BHARTI BANSAL,AGRA vs. DCIT-1, AGRA

This appeal in ITA No. 304/Agr/2016 for the assessment year

2010-11 has arisen from the appellate order dated 30.06.2016 in Appeal

No.-129/CIT(A)-1/AGRA/DCIT-1/AGRA/2013-14 passed by learned

Commissioner of Income-tax (Appeals)-1, Agra, whichappeal before ld.

CIT(A) has in turn arisen from the assessment order dated 04.03.2013

passed by Assessing Officer u/s.143(3) of the Income-tax Act, 1961.

ITA No.304/Agr/2016

the Income-Tax AppellateTribunal, Agra Bench, Agra, reads as under :

“1. Because the Ld. CIT (A) has erred in confirming the rejection of books of accounts of the assessee without properly appreciating the facts & the circumstances of the case. 2. Because the Ld. CIT (A) has erred in confirming the estimation of income of the appellant @ 8% of gross contract receipts without properly appreciating the facts & circumstances of the case. 3. Because the Ld. CIT (A) has erred in confirming an addition on account of interest on FDR to the tune of Rs 87662/- without properly going through the merits of the case and without appreciating the fact that the same was already included in the total income of the appellant. 4. Because the Ld. CIT (A) has erred in confirming an addition on account of interest to the tune of Rs 73972/-received from JSPL without properly going through the merits of the case and without appreciating the fact that the same was already included in the total income of the appellant. 5. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the grounds are without prejudice to each other.”

on 31.10.2010 declaring income of Rs.31,10,060/-. The return of income

was processed by the Revenue u/s. 143(1) of the Act. Case of the

assessee was selected by Revenue for framing scrutiny assessment u/s

143(2) read with Section 143(3). Statutory notices u/s. 143(2) and 142(1)

were issued by the AO to the assessee during the course of assessment

proceedings. The assessee is a proprietor of M/s. Shakti Construction

,and derives business income from contract work, income from house

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property and income from other sources. The assessee participated in

the assessment proceedings. The books of accounts were produced by

the assessee before the AO during the course of assessment

proceedings, and were test checked by the AO. The assessee also

furnished supporting bills/vouchers. Assessing Officer observed that

these bills are self-made and paid in cash. The assessee was unable to

verify the said vouchers. Assessing Officer issued show cause notice to

the assessee asking the assessee to explain why the books of accounts

maintained should not be rejected u/s. 145(3) of the Act , and net profit

should not be estimated @ 8% of the gross receipts. The assessee

submitted that the expenditure are fully supported by vouchers and bills,

cash memos and recipients signatures are duly endorsed thereon. Books

of accounts are audited by the independent Chartered Accountant and

audit report u/s. 44AB dated 27.09.2010 has already been submitted by

the assessee. There was no adverse comments given by the Chartered

Accountant. Hence, there is no justification in estimating the profit @ 8%

of the gross receipts. The assessee also submitted that the contract was

not merely a labour contract. Out of the total receipts of Rs.4,00,48,401/-

an amount of Rs.3,75,880/- (sic. Rs. 3,75,43,880/-) was against sale

and supply of material to the contractee, while the balance of

Rs.25,04,521/- was against execution of works contractwhich is 6.25% of 3 | P a g e

ITA No.304/Agr/2016

the gross receipts. Thus, presumptive rate of 8% of the gross receipt

cannot be applied, to estimate income of the assessee. The assessee

submitted that the assessee has undertaken contract of a private

contractee, M/s. K.S. Oils Ltd., wherein tough negotiation in rates have

taken place with minimum margin’s. The assessee contended that this

contract was with private party where rates are competitive, while in

government contracts margins are higher. Contract was for laying railway

lines, which was first contract of the assessee in this field. There was

tough competition with other parties. The assessee has to offer

competitive prices and prayers were made not to assess the business

income @ 8% of the gross receipts. Assessing Officer rejected the

contentions of the assessee and brought to tax net profit @ 8% of the

gross receipts, as the assessee failed to furnish the reasons for self

made vouchers and justifications for making payments in cash. While

estimating the profits of the assessee as above, the AO also made ,

inter-alia, additions of Rs. 73,972/- being interest earned by the assessee

from JSPL by including the same separately as income under the head

‘income from other sources’

Learned CIT(Appeals) dismissed the appeal of the assesseewith respect

to chargeability of profit of 8% byrejecting the contentions of the 4 | P a g e

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assessee. There was one more addition, inter-alia, which was upheld by

the ld. CIT(Appeals) with respect to addition of Rs.73,972/- as interest

income from JSPL as income from other sources. The assessee

submitted that the same is included in the business income and has

been taxed under the head profit and gain from business or profession.

CIT(Appeals) observed that there is no double addition on account of

interest income of Rs.73,972/-, as the said income was shown as income

from business, and was not separately added by the assessee to the

income from other sources while the Assessing Officer has only applied

profit rate of 8% on the gross contract receipts.

The assessee Shri Rakesh Kumar Bansal is stated to haveexpired ,and

appeal is filed by the legal heir Smt. Bharti Bansal, who is wife of the

assessee. The Revenue has not raised any objection to bring legal heir

on record. Son of the assessee Shri Pulkit Bansal appeared before the

Bench. He drew my attention to ITA No. 211/Agr/2013 for the

assessment year 2008-09, in which under the similar facts and

circumstances, the ITAT, Agra Bench, Agra vide order dated 27.08.2013

has upheld the rejection of books of account u/s. 145(3) of the Act and

under the similar circumstances, has upheld the addition of Rs.1,00,000/-

to cover the lapses pointed out by the AO towards self-made vouchers 5 | P a g e

ITA No.304/Agr/2016

being unverifiable which are not supported by supporting evidences. Son

of the assessee has also placed comparative chart of turnover and

profitability before the Bench(SMC), which is reproduced below :

M/s Shakti Construction Company c/o Bharti Bansal ITA No. MA01/Agr/2018 A.Y. 2010-11 Statistical Comparision of A.Y. 2008-09 & A.Y. 2010 -11 The case of A.Y. 2008-09 has been decided by the Honble ITAT (order enclosed in paper Book)

A.Y. 2010-11 A.Y. 2008-09 Turnover As per As per CIT(A) As per As per CIT(A) As per ITAT Assessee Assessee Net profit 40048400.97 40048400.97 41602496.11 41602496.11 41602496.11 before other income Net profit rate 2768956.00 3203872.00 1134550.00 2080124.81 1234550.00 before other 6.91% 8.00% 2.73% 5.00% 2.97% income Total addition 434916.00 945574.81 100000.00 Interest 161634.00 161634.00 141580.00 161634.00 161634.00 income as per P&L Account Net profit after 2930590.00 3365506.00 1276130.00 2241758.81 1396184.00 considering other income Net profit rate 7.32% 8.40% 3.07% 5.39% 3.36% after considering other income

Notes:

5.2 In this chart, the assessee stated that the profit declared by the

assessee during the year under consideration was to the tune of 7.32%

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while in the assessment year 2008-09, same was 3.07%. It was

submitted that in view of higher profit being declared by the assessee, no

addition should be sustained.

5.3 Learned Sr. DR, on the other hand, submitted that the books of

accounts were not produced and the Assessing Officer has applied the

provisions of section 44AD . The ld. Sr. DR submitted that the said profit

rate of 8% should be sustained. Learned CIT(Appeals) has rightly

confirmed the order of the Assessing Officer.

record. I have observed that the assessee Shri Rakesh Kumar Bansal

has filed return of income on 31.10.2010 declaring income of

Rs.31,10,060/-. The return of income was processed by Revenue u/s.

143(1) of the Act. Case of the assessee was selected by Revenue for

framing scrutiny assessment u/s 143(2) read with Section 143(3).

Statutory notices u/s. 143(2) and 142(1) were issued by the AO to the

assessee during the course of assessment proceedings. I have observed

that the assessee is a proprietor of M/s. Shakti Construction and derives

business income from contract work, income from house property and

income from other sources .The assessee participated in the assessment 7 | P a g e

ITA No.304/Agr/2016

proceedings. Books of accounts of the assessee were produced which

were verified by the Assessing Officer on test check basis.. I have

observed that the assessee has expired and appeal is filed by the legal

heir Smt. Bharti Bansal, wife of the assessee. The Revenue has not

raised any objection to bring legal heir on record. Son of the assessee

Shri Pulkit Bansal appeared before the Bench. I have observed that

during the scrutiny proceedings, the Assessing Officer has observed that

the assessee has filed self made vouchers/bills, which were paid in cash

and which are not verifiable as not supported by evidences , which led to

rejection of books of account u/s. 145(3) of the Act and net profit was

computed @ 8% of the gross receipts. The assessee has submitted

before the Assessing Officer that the assessee has done this first

contract for laying railway lines for M/s. KS Oils Ltd and out of the total

receipts of Rs.4,00,48,401/-, an amount of Rs.3,75,43,880/- was against

sale and supply of material to the contractee while the balance of

Rs.25,04,521/- was against execution of works contract, which is 6.25%

of the gross receipts. The assessee has contended before the Assessing

Officer that the assessee has to make very competitive offers to get the

contract as the assessee was dealing in such contract for the first time

,and the contractee who has to award the contract is a private sector

entity K S Oils Limited , but these contentions did not find favour with the 8 | P a g e

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Assessing Officer. The assessee submitted that it has also filed tax audit

report u/s 44AB wherein accounts were audited by qualified chartered

accountant and no discrepancy were reported by the said tax-auditor. Ld.

CIT(Appeals) dismissed the appeal of the assessee and upheld the

rejection of accounts made by the Assessing Officer. I have also

observed that similar situation arose in assessment year 2008-09,

wherein the Tribunal vide order dated 27.08.2013 in ITA No.

211/Agr/2013 has upheld the addition of Rs.1,00,000/- in the similar

circumstances being towards lapses pointed out by AO towards

submission of self made vouchers for expenses which were not

supported by evidence and were not verifiable. I have observed that the

assessee is not able to demonstrate even before ITAT that the

vouchers/bills were not self made and same can be subjected to

verification/enquiry. Thus, the findings of the authorities below remained

uncontroverted by the assessee even before the ITAT. It is equally true

that the authorities below never made any attempt to quantify and specify

with precision as to what are self made vouchers which could not be

subjected to verification and their magnitude/quantification .The

authorities below have not pin pointed the said self made cash vouchers

and their quantification/identification, which were not supported by

evidences and which remained unverifiable. The assessee has stated 9 | P a g e

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that all these self made vouchers were duly receipted by the recipients. If

the recipients were identifiable , then it was incumbent on the authorities

below to have made enquiries with the recipients to unravel truth. The

authorities below has dealt with the matter in a very casual manner, and

such lack luster and casual approach can never be appreciated, more so

the assessee has to face the ordeal dealing with lengthy and expensive

litigation running into several years. In the instant case, the case of the

assessee was selected for framing scrutiny assessment in 2011 while

assessment was framed in 2013 i.e. more than 10-11 years have now

passed and litigation is still continuing .The assessee is also equally

responsible for its woes , as it has not made any attempt to

controvert/dislodge the findings of the AO. No doubt, the assessee has

shown higher profit during the year under consideration vis a vis profit in

assessment year 2008-09, but every assessment year is a separate

year. The assessee has also claimed to have entered into a contract for

laying railway lines which was claimed to be undertaken for the first time

by the assessee with a private party, and it is claimed that due to tough

competition , the margins were squeezed. . The turnover of the assessee

during the year under consideration was Rs.4,00,48,401/- while in the

assessment year 2008-09, the turnover was Rs.4,16,02,496/-. Thus, the

turnover in this year is merely 4% lower than the turnover for the 10 | P a g e

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assessment year 2008-09, which is negligible difference , and

Respectfully following the decision of ITAT for the assessment year

2008-09 and with a view to end this protracted litigation, I confirm the

addition of Rs.1,00,000/- in the hands of the assessee keeping in view

that the assessee has produced self made vouchers/bills before the

authorities below which were not verifiable , and this finding could not be

unsettled by the assessee even before ITAT by producing bills/vouchers

and its verification, no doubt, it is true that the assessee produced books

of account, tax audit report before the authorities below. The assessee

has also claimed that these vouchers were receipted by the recipients . It

is also claimed that the chartered accountant who did the tax-audit did

not pointed any fault/defect in the accounts. Thus, keeping in view totality

of facts and circumstances and in the interest of justice as also to end

this protracted litigation, the addition of Rs.1,00,000/- is confirmed. I

order accordingly.

6.2 So far as interest of Rs.73,972/- from JSPL is concerned, the

assessee has claimed that he has reflected the said income in profit and

loss account of Shakti Construction,and the same was accordingly

brought to tax under the head income from business or profession. It is

observed that the assessee has not brought the same to tax under the 11 | P a g e

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head income from other sources. The assessee has not demonstrated

that the said interest income is earned keeping in view the business

requirement and business exigencies , rather than investing the surplus

fund lying with the assessee with JSPL. This requires investigation of

facts and the matter is remanded back to the file of Assessing Officer for

limited verification as to whether said funds were invested with JSPL

keeping in view commercial/business expediency rather than merely

investing surplus fund, on which interest of Rs.73,972/- was earned. After

arriving at the conclusive finding as aforesaid, the Assessing Officer shall

accordingly bring to tax the said income. If it is surplus fund, the same

shall be taxed separately, while if it is earned from the funds deployed for

commercial/business exigency, then the same be treated as business

income . Onus is on the assessee to prove commercial expediency and

or business requirement to invest funds with JSPL, on which interest

income is earned. Accordingly, this matter is remanded back to the file of

Assessing Officer to decide the same afresh after arriving at the findings

as aforesaid. The AO shall also keep in view our decision in this order in

sustaining only the disallowance of expenditure of Rs. 1,00,000/- as

against bringing to tax business income computed @8% on the gross

turnover by the AO and as sustained by ld. CIT(A). The AO shall also see

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that the same income should not suffer taxation twice, which is the

fundamental principle of the taxing statute. I order accordingly.

indicated above.

Order pronounced in the open court on 27.01.2025.

Sd/- (RAMIT KOCHAR) ACCOUNTANT MEMBER Dated: 27.01.2025 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra

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