M/S. NARESH AGARWAL CONSTRUCTIONS (P) LTD.,GHAZIABAD vs. DCIT, GHAZIABAD

(hereinafter referred to as the ‘assessee’) by filing the present appeal sought to set aside the impugned order dated 27.04.2016 passed by the Commissioner of Income-tax (Appeals), Ghaziabad qua the assessment year 2012-13 on the grounds inter alia that :-

Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee is a civil and electrical contractor mainly executed the work for Uttar Pradesh Statement Department who has shown his gross receipt at Rs.16,53,81,214/- and has shown net income of Rs.99,70,986/- which is 6.03% of the receipt. In para 2 of the assessment order, AO recorded that the books of accounts were produced and test checked. Thereafter, AO recorded that despite several opportunities, the assessee has failed to produce complete books of account. AO on the basis of his findings that no cash book and ledger were produced, no stock register has been maintained and the primary evidence supporting books were not produced for verification and to verify the quantitative details, no stock register has been maintained and thereby proceeded to reject the books of accounts under section 145 (3) of the Income-tax Act, 1961 (for short ‘the Act’) and assessed the net profit @ 8% as against 6.03% of the receipts shown by the assessee and thereby assessed the total income at Rs.1,34,45,887/-.

Assessee carried the matter by way of an appeal before the ld. CIT (A) who has confirmed the addition by dismissing the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.

We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

Bare perusal of the assessment order goes to prove that in para 2, the AO has categorically recorded that the books of accounts were produced and test checked. Then in para 3, it is recorded by the AO that despite giving number of opportunities, assessee has failed to produce complete books of accounts without narrating as to which part of the books of accounts has been withheld by the assessee. AO then in para 3 at page 3 again recorded that on 26.02.2015, assessee appeared and produced books of accounts and bills and invoices available with him, however assessee did not furnish complete set of books of accounts. In para 3 at page 4, it is specifically recorded by the AO that “the ld. AR for the assessee has reiterated that books of accounts are audited, hence should not be rejected, but he failed to give any convincing and reasonable ground for not rejecting the books of accounts u/s 145 (3) of the Act and estimating the profit @ 8% of the gross receipts.”

When we examine the findings returned by the AO in the assessment order in entirety, it is difficult to work out as to which part of the books of accounts have not been produced by the assessee rather AO has returned self-contradictory, in other words, cryptic findings and jumped to estimate the profit rate at 8% as against 6.03% shown by the assessee. All these facts have not been examined by the ld. CIT (A) in appeal rather confirmed the order passed by the AO as it is.

When undisputedly books of accounts of the assessee are audited one, which fact has not been controverted by the AO as well as ld. CIT (A) in the impugned orders, AO/CIT(A) were not supposed to jump to the conclusion without specifically pointing out as to which part of the books of accounts and which of the bills and vouchers have not been produced by the assessee during assessment proceedings. At every stage, AO has returned cryptic findings by stating that, “He produced cash book, bank statement and ledger of expenses debited in the profit & loss account such as bank charges, interest payment, telephone, labour, cess audit fee, office expenses, general expenses, medical expenses, legal and professional expenses, travelling and conveyance expenses.” Then, in the same breath, AO held that on perusal of the same, it was noticed that several expenses have been incurred in cash for which no bills and vouchers were produced despite several opportunities.

Moreover, assessee has given the net profit rate earned by the company in the preceding and succeeding years which has been accepted by the Revenue and is less than the net profit rate given by the assessee during the year under assessment. For ready perusal, net profit rate of the assessee during the preceding and succeeding years is as under :-

In view of what has been discussed above, we are of the considered view that when assessee has provided books of accounts as per quarries raised by the AO, specific findings regarding each and every entry were required to be returned. So, to meet with the ends of justice, the matter is required to be remanded back to the AO to decide afresh after perusing the books of accounts, bills and vouchers and audited financials after providing an opportunity of being heard to the assessee. Consequently, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in open court on this 14th day of June, 2019.