Year of Appellants business. (v) Whether the learned Income Tax Appellate Tribunal erred while passing the impugned Order/ Judgment that during assessment, learned Assessing Officer can not reject the whole books of accounts threshold without pointed out specific defects.” 2 THE HIGH COURT OF MADHYA PRADESH I.T.A. No. 99/2018 Jain & Rai Construction Co. Vs. Commissioner of Income Tax, Gwalior The relevant facts giving rise to the controversy briefly are that, the appellant assessee carries the business of Government contractor. During the year under consideration i.e. 2010-2011 the appellant declared his income of Rs. 5,09,137/-. The appellant's case was selected under CASS. The Assessing Officer noted discrepancies in the books of account in as much that the purchase of Rs.4,81,63,098/- against total contract of Rs.5,68,85,751/- was made from unregistered dealers, which included purchase of soil, greets, bricks, muram etc, by hand-made vouchers which could not be verified; therefore, their genuineness were doubted. The vouchers pertaining to office expenses and general expenses were not produced. Nor the explanation qua Rs.7,91,168/- on employees & recruitment was produced. The overhead expenses

Car

(Rs.1,36,534/-),

Crane (Rs.1,61,400/-), freight and carrier (Rs.10,87,138/-), fuel (Rs.4,05,895/-), JCB machine (Rs.5,71,360/-) were not verifiable. These deficiencies resulted in disallowance of books of accounts. The Assessing Officer applied a net profit rate of 8% on the total gross receipts and assessed the income accordingly. 3 THE HIGH COURT OF MADHYA PRADESH I.T.A. No. 99/2018 Jain & Rai Construction Co. Vs. Commissioner of Income Tax, Gwalior Modifiying the order, the Commissioner of Income Tax (Appeals) disallowed Rs. 1 Lac out of various expenses and selected the remaining addition on the finding that the defects being minor ought not to have led to rejection of book results under Section 145(3) of the Act. On an appeal by the Revenue, the Appellate Tribunal on an issue: “Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in by holding that provisions of Section 145(3) are not applicable ignoring the facts that assessee has failed to produce the complete bills & vouchers for expenses many of them being unverifiable”, by taking into consideration the fact that the Assessing Officer of unverifiable vouchers and unexplained expenses allegedly incurred by the assessee and the Commissioner of Income Tax (Appeal) not adverting to the respective deficiencies found fault with the order by the Commissioner of Income Tax (Appeal), consequently reversed the same and upheld the rejection of books of account under Section 145(3) by the Assessing Officer. Though multiple substantial question of law has been proposed. However, no material is 4 THE HIGH COURT OF MADHYA PRADESH I.T.A. No. 99/2018 Jain & Rai Construction Co. Vs. Commissioner of Income Tax, Gwalior commended at to dispel the findings arrived by the Assessing Officer as regard to the defective unidentified, unverified method of accounting adopted by the assessee, which led the Assessing Officer to apply the best judgment assessment. In M/s. Kachwala Gems, Jaipur Vs. Joint Commissioner of Income Tax, Jaipur (AIR 2007 SC 487), it is observed:- “9. In our opinion, whether there were bogus purchases or not, is a finding of fact, and we cannot interfere with the same in this appeal. As regards the rejection of the books of accounts, cogent reasons have been given by the Income Tax Authorities for doing so, and we see no reason to take a different view. 10. It is well settled that in a best judgment assessment there is always a certain degree of guess work. No doubt the authorities concerned should try to make an honest and fair estimate of the income even in a best judgment assessment, and should not act totally arbitrarily, but there is necessarily some amount of guess work involved in a best judgment assessment, and it is the assessee himself who is to blame as he did not submit proper accounts. In our opinion there was no arbitrariness in the present case on the part of the Income Tax Authorities. Thus, there is no force in this appeal, and it is dismissed accordingly. No costs.” In M. Janardhana Rao Vs. Joint Commissioner of Income Tax (AIR 2005 SC 1309), it is held:- 5 THE HIGH COURT OF MADHYA PRADESH I.T.A. No. 99/2018 Jain & Rai Construction Co. Vs. Commissioner of Income Tax, Gwalior “16. An appeal under Section 260A can be only in respect of a 'substantial question of law'. The expression 'substantial question of law' has not been defined anywhere in the statute. But it has acquired a definite connotation through various judicial pronouncements. In Sir Chunilal V. Mehta & Sons Ltd. v. Century Spinning & Mfg. Co. Ltd., (AIR 1962 SC 1314), this Court laid down the following tests to determine whether a substantial question of law is involved. The tests are: (1) whether directly or indirectly it affects substantial rights of the parties, or (2) the question is of general public importance, or (3) whether it is an open question in the sense that issue is not settled by pronouncement of this Court or Privy Council or by the Federal Court, or (4) the issue is not free from difficulty, and (5) it calls for a discussion for alternative view. There is no scope for interference by the High Court with a finding recorded when such finding could be treated to be a finding of fact.” Presently, the entire case turn on facts. No material being commended at to establish the verifiable account method adhered at by the assessee, the conclusion drawn by the Assessing Officer, being inevitable, no substantial question of law arises for consideration. Consequently, appeal fails and is dismissed.

(Sanjay Yadav) (Vivek Agarwal) Judge Judge shubhankar* Digitally signed by SHUBHANKAR MISHRA Date: 2018.09.19 17:24:14 +05'30'