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2015 (6) TMI 199 - ITAT JAIPUR

2015 (6) TMI 199 - ITAT JAIPUR - TMI - Trading addition - rejection of book result U/s 145(3) - AO estimated the N.P. rate @ 10% - Held that:- The A.R. himself admitted before the Assessing Officer that Section 145(3) are squarely applicable in the case of assessee. The assessee has shown current outstanding liability as on 31/3/2008 at ₹ 70,83,850/-, which was more than 30% of expenditure under the head of salary and wages and also pending for more than three months, which is not possible .....

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t be ground of rejection of books of account U/s 145(3) of the Act. There is no justification by the learned CIT(A in confirming the addition of ₹ 1 lac without confirming the rejection of book result U/s 145(3) of the Act. The defects pointed out by the Assessing Officer are sufficient to reject the book result. However, we find that AO had estimated the income higher side and had not compared the past history of the case and also had not made any comparison with another case of similar l .....

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l filed by the department against the order dated 16/09/2011 passed by the learned CIT(A)-III, Jaipur for A.Y. 2008-09. The effective grounds of appeal are as under:- "(i) the CIT(A) has passed a perverse order in restricting the trading addition of ₹ 34.39 lakh, simply, on the ground that the G.P. rate of 5.08% disclosed in the present year, was better than G.P. rate of 5.06, disclosed in the earlier year. (ii) The CIT(A) has contradicted himself and passed a perverse order by uphold .....

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he disclosed outstanding liabilities etc. (v) The appellant craves leave to add, alter, amend, withdraw or interest any ground or grounds of appeal before or at the time of hearing of the appeal." 2. All the grounds of the revenue's appeal are revolving around rejection of book result U/s 145(3) of the Income Tax Act, 1961 (hereinafter referred as the Act) and confirming the addition at ₹ 1 lac only as against the addition made by the Assessing Officer at ₹ 34,39,982/-. The .....

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55,857/-, it means N.P. rate was 5.57% on gross receipt. It is observed that as per audit report, the assessee has not maintained the vouchers for petty cash expenses. It is also found that the assessee had not maintained stock register and stock was valued on estimate basis. Expenses were only partly vouched, many of the expenditure vouchers like those for rent, water charges etc. have no signature of the recipient and are self prepared. The assessee gave the reasonable opportunity of being hea .....

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assessee's work was of different nature requiring lot of digging and filling work. It is argued that purchase order rates were same in earlier two years but expenditure had increased but the submission was without any corroborative evidence. Similar many of the expenses particularly the expenses under head other direct expenses, water charges, fooding charges, office rent etc. are not without proper vouchers but also unreasonably high and payment is made mostly in cash. After considering abo .....

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specially in the light of the facts and circumstances of the issue under consideration. As can be seen, the controversy involved in the present case is only about the rejection of books of account and estimation of income u/s 145 of the Act. The assessment order reveals that the G.P. in the current year is shown better at 5.08%, on the substantial higher turnover of ₹ 7.81 crores, then the similar trends of the previous year, i.e. 5.06% on total sale of ₹ 2.62 crores only. In this re .....

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grounds for applying the provision of Sec. 145. In this regard, the onus is on the department to prove that accounts are really defective or incomplete to invoke such harsh measures. The above views are also echoed in the following decisions:- 1. Uttam Chuna Pathan Udhyog 20 TW 422 (Jaipur Bench) 2. Paradise Holidays 325 ITR 20 (Delhi). In this regard, apart from the case laws relied upon by the learned A.R., even in other cases, including of M/s Gotton Line Khanij Udhyog (256 ITR 243) (Raj.) an .....

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ous year. This crucial aspect has been over looked by the A.O., while drawing the adverse view, i.r.o., reliability of the books of account. In my considered opinion, since the appellant has shown better result in the current year on higher T.O. therefore, the other related minor shortcomings on the part of the appellant have became insignificant and redundant. Accordingly, the act of rejection of the books of account U/s 145(3) on the part of the A.O. is held as untenable and unwarranted, thus .....

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deleted. Consequently, this ground of appeal is partly upheld." 4. Now the Revenue is in appeal before us. The learned D.R. vehemently supported the order of the Assessing Officer and argued that number of deficiencies were found in the books of account including opening and closing stock. Payment through cash, self made vouchers, which were verified by the Assessing Officer and detailed findings have been given in the assessment order and these defects are sufficient in case of civil contr .....

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cca bill/outside vouchers are neither possible nor practicable. However, such expenditure is supported by the internal vouchers containing details of expenditure and signature of recipients. The main reason for outstanding salary is that assessee did not receive the payment from the companies on time. It received payment from companies at the fag end of the year and part amount in April 2008 to June 2008 after the close of the year. On receipt, the amount was withdrawn in cash and payments to th .....

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. Hence huge trading addition made by the Assessing Officer is uncalled for and be deleted. He further argued that the position of G.P. rate and N.P. rate as per audited books of account of the assessee during the previous year under consideration and in last year to that is tabulated as under:- F.Y. A.Y. Turnover Gross Profit G.P. rate Net Profit N.P. rate 2006-07 2007-08 2,62,84,448/- 24,10,567/- 9.17% 6,37,917/- 2.43% 2007-08 2008-09 7,81,25,010/- 1,45,93,602/- 18.68% 39,70,558/- 5.08% From t .....

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Contractor (ITA No. 404/Jodh/2013). 2. Addl.CIT Vs. Lakhani Shoes Limited 34 Tax Worls 32 (JP) (ITA No. 173/JP/2000). 3. J.C. Sharma Vs. ITO 33 Tax World 80 (JP) (ITA No. 258/JP/1996). 4. Brij Bhushan Lal Praduman Kumar Vs. CIT (1978) 115 ITR 524 (SC). 5. CIT Vs. Popular Electric Co. (P) Ltd. (1993) 203 ITR 630 (Cal.). 6. Ashok Kumar & Co. Vs. ITO (2004) 2 SOT 518 (Asr.) The learned Assessing Officer had not pointed out any specific defect or discrepancy in the books of account maintained by .....

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der of the learned CIT(A). 6. We have heard the rival contentions of both the parties and perused the material on record. The assessee is a civil contractor. As per auditor's note on account, the assessee has not maintained the vouchers for petty cash expenses. The assessee has not maintained closing stock properly but maintained on estimate basis. The expenses were partly vouched on which no signature of recipient has been made. Particularly, the expenses for rent, water charges and claimed .....

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