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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: S/SHRI N.S SAINI & PAVAN KUMAR GADALE
IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR
BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER
ITA No.355/Rpr/2014 Assessment Year : 2010-2011
DCIT, 1(1), Raipur Vs. Shri Rajesh Makhijani, Shantideep Colony, Naveen Road, Kawardh PAN/GIR No.ADWPM 3488 R (Appellant) .. ( Respondent)
Assessee by : None Revenue by : Mrs Shital Verma, DR
Date of Hearing : 16/01/ 2018 Date of Pronouncement : 17/01/ 2018
O R D E R Per Pavan Kumar Gadale, JM This is an appeal filed by the revenue against the order of the CIT(A)-
Raipur, dated 30.9.2014 for the assessment year 2010-2011.
Grounds of appeal raised by the revenue are as under:
“Whether in law and on facts and circumstances of the case, the CI(A) has erred in restricting the addition to Rs.1,69,908/- out of disallowance made by the AO on account of expenses incurred on purchase of materials, labour charges, transportation charges, etc thereby giving relief of Rs.55,53,733/-.” 2. Whether in law and on facts and circumstances of the case, the CI(A) has erred in deleting the addition of Rs.18,95,000/- made by the AO on account of unexplained cash credit u/s.68 of the I.T.Act, 1961 specially when the ld CIT(A) has dismissed the
2 ITA No.355/Rpr/2014 Assessment Year : 2010-2011
ground related in making of assessment u/s.144 of the I.T.Act, 1961.”
Briefly stated the relevant facts are that the assessee derives income
from execution of civil contract works. The assessee filed return of income
on 18.3.2011 showing total income at Rs.13,72,490/-. The case was
selected for scrutiny. Notices 143(2) and 142(1) were issued to the
assessee to attend the hearing and produce books of account. However, the
assessee failed to appear before the Assessing officer and produce books of
account. On the basis of documents filed by the assessee like tax audit
report, audited financial statement and copy of some ledgers, the Assessing
Officer competed assessment u/s.144 of the Act assessing the income at
Rs.89,91,131/- after making disallowances out of expenses aggregating to
Rs.57,23,641/- on adhoc basis and Rs.18,95,000/- as unsecured loans.
The Assessing Officer observed that since the assessee has not
produced books of account, he disallowed 10% of the following expenses:
Purchase exp. Of material : Rs.20,,69,418/-
Labour charges : Rs.18,36,151/-
Transportation etc. charges : Rs.17,28,961/-
He also disallowed depreciation @ 100% and added Rs.89,061/-,
aggregating to total disallowance at Rs.57,23,641/-. The Assessing Officer
3 ITA No.355/Rpr/2014 Assessment Year : 2010-2011
also observed that the assessee had shown profit at 3.12% while in other
comparable cases; the net profit was shown at 6.69% and 6%.
On appeal, the CIT(A) called for a remand report from the Assessing
Officer. He further observed that during the remand proceedings, the books
of account of the assessee were not called for, which proves that the
Assessing Officer has avoided to verify the correctness and completeness of
the claim and opined that the expenses are not verifiable. The CIT(A)
following the decision of the Raipur Bench of the Tribunal in the case of C.M
Makhija n ITA No.568/Nag/2008, wherein, the NP was estimated by the
Assessing Officer at 5% while it was reduced by the CIT(A) to 4.3% and the
Tribunal directed to adopt net profit at 3.5% and directed the Assessing
Officer to apply net profit at 3.5% of the total receipts after considering
deductions including depreciation and add the difference to the returned
income and partly allowed the appeal of the assessee.
Ld D.R. submitted that the Assessing Officer has made estimation of
expenditure whereas the CIT(A) has erred in restricting the addition in
respect of addition on percentage basis.
We have heard the submissions of ld D.R., perused the orders of lower
authorities and materials available on record. We find the Assessing Officer
has made assessment u/s.144 of the Act and made disallowance at 10% of
4 ITA No.355/Rpr/2014 Assessment Year : 2010-2011
the total receipts, relying on tax audit report and copies of some alleged
accounts. The CIT(A) has reported that during remand proceedings, the
books of account were not called for verification. The CIT(A) further
observed that the net profit shown by the assessee appears to be low. The
CIT(A) relied on the decision of the Tribunal in the case of CM Makhija
(supra) and directed the Assessing Officer to apply net profit at 3.5% of the
total receipts and deleted the disallowance made by the Assessing Officer.
Before us, ld D.R. could not point out any specific mistake in the order of the
CIT(A). As the CIT(A) has followed the decision of the Tribunal in the case
of CM Makhija (supra) to adopt the net profit rate at 3.5%, which is higher
than the net profit shown by the assessee, we find no good reason to
interfere with the order of the CIT(A), which is hereby confirmed. Ground
No.1 of appeal is dismissed.
With regards to Ground No.2 of appeal, we have heard ld D.R. The
Assessing Officer observed that the assessee has received Rs.18,95,000/-
from four persons as loans. Since the assessee has failed to substantiate the
identity and creditworthiness of the creditors and genuineness of
transaction, the Assessing Officer disallowed the same.
The CIT(A) observed that the assessee has furnished compete postal
address and PAN particulars of the creditors and address of the creditors to
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the Assessing Officers with whom the creditors are assessed to tax.
Therefore, he deleted the addition made by the Assessing Officer.
Ld D.R, relying on the decisions in the case of Commissioner of
Income-tax vs. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC) and
Grover Fabrics (India) P. Ltd. vs. Commissioner of Income-tax [2011] 332
ITR 312 (P&H) submitted that there is no bar for addition u/s 68 and a
trading addition for the same year.
We find that the assessee has furnished the details of the income tax
returns alongwith PAN. It has also been informed that the lenders have
given confirmation. Therefore, the assessee has complied with the
conditions prescribed in the provisions of Sec. 68 of ITAct. Considering the
totality of facts and circumstances of the case, especially when no adverse
remarks is on record, we find no reason to reverse the findings of the ld
CIT(A). Hence, we reject the ground of appeal taken by the revenue.
In the result, appeal filed by the revenue is dismissed.
Order pronounced on 17 /01/2018.
Sd/- sd/- (N.S Saini) (Pavan Kumar Gadale) ACCOUNTANT MEMBER JUDICIALMEMBER Raipur; Dated 17 /01/2018
6 ITA No.355/Rpr/2014 Assessment Year : 2010-2011
B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : DCIT, 1(1), Raipur 2. The Respondent. Shri Rajesh Makhijani, Shantideep Colony, Naveen Road, Kawardh 3. The CIT(A)- Raipur 4. Pr.CIT- Raipur 5. DR, ITAT, Raipur 6. Guard file. //True Copy//
BY ORDER,
SR.PRIVATE SECRETARY ITAT, Raipur