THE OSHO CO-OP L7&C SOCIETY,SHOP NO. 2 GEETA MARKET PANIPAT vs. ITO WARD 3, PANIPAT

The present appeal has been filed by the assessee, wherein correctness of the order dated 23.10.2018 of CIT(A), Karnal pertaining to 2015-16 assessment year is assailed on the following grounds :

“1. That on the facts & in the circumstances of the case, the A.O. has wrongly & arbitrarily estimated the income at Rs.971506/- by applying net rate of 8% on the gross receipts which is wrong & very high.

2. Both the parties have been heard. A perusal of the record shows that the assessee is shown to be a contractor engaged in the work of civil construction of HSAM Board, Panipat. The assessee filed its return of income declaring net profit @ 0.61% against gross contract receipts of Rs.1,21,43,829/- and declared net profit at Rs.74,950/- and had claimed a refund of Rs.2,42,877/- on account of TDS. The assessee had debited huge expenses to profit & Loss account on account of wages, material purchase, commission and salary. Further, the assessee had also shown expenses payable at Rs.31,98,000/- as on 31.03.2015. The assessee had debited expenses amounting to Rs.88,86,905/- on account of purchase of material. The assessee had also not shown any work in progress. As per balance sheet, the assessee did not show any sundry creditors as on 31.03.2015 whereas in party wise details of Sundry Creditors given by the assessee during the course of assessment, it has been shown at Rs.24,04,209/-. Perusal of Bank account statement revealed that the assessee had made the payment of all the expenses in cash. During the course of assessment proceedings, the assessee was asked to produce cash book, ledger, muster roll, salary register, stock register bill/vouchers and copy of contracts executed with the departments but inspite of providing ample opportunities, the assessee did not furnish /produce any information and produce the requisite documents. Perusal of statement of facts shows that the assessee is a labour & construction co-op. society registered with the Registrar of Societies vide Registration No. 2146 dated 10.08.2007 and is engaged in doing collective disposal of labour of its members contribute their labour & carry on the work of construction against tenders or other work. In the proceedings before the Assessing Officer, the assessee was held not to be entitled to claim deduction u/s. 80P(2)(a)(vi) and additions in terms of para 4 & 5 of the assessment order were made. The additions were challenged before the ld. CIT(A). However, it appears that no specific ground for 80P deduction was raised and the assessee heavily contested the additions on the ground that accounts were audited. The ld. CIT(A) rejected the claim of assessee observing as under :

“From a perusal of the above, it is clearly seen that the assessee did not furnish the details asked for by the A.O. and even at this stage, beyond stating that the accounts are audited, no concrete evidence in support of its claims have been submitted. In view of the above, the action of the A.O. in rejecting the books of accounts was correct and I confirm the said addition. As far as the submission in respect of addition u/s. 80P of the Income Tax Act is concerned, no ground of appeal was filed on this issue and hence, does not call for a decision in this regard.

3. Perusal of the impugned order shows that before the ld. CIT(A), the assessee failed to address on the issue involved in ground No.2 regarding deduction under section 80P. The assessee is stated to have been in this business for 6 to 7 years. It is seen that in order to adjudicate upon ground No. 2, past history of the assessee and facts on record need to be taken into consideration. In view of the fact that there is no finding of the ld. CIT(A) on this issue, it will be appropriate to restore this issue back to the file of ld. CIT(A). On the first issue, it was submitted that profit rate of 8% is very high and the estimate as considered in the case of similar labour and construction society in in the case of The Karnal Komi Ekta Co-op. Labour & Construction Society Ltd. vs. ITO, wherein the estimate of 2.5% is concerned to be justified, be taken into consideration. Copy of order dated 23.05.1997 was filed. Since, there is no comparison available on record for the estimate of 8% relied upon by the tax authorities and there is no discussion on the past history, accordingly, it is deemed appropriate to set aside the impugned order for proper representation and discussion on the issues involved in this appeal. In view thereof and in the interest of substantial justice, the impugned order is set aside to the file of ld.

CIT(A) for deciding the issues by way of speaking order and in accordance with law after giving proper opportunity of hearing to the assessee.