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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI S.S. GODARA & DR. DIPAK P. RIPOTE
This assessee‟s appeal for AY 2012-13 arises against the CIT(A)-2, Pune‟s order dated 12-02-2018 passed in case No.PN/CIT(A)-2/DCIT Cir/PVL/1001/2017-18, in proceedings under Section 143(3) of the Income Tax Act, 1961, in short „the Act‟.
Case called twice. None appears at the assessee‟s behest. It is accordingly proceeded ex-parte.
We note with the able assistance coming from the Revenue side that the assessee‟s sole substantive grievance raised herein challenges correctness of both the learned lower authorities‟ action estimating net profit @ 10% than that offered @ 4.37% as per its audited results, in the course of assessment framed on 30.03.2015 as upheld in the CIT(A)‟s detailed discussion reading as under:
“7. I have perused the facts of the case as mentioned in the assessment order. I have also considered the arguments taken on behalf of the appellant. It is noticed that the appellant has not produced any books of accounts in spite of repeated requests of the AO. Since the books of accounts itself has not been produced therefore veracity of the trading result and profits declared cannot be cross checked. It is the argument of the assessee that books of accounts were destroyed due to vandalisation which took place on 14.04.2014 and therefore, he could not produce the books of accounts and supporting bills before the AO. The appellant has further argued that in the preceding A.Y. i.e. 2010-11 the addition was restricted by CIT(A) to 8.5 of the gross receipt which was subsequently reduced by Hon'ble ITAT to 7.5. Therefore, an alternative plea has been taken that the profit at any cost should not be estimated more than 7.5% which has been ordered by the ITAT.
On a careful perusal of the facts of the case, it is seen that the failure to produce books of accounts has been attributed, to the vandalisation which the assesses argued had taken place on 14.04.2014. Similar argument taken while completing the assessment for the preceding A.Ys. 2010-11 and 2011-12. However, it is important to note here that those two assessments were completed
before the alleged date of vandalisation as has been claimed by the appellant. The assessment for A.Y. 2010-11 was completed on 18.03.2013 while the assessment for A.Y. 2011-12 was completed on 25.03.2014. These two dates are prior to the date of 14.04.2014 which has been argued on behalf of the appellant. Even if for a moment, it is presumed that any vandalisation has taken place on 14.04.2014 then the appellant was specifically requested during the appellate proceedings to furnish evidences in support of any such mishap taking place like copy of FIR or insurance claim or any audio-visuals captured on CCTV etc. However, the appellant has railed to furnish any of these evidences or any other evidence to prove the point that there was any actual vandalisation on the date as has been argued. In fact, the only paper which has been filed is a copy of letter addressed to the Sr. Police Inspector, Alibaugh dated 14.04.2014. But this document lacks authenticity as because the same is neither stamped by the concerned police station nor any other evidence has been furnished showing that the same letter was actually filed by the appellant. It is just a plain piece of paper without having any corroborative evidence. 8.1 The appellant has also drawn attention to the order passed by Hon'ble ITAT, Mumbai bench in the A.Y, 2010-11 in dated 24.03.2017. The Hon'blie bench while deciding the appeal of the appellant has clearly mentioned in page 4 of its order that the incident claimed to have happened was subsequent to the completion of the assessment and there was no reason for the assessee not to produce the books of accounts and supporting details to justify its claim. Hon'ble bench while directing to adopt the net profit at the rate of 7.5% has very clearly stated that such direction should not be considered as precedent. The relevant portion of the decision of the Hon'ble bench as mentioned in para 6 is reproduced as under:
“6. We have considered the rival submissions arid perused the material on record. Though, the learned A'R admitted before us that the assesses was unable to produce the books of account and supporting details, 'however, he submitted that, the net profit rate adopted @ 8.5% by the CIT(A) is on the higher side compared to the net profit rate shown in the preceding as well as subsequent assessment years. In this context, he drew out attention to the comparative net profit rate for earlier and subsequent assessment years as referred to in para 4.1 of the order of the learned CIT(A). He therefore, submitted that a net profit rate comparable to the net profit of the preceding assessment years can be applied, which according to the learned AR would be 6.5%. As could be seen from the facts on record, this is a case where the assesses, though, claimed to have maintained books of account, however, it has failed to produce the same with supporting details either before the AO or before the CIT(A). The learned AR has stated before us, since the books of account were destroyed in a riot it could not be produced. Though, it may be a fact that assessee’s books of account might have been destroyed due to some untoward incident, it appears such incident happened subsequent to the completion of the assessment. Therefore, there was no reason for the assessee not to produce the books of account and supporting details to justify its claim. That being the case, there was no other option before the AO but to proceed for best judgment assessment by resorting to estimation of profit. Thus, the only issue arising for consideration is what can be the reasonable profit said to have been earned by the assessee from execution of work contract. It is evident, while the AO has estimated the profit @ 10% of the gross receipts, the. Ld CIT(A) has reduced it to 8.5%. However, as can be seen from the net profit rate of the preceding and subsequent A.Ys. shown by the assessee, as referred to in para 4.1 of the CIT(A) order, it hovers around 4% to 6.5%. As per the provisions of Section 44AD of the Act in case of non maintenance of books ofccount, net profit rate applicable is 8% of the gross receipts. In the present case, however, the assessee's turnover is more than 14 crore therefore, as per the provision of the Act assessee is required to not only maintain the books of account but also get it audited. Considering the overall facts and circumstances of the case and keeping in view the net profit, rate shown by the assesses in the past years as well as the fact that the assessee was unable to justify its claim by producing books of account and supporting detents, we conifer it appropriate to fix the net profit @ 7.5% of the gross receipts. The AO is directed to compute the net profit @ 7.5% of the gross receipts. At this stage we must clarify, the net profit rate of 7.5% applied by us is purely on the basis of peculiar facts involved in the present case, hence should not be considered as precedent. Accordingly, the grounds are partly allowed.” 8.2 Hon’ble Punjab High Court in the case of Jamnadas Rameshwar Das vs. CIT in 21 ITR 109 has held that “The Income Tax department is entitled to judge the accounts of an assessee each year on their merits. The facts that they accepted a particular form of account as sufficient in one year does not debar them from holding later that particular items and particular claims made by the assessee in later year have not been established. There is no question of estoppel in such case. In view of the aforesaid decision of the Hon’ble Punjab High Court, the request of the appellant that direction of the Hon’ble ITAT in its own case should be followed is not acceptable as the principle of estoppel is not applicable o Income Tax proceedings as has been held by the Hon'ble Court. Not only that even the ITAT itself has held that its decision should not be treated as a precedent.
8.3 Hon'ble Supreme Court in the case of CIT vs. British Paints India 188 ITR 44 has held under: "ITO is not bound to accept system of accounting. It is not only the right but the duty of the Assessing Officer to consider whether or not the books disclose the true state of accounts and the correct income can be deduced there from. It is incorrect to say that the office is bound to accept the system of accounting regularly employed by the assessee, the correctness of which had not been questioned in the past. There is no estoppels in these matters, and the officer is not bound by the method followed in the earlier years," 8.4 Hon’ble Rajasthan High Court in the case of CIT vs. Mangilal Choudhary 229 Taxmann 378 has upheld the action of the revenue in estimating the profit by rejecting the book results where there was no plausible reasons for discrepancies. In this case also the assessee was civil contractor. The relevant portion of the decision reads as under; "Under Section 145(3) of the Act of 1961 the requirement is that the Assessing Officer must be satisfied about correctness and completeness of the accounts of the assessee. Mere submission of vouchers is not sufficient to arrive at the conclusion that the trading result shown by the assessee are true. The Assessing Officer while making assessment of return can reject the same as unreliable, if important transactions CUTS- emitted there from or if proper particulars in vouchers are not forthcoming or if they do wt include entries relating to several relevant facts necessary to compute income. The, rejection of accounts would always be justified when the accounts books are found unreliable, incorrect or incomplete for valid reasons
In the case in hand the Assessing Officer by relying upon several errors and incompleteness in the books of accounts decided, to invoke the authority as per Section 145(3) of the Act of 1961. Suffice to mention that no plausible reason was extended by the assessee for errors in the vouchers and in other accounts books. The Income Tax Appellate Tribunal without examining the errors pointed out by the Assessing Officer reversed the order of assessment and its affirmance by Commissioner of Income Tax (Appeals) by relying upon the principle that the vouchers submitted are not required to be treated untrue. The tribunal did not choose to examine the, fact that no plausible reason was extended by the assessee to satisfy the Assessing Officer about their truthfulness.
The appeal, thus deserves acceptance, hence is allowed. The order impugned dated 31.5.2010 passed by Income Tax Appellate Tribunal in (Annexure-3) is declared illegal and therefore, the same is quashed. The order passed by the Assessing Officer dated 22.12.2008 (Annexure-1) is affirmed," 9. In the light of the aforesaid facts and decisions cited, it is dear that the appellant is constantly taking shelter of alleged vandalisation of its office right from AY 2010-11 onwards. However, there is no evidence whatsoever with regards to genuineness of any such mishap taking place. This practice of the appellant has been rightly dismissed by the.AO. Almost all contractual receipts of the appellant is from government where there is generally high margin. By taking, shelter of an unsupported event the appellant has tried to suppress its profits which cannot be permitted on year to year basis. I therefore confirm the action of the AO in estimating the profit from the contract receipt at 10%. The order of the AO is accordingly confirmed and the grounds raised are dismissed.”
We have given our thoughtful consideration to both the assessee‟s pleadings as well as the Revenue‟s vehement contentions. It is an admitted fact that the assessee has not challenged rejection of its book results all along right from assessment till date. So far as its civil contractor business is concerned, there is further no denial as per the assessment discussion in para 3 page 2 that the Assessing Officer had completed 143(3) assessments in assessment year 2010-11 and 2011-12 estimating 10% of the net profit rate on account of the taxpayer‟s similar failure in producing the corresponding books of account. Faced with this situation, we hardly see any reason to deviate from the very profit rate in the absence of any distinction on facts or law; as the case may be, in all these assessment years. We accordingly uphold the learned lower authorities‟ action in view of these peculiar facts and circumstances.
This assessee‟s appeal is dismissed in above terms.
Order pronounced in the Open Court on 27th July, 2022.