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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri Joginder Singh, & Shri Rajesh Kumar
Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 27/09/2013 of the ld. First Appellate Authority, Mumbai. Though the assessee has taken ground with respect to not providing proper opportunity of being heard and further the assessment was framed u/s 144 of the Income tax Act, 1961 2 Mr. Ganesh Kumar R. Dixit (hereinafter the Act), however, the ld. counsel for the assessee Smt. Aashifa Khan, did not press ground no.1 & 2 raised in the appeal, therefore, both these grounds are dismissed as not pressed.
The only ground remained for adjudication by us is with respect to disallowance with respect to labour expenses amounting to Rs.1,86,74,554/-, purchases Rs.28,56,545/- and other expenses amounting to Rs.12,17,164/-. The crux of argument advanced on behalf of the assessee that assessee is engaged in labour incentive work as a contractor. It was pleaded that notices were send at wrong address, however, remand report was sought from the Assessing Officer by further contending that the necessary bills and vouchers were produced before the ld. Commissioner of Income Tax (Appeals). It was empathetically contended that in earlier assessment years i.e. 2008-09 and 2007-08, the net profit was assessed at 6.34% and 11.79% respectively, therefore, a reasonable view may be taken.
2.1. On the other hand, the ld. DR, Shri Sambit Mishra, defended the conclusion arrived at in the impugned order by contending that the assessee did not respond to the notices issued to the assessee, therefore, the Assessing Officer had not option but to fame the assessment u/s 144 of the Act by further contending that the assessee did not produce the necessary bills and vouchers. The impugned order was defended.
3 Mr. Ganesh Kumar R. Dixit 2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee declared income of Rs.12,82,450/- in his return filed on 29/09/2008. Notice u/s 143(2) was issued on 05/08/2009 which was returned by the postal authorities with the remark “unclaimed returned to the sender”. Since, the assessment was getting time barred, the ld. Assessing Officer completed the assessment ex-parte, qua the assessee, as per the provisions of section 144 of the Act. The assessee declared sales/gross receipts of Rs.3,13,60,371/- and other income of Rs,58,922/-. On perusal of the profit and loss account, attached with the return, it was notices by the Assessing Officer that the assessee has debited various expenses. In the absence of genuineness of the claimed expenses, these were disallowed and added to the total income of the assessee, thus, the assessment was framed on a income of Rs.3,18,98,380/-.
On appeal, before the ld. Commissioner of Income Tax (Appeals), the contention of the assessee were considered, the disallowances made by the Assessing Officer were affirmed, against which the assessee is in further appeal before this Tribunal.
If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, there is no dispute to the fact that the notices 4 Mr. Ganesh Kumar R. Dixit Assessing Officer, consequently, the assessment was framed u/s 144 of the Act. For want of genuineness of the claimed expenses, the ld. Assessing Officer added the claimed expenses to the total income of the assessee. The assessee is an individual and doing the business as a contractor in the name of M/s Ganesh Enterprises. Admittedly, in the case of the contractor, it is a labour oriented work which includes cable laying, ducting, graving, filling, construction of towers, etc. We have perused the paper book, therefore, summarizing hereunder the net profit ration of various assessment years:-
Assessment 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 year Particulars Labour 97,83,190 83,72,540 48,39,400 54,77,223 59,53,632 3,13,60,371 charges realized Net Profit as 1,76,940 1,83,467 1,76,048 1,52,347 3,01,467 12,48,816 per P/L A/C Add: Income 2,01,550 1,78,144 50,607 57,936 58,263 3,61,685 tax debited to P/L A/C Depreciation 8,178 6,542 5,234 4,187 92,949 61,208 Finance 2,24,647 2,39,548 2,10,547 2,06,480 2,49,465 3,17,313 Charges Total Net 6,11,315 6,07,701 4,42,436 4,20,950 7,01,844 19,89,022 profit returned Net profit 6.25% 7.26% 9.14% 7.69% 11.79% 6.34% ratio If the aforesaid analysis is kept in juxtaposition with the facts of the present appeal, one fact is oozing out that the net profit ratio is from 6.25% to 11.79% for different assessment years.
5 Mr. Ganesh Kumar R. Dixit In earlier years, this factual matrix was accepted by the department. It is also a fact that the assessee produced the audit report u/s 44AB of the act in form no.3CB and 3CD along with the statement of total income, balance sheet and profit and loss account (pages 1 to 17 of the paper book), monthly summary of labour charges paid for the period from 01/04/2007 to 31/03/2008 (page-18 of the paper book), details of labour charges paid to unskilled/temporary workers on daily basis, as per the job card maintained at the site (page 19 to 40), copies of sample vouchers showing the payment made to labours (pae 41 to 74), copy of ledger account of the purchase (pages 75 to 86), details of partywise purchases (page 87), copy of confirmation, bills, delivery challans, copy of acknowledgment of return of income etc of the purchase party (pages 88 to 139), copy of bank statement for the period from 01/04/2007 to 31/03/2008 showing the payment made for the purchases (pages 140 to 161), monthly summary of salary and wages paid for the period from 01/04/2007 to 31/03/2008 (page 62), partywise details of salary and wages paid (page 163) etc. In view of these facts, the assessee, though, could not produce the documents before the Assessing Officer to ascertain the genuineness of the expenses claimed by the assessee but at the same time no purpose will be served to send the matter back to the file of the Assessing Officer, therefore, to cut short the litigation and further to safeguard the interest of Revenue, we hold that it will serve the purpose, if the net profit ratio is adopted at the rate of 10% of the receipts. Even otherwise, as per the provisions of 6 Mr. Ganesh Kumar R. Dixit 44AD, there is a provision of 8% of the total turnover or the gross receipt of the assessee, which is a special provision for computing profit & gains of business on presumptive basis. Thus, we direct the Assessing Officer to calculate the income of the assessee by adopting the net profit at the rate of 10% of the gross receipts/expenses with respect to labour expenses. Our view will also identical with respect to purchases and other expenses (ground no.4 & 5). The ld. Assessing Officer is directed accordingly. It is made clear that our view is limited to this assessment year only, being the peculiar facts of the case, and may not be quoted for future references. Finally, the appeal of the assessee is disposed off in terms indicated hereinabove. This Order was pronounced in the open court in the presence of ld. representatives from both sides, (as agreed by them) at the conclusion of the hearing on 27/10/2015.