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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. N. K. CHOUDHRY & SH. O. P. MEENA
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. N. K. CHOUDHRY, JUDICIAL MEMBER AND SH. O. P. MEENA ACCOUNTANT MEMBER I.T.A. No. 436/Asr/2017 Assessment Year: 2010-11
Sh. Mohd Yaqoob Khan vs. Income Tax Officer, Proprietor of M/s Unique ITO-Ward Anantnag- Constructions, Killora-Shopian Anantnag Kashmir Kashmir [PAN: ASRPK 1210D] (Appellant) (Respondent)
Appellant by : None Respondent by: Sh. Naresh Kumar Bhagat (DR) Date of Hearing: 16.12.2019 Date of Pronouncement: 18.12.2019
ORDER Per O. P. Meena, AM: This appeal by the Assessee is filed against the order of learned Commissioner of Income Tax (Appeals)-1, Amritsar dated 06.03.2017 for the Assessment Year 2010-11.
Ground no. 1 to 3 states that Ld. CIT(Appeal) has erred in both facts and law by confirming the net profit rate of 8% without any logical basis whereas the assessee has produced complete books of account and the AO could not find any material defect in the books of account.
2 ITA No. 436/Asr/2017 (AY 2010-11) Sh. Mohd Yaqoob Khan v. ITO 3. Succinct facts of the case are that the assessee is a Proprietor of M/s Unique Constructions and engaged in the business as a contractor. During the course of assessment proceedings, the AO has examined the books of account and found that the assessee has shown gross contract receipt of Rs.3,15,21,611/- for the assessment year under consideration against which the net profit of Rs.6,87,464/- was shown. The assessee has debited expenditure of Rs.2,73,45,987/- under the head purchased of material of Rs.2,53,680/- under the head labour charges besides other routine related expenses. The AO noticed that the assessee has failed to maintain any stock register in support of the purchase of material, quantity and quality of material purchase, date of purchase and usage/issue of material for a particular site and also failed to produce WIP monthly statement. The AO further noted that the expenses under the head salaries or wages are claimed in the revised return at Rs.2,53,680/- as against the original claim of Rs.44,70,097/- which states that the labour charges were paid from undisclosed sources outside the books of account, hence books of account are not complete and correct. Keeping in view of these discrepancies and gross turnover/sales and purchases shown in the original return of income and the revised version of accounts. The AO held that the assessee has failed to maintain complete and correct books of account with documentary evidence. Therefore, the books of account are not complete and correct, hence same were rejected by invoking the provisions of section 145(3) of the Act. The AO therefore, asked to show cause the assessee as to why net profit should not be estimated by applying profit rate of 12% in the light of decision of ITAT Chandigarh in the case of Prabhat Kumar (in ITA No. 323/Chd/2005) and Ess. Ess. Builders Pvt. Ltd., Ludhiana wherein 12% of contract receipt disclosed by the assessee were justified. Considering the reply of the assessee, the AO estimated 10% of the gross contract receipt of Rs.3,15,21,611/- which worked out
3 ITA No. 436/Asr/2017 (AY 2010-11) Sh. Mohd Yaqoob Khan v. ITO at Rs. Rs.3,15,21,61/- and the assessed the total income of Rs. Rs.3,15,21,61/- including the income returned at Rs.6,87,464/-.
Being aggrieved the assessee carried the matter before the CIT(Appeal), wherein it was submitted that the AO rejected the books of account without giving any reason to reject the same and considering that facts in the original return. It was submitted that Allahabad High Court in the case of Dhampur Sugar Mills Ltd. v. CIT [1973] 90 ITR 236 (All) and ITAT Mumbai in the case of IVF Holdings (P) Ltd. Mumbai v. Department of Income Tax has observed that the revised return have been filed as per the terms of the provisions of section 139(5), then the original return shall be treated as withdrawn. Without prejudice it was further submitted that the AO has not referred the peculiar facts to estimate the income of the assessee @ 10% of the gross receipt referring the judgments in the case of M/s. Shivam Constructions Company v. ACIT (in ITA No. 183 of 2007 dated 14.05.2007) of Punjab & Haryana High Court. The assessee has furnished complete details of books of account, bills and vouchers in support of return of income during the course of assessment proceedings and the AO did not find any mismatch with the information furnished by the assessee nor any independent inquiry were made by the AO. It was further submitted that similar is the case history of the appellant and in all probability, the net profit rate in the case of appellant cannot be in excess of 5% as upheld by the Hon’ble ITAT in the case of Mohan Singh Contractor (in ITA No. 59/Asr/2019) and in the case of M/s Construction Engineers v. ACIT at 6.5%. However, the CIT(Appeal) observed that the AO has relied upon the judgment of Hon’ble Punjab & Haryana High Court in the case of Shivam Constructions and where the rate of 10% was held reasonable. The Punjab & Haryana High Court in the case of Vidya Sagar Saini held that in the present case after rejecting the books of account. The AO assessed the net profit
4 ITA No. 436/Asr/2017 (AY 2010-11) Sh. Mohd Yaqoob Khan v. ITO rate at 10% which the Commissioner of Income Tax (Appeals) reduced to 8%. Such rate of profit has been affirmed by the Tribunal. Therefore, it would be a pure finding of fact that what should be the net of profit from the work of a civil contract. Relying on the judgment of Punjab & Haryana High Court in the case of Vidya Sagar Saini. The CIT has reduced 8% allowing the appeal particularly in favour of the assessee.
Being aggrieved the assessee has filed this appeal before us, however none was present from the side of the assessee, therefore, we are deciding this appeal on the basis of material available on record.
Per contra the learned Sr. DR relied on the CIT(Appeal).
We have heard the rival submissions and perused the material available on record. We find that the AO has rejected the books of account on the basis of fact that of original return, when the expenditure shown by the assessee has been reduced in revised return. Therefore, the AO was of the view that the books of account are not giving correct and true picture. Therefore, by citing some judicial decisions, the AO has applied net profit rate at 10% and made addition accordingly. However, CIT(Appeal) has reduced the same to 8% by applying ratio of some decisions. However, we find that the assessee has submitted before the CIT(Appeal) by relying on the decisions in the case of Dhampur Sugar Mills Ltd (supra) and M/s IVF Holdings (P) Ltd. Mumbai (supra), that where the revised return has been filed as per the terms of the provisions of section 139(5), the original return shall be treated as withdrawn. Therefore the revised return is only to be considered during the assessment proceedings. However, the AO, on the basis of original return of income pointed out some discrepancies and rejected the books of account. We find from the submission made by the assessee before CIT(Appeal)
5 ITA No. 436/Asr/2017 (AY 2010-11) Sh. Mohd Yaqoob Khan v. ITO that the tribunal of Amritsar Bench in the case of Mohan Singh Contractor (supra) has considered 5% NP rate has reasonable in the case of contractor. Therefore, considering the facts of the case and following the decisions of coordinate Bench of ITAT Amritsar in the case of Mohan Singh Contractor (supra), we direct the AO to apply 5% NP rate in the case of assessee on the gross receipt of Rs.3,15,21,611/- including return of income of Rs.6,87,464/-. The AO is directed to recompute the taxable income of the assessee by applying 5% NP rate. Accordingly, this appeal is partly allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on December 18, 2019
Sd/- Sd/- (N. K. Choudhry) (O. P. Meena) Judicial Member Accountant Member Date: 18.12.2019 /GP/Sr. Ps. Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals), (4) The CIT concerned (5) The Sr. DR, I.T.A.T.