SH. RAKESH KUMAR MAHAJAN,KANGRA vs. DCIT, PALAMPUR

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 27.03.2017 of the Commissioner of Income Tax [hereinafter referred to as CIT(A)], Palampur (H.P.). The assessee has taken following grounds of appeal:

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law in rejecting the books of account of the Appellant u/s 145(3) without any reasonable and logical basis. The rejection of books of account is illegal, bad in Jaw and without any judicious application of mind.

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that the assessee is engaged in the business of a government road

contractor. That the assessee had been carrying on the road

construction project work at various sites. That owing to the

nature of the business of the assessee, it was very difficult to

maintain day to day stock register. The Ld. Counsel has invited

our attention to the impugned order of the Assessing officer and

has submitted that the main objection for which the books of

account have been rejected by the Assessing officer is for non-

maintenance of the stock register.

have found that the Assessing officer while rejecting the books of

account has observed that the assessee is not maintaining day to

day stock register, and has failed to furnish the measurement

sheets and even also failed to file details of the work in progress.

Further that certain entries on account of repairs, freight charges

have been found handmade and even some are unsigned. The Ld.

Counsel for the assessee has invited our attention page 35 of the

paper book to state that so far as the non-furnishing of

measurement sheets was concerned, it was duly explained to

Assessing officer that the assessee had been carrying out the

contractual work for the Government department and the

measurement is done by the government department itself. That

the assessee did not use to maintain measurement sheets

separately. So far as the details of work in progress is concerned,

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the Ld. Counsel for the assessee has drawn our attention to para 9

of the letter of the assessee placed at page 35, which is the copy

of income tax notice issued u/s 142(1) of the Act dated

12.11.2015, and has submitted that the assessee had requested

that the work in progress would be filed by the next date of

hearing but by that time, the Assessing officer passed the

impugned assessment order. The Ld. Counsel further submitted

that in the immediately preceding assessment year, the assessment

was carried out by the Assessing officer u/s 143(3) of the Act and

books of account of the assessee were accepted. He, in this

respect has furnished the order dated 20.3.2015 of the Assessing

officer passed u/s 143(3) of the Act in the case of the assessee.

The Ld. Counsel has further submitted that even in the subsequent

year, though the return was processed u/s 143(1) of the Act,

however, till date nothing wrong has been found and no reopening

of assessment has been done. The Ld. Counsel has also relied

upon the decision of the Hon'ble Delhi High Court in the case of

‘CIT Vs. Jas Jack Elegance Exports” [2010] 324 ITR 95 (Delhi)

and also of the Jurisdictional High Court Hon'ble Punjab &

Haryana High Court in the ‘Pandit Bros. Vs. CIT’ [1954] 26 ITR

159 (Pun) and further on the decision of the ‘CIT Vs. Bindal

Apparels’ [2011] 322 ITR 410 (Del).

the lower authorities and has also invited our attention to the

impugned order of CIT(A) wherein the Ld. CIT(A) has observed

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that even during the assessment year 2005-06, the books of

account of the assessee were rejected and the net profit from

contract @ 8% of gross receipts was estimated. That the above

estimation of profit was further upheld by the Hon'ble

Jurisdictional High Court of Himachal Pradesh in ‘CIT Vs. Rakesh

Mahajan’ vide its order dated 9.9.2015 ITA No. 55 of 2009 with

ITA No. 38 of 2010.

before us the copy of the assessment order for assessment year

2005-06, order of the CIT(A) as well as the order of the Tribunal

dated 15.5.2009 and also the copy of the decision of the Hon'ble

High Court of Himachal Pradesh dated 9.9.2015 passed in the

case of assessee for assessment year 2005-06. A perusal of the

judgement of the Hon'ble High Court order dated 9.9.2015 (supra)

reveals that the books of account for assessment year 2005-06

were rejected mainly due to non-furnishing of the proper accounts

/ documents relating to the income of the assessee from running

of trucks on hire. The Assessing officer disputed the expenditure

claimed against the contract receipts including expenses on

freight and carriage. The Hon'ble High Court after deliberation on

the facts and issue involved observed that the assessee had failed

to maintain its account properly and had failed to explain the

excessive freight and carriage debited in the profit and loss

account. It was observed by the Hon'ble High Court that only 6

trucks were used by the assessee for its contract business.

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However, the assessee had failed to segregate the expenses of the

contract business from other nine trucks operated by the assessee.

We find force in the contention of the assessee that the rejection

of books of account for assessment year 2005-06 was not on

identical grounds but because of certain discrepancies relating to

truck hire contract business of the assessee. So far as the

assessment year under consideration is concerned, the issue is

relating to non-maintenance of day to day stock register is

covered by the various decision of the Hon'ble High Courts

including that of Delhi High Court in the case of ‘CIT Vs. Bindal

Apparels’ (supra) and ‘CIT Vs. Jas Jack Elegance Exports’

(supra) and of the Hon'ble e Punjab & Haryana High Court in the

case of ‘Pandit Bros. Vs. CIT’ (supra) wherein the Hon'ble High

Courts have been unanimous to hold that where owing to the

nature of business of the assessee it is not possible for the

assessee to maintain day to day to day stock register, the books of

account should not be rejected merely on this count. So far as the

non-furnishing of the measurement sheets is concerned, the

assessee had already explained before Assessing officer that it

was not in practice of making the measurement sheets as the said

work was used to be done by the quality manager of the

department of the government before making the payment.

Further, it is also a fact that the assessee finally had completed

the projects. So far as the observation of the Assessing officer

that certain vouchers were handmade and certain receipts were

unsigned, as observed, since the assessee is involved in the road

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construction business for which it had to make payment to various

labourers and other persons, who do not possess any printed

vouchers, taking into the consideration the aforesaid nature of

business, even if some vouchers relating to freight, repairs etc.

were handmade, that also, in our view, is not sufficient ground

to reject the books of account. In view of above discussions, we

hold that the Assessing officer was not justified in rejecting the

books of account only for the aforesaid reasons in the absence of

any other discrepancy.

officer for rejecting the books of account because of the aforesaid

reasons was not justified. Accordingly, the matter is restored to

the file of the Assessing officer to go through the accounts of the

assessee viz a viz the computation of income and pass a fresh

assessment order. The Assessing officer will adjudicate on all the

issues as will be raised by the assessee including that of interest

income treated by the Assessing officer as ‘income from other

sources’ as against the claim of the assessee that the same being

the ‘business income’ of the assessee.

In the result, the appeal of the assessee is treated as

allowed.

Order pronounced in the Open Court.

Sd/- Sd/- (B.R.R.KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 10.04.2018 Rkk

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Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR