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Income Tax Appellate Tribunal, CIRCUIT ‘SMC’ BENCH, VARANASI
Before: SHRI.VIJAY PAL RAO
SHRI VIJAY PAL RAO, JUDICIAL MEMBER: This appeal by the assessee is directed against the order dated 19.9.2018 of CIT(A) for the assessment year 2012-13. 2. None has appeared on behalf of the assessee despite repeated notices issued to the assessee through RPAD as well as Email sent at the Email ID given in Form No. 36. Accordingly, the case was taken up for hearing and disposal ex parte. The assessee has raised the following grounds:- “1. That in any view of the matter assessment made on income of Rs. 39,10,220/- by order dated 03.03.2015 passed u/s 143(3) r.w.s. 144 of the IT act is bad both on facts and in law. 2. That in any view of the matter the extra profit addition of Rs. 20,01,198/- as maintained by CIT(A) as against Rs. 33,62,788/- by Assessing Officer is highly unjustified. 3. That in any view of the matter the Ld. CIT(A) was wrong in allowing relief to the assessee since the net profit ate is disclosed by the assessee was before salary and interest paid to partners whereas the Ld. CIT(A) has not allowed deduction on account of salary and interest to partners and maintained the addition which is highly unjustified. 4. That in any view of the matter in other comparable cases the net rate is determined before salary and interest whereas the Ld. CIT(A) has given the working by comparing net rate before salary and interest to partners with the return figure (net profit) which is highly unjustified.
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That in any view of the matter addition of Rs. 2,79,312/- as made by the Assessing Officer on account of interest income and his action as confirmed by CIT(A) is highly unjustified. 6. That in any view of the matter the appellant reserves his rights to take any fresh ground of the appeal before hearing of the appeal.” 3. The assessee firm is engaged in the business of Civil Contract. The assessee filed its return of income on 26.9.2012 declaring total income of Rs. 2,68,120/- after deduction of salary and interest to partners. During the scrutiny assessment, the Assessing Officer issued various notices under section 142(1) but the assessee did not respond to the notices except once through its counsel when the assessee filed a copy of the ITR with Audit Report. The Assessing Officer also issued a notice under section 133(6) to the Bank Manager where the assessee is having the bank account. No information was provided even by the bank or by the assessee as requisitioned by the Assessing Officer. The Assessing Officer finally completed the assessment under section 144 of the Income Tax Act. The Assessing Officer noted that the assessee has received against the contract work of Rs. 453,86,361/- but declared net profit at Rs. 2,68,120/- after salary and interest to the partners. Thus the assessee declared net profit rate of 0.59% whereas in the just immediately preceding year, the assessee has shown the net profit at 1.01%. Since the assessee did not produce the books of accounts, bills and vouchers in support of the expenditure claim therefore, the Assessing Officer rejected the book result under section 145(3) of the Act and estimated the income of the assessee by applying net profit rate of 8% on its gross receipts. 4. Consequently, the Assessing Officer has made an addition of Rs. 33,62,788/- to the income of the assessee. The Assessing Officer further made an addition on account of the interest received from the bank as well as the investment made in the deposits amounting to Rs. 2,79,312/-. The assessee challenged the action of the Assessing Officer before the CIT(A). The CIT(A) restricted the net profit rate to 5% instead of 8% applied by the Assessing Officer and consequently the addition on this account is confirmed to the extent of Rs. 20,01,198/- as against Rs. 33,62,788/-. As regards the addition of unexplained 2
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investment and interest to the extent of Rs. 2,79,312/-, the CIT(A) has sustained the order of the Assessing Officer. 5. I have heard the learned DR and carefully perused the orders of the authorities below. The Assessing Officer rejected the books results for want of books of accounts as well as bills and vouchers. Even before the CIT(A) the assessee has produced only books of accounts but no vouchers were produced. The CIT(A) has given its finding on both the issues in para 2.2 to 3.1 as under:- “2.2 I have gone through the facts of case as well as submission made by the appellant. It is clear that the appellant has not produced books of account and vouchers before the Assessing Officer in spite of reasonable opportunity allowed to him in this regard. Since the books of account were not verified, the Assessing Officer was in his rights to reject the same u/s 145(3) of the I.T. Act. Since, the complete books of account alongwith vouchers were also not produced during the course of assessment proceedings, I hold that action of the A.O. in rejecting the book results as justified. Now coming to the estimation of N.P. at 8%, since comparable cases were not cited by the A.O. and in the appellant own case N.P. at 3.60%, 3.23% and 5.10% has been accepted for AYs 2011-12, 2013-14 and 2014-15, I hold that determination of N.P. @ 5% is justified in the case of the appellant which comes to Rs. 22,69,318/- (Rs. 4,53,86,361/-x 5%). Since, the appellant has shown N.P. at Rs. 2,68,120/- the extra addition on account of profit comes to Rs. 20,01,198/- which is sustained. Since, the appellant has made an addition of Rs. 33,62,788/-, the appellant gets relief of Rs. 13,61,590/- . 3. Ground no.6: 6. That in any view of the matter addition of Rs. 2,79,312/- on account of bank interest as made by creating artificial figure of alleged investment only on assumption is highly unjustified and illegal in the facts and circumstances of the case hence the addition deserves to be deleted.” 3.1 A perusal of assessment order reveals that assessee has not disclosed TDS of Rs.3,263/- and has also shown interest income received from bank of Rs. 19,082/-. The source of investment in earning the interest income shown on the bank and also the undisclosed interest income on which TDS of Rs. 3,263/- was not disclosed, has not been properly explained. Accordingly, the A.O. estimated the amount of investment on which the interest income was earned at Rs. 2,79,312/- and add the same to the income of the appellant. During the course of appellate proceedings also, it was also admitted by the learned counsel that source of investment was not properly explained, accordingly, the addition made by the A.O. is sustained.” 6. So far as the estimation of the income by the Assessing Officer by applying net profit at 8%, by Assessing Officer which was restricted by CIT(A) to 5% is concerned the 3
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CIT(A) has given the past history of net profit declared by the assessee and the average of the same comes to Rs. 4%. Therefore, the addition made on this account is restricted by applying the net profit at 4% instead of 5% applied by the CIT(A). 7. As regards, the addition on account of unexplained investment and interest income, the CIT(A) has recorded in the order that the counsel for the assessee has admitted the said addition. Accordingly, I do not find any reason to interfere with the order of the CIT(A) on this issue. 8. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 07.06.2022.
Sd/- [VIJAY PAL RAO] JUDICIAL MEMBER DATED: 07/06/2022 Varanasi/Allahabad Sh Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A),Varanasi 4. CIT 5. DR By order Sr. P.S.