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2015 (7) TMI 698 - ITAT PUNE

2015 (7) TMI 698 - ITAT PUNE - TMI - Rejection of books of accounts - adoption of GP rate of 20% - Since the assessee has already offered GP rate of 13.60% during the year under consideration the balance 6.4% on turnover of which comes to ₹ 55,08,898/- was treated by him as suppressed profit of the impugned assessment year - Held that:- From the comparison of the profit and loss account for A.Y. 2008-09 and A.Y. 2009-10, we find the material consumption was 36.79% during the current year a .....

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k will be less since the main contractor retains a part of the profit. Therefore, as against 17.96% profit from own contract work, the assessee has earned 10.38% from sub contract work and therefore profit from sub contract work cannot be at par with profit from contract work.

The Hon'ble Bombay High Court in the case of R.B. Jessaram Fatechand (1969 (7) TMI 10 - BOMBAY High Court ) has held that in the case of cash transaction where delivery of goods is taken against payment, it is h .....

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erely on the ground that there is fall in profit ratio.

Since in the instant case, we have already held that the defects as pointed out by the Assessing Officer are trivial in nature which do not call for rejection of the book results, therefore, consideration the totality of the facts of the case and in view of our discussion in the foregoing paragraphs, we are of the considered opinion that the rejection of books of account in the instant case is not justified. We therefore hold tha .....

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Year 2009-10. For the sake of convenience, these were heard together and are being disposed of by this common order. 2. Facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of Civil Construction. It filed its return of income on 19-09-2009 declaring total income of ₹ 41,21,819/-. During the course of assessment proceedings the Assessing Officer noted that assessee firm has shown net profit of ₹ 47,21,819/- on a total turnover of ₹ 8,6 .....

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mparison to previous year. 3. On being asked by the Assessing Officer it was claimed that the fall in profit was due to increase in labour, material and overhead cost. The assessee firm also submitted the comparative details of gross profit/operational profit for the preceding year as well as current year. From the various details furnished by the assessee the Assessing Officer noted that there is substantial increase in Diesel, Petrol, Salary and Bonus, Wages and Transportation charges. From th .....

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ages claimed at ₹ 1,83,01,225/- as against ₹ 1,30,66,346/- in the preceding year cannot be justified. Similarly, from verification of the transport bills, he noted that the bills do not show Telephone No., Registration No., detailed addresses etc. The transport bills do not show the mode of Vehicle, Vehicle No. etc. Therefore, he was of the opinion that independent verification cannot be made. Further, the transport bill does not support voucher of Hamali expenses. He therefore was o .....

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bill was tampered since as against the date 28-02- 2009 it was hand written earlier as 28-02-2008. Further, certain bills were computerised print outs and do not contain detailed addresses, contact number, registration number etc. On being questioned by the Assessing Officer, it was clarified that in this line of business the persons involved therein are from remote villages and are mostly uneducated. However, the AO was not satisfied with the explanation given by the assessee and observed that .....

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arious explanations given by the assessee and observing that the assessee firm failed to justify the fall in GP from 19.26% in the preceding year to 13.60% in the impugned assessment year, the Assessing Officer adopted 20% GP holding the same to be most reasonable. Since the assessee has already offered GP rate of 13.60% during the year under consideration the balance 6.4% on turnover of which comes to ₹ 55,08,898/- was treated by him as suppressed profit of the impugned assessment year. H .....

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l as detailed addresses and contact numbers of suppliers. Further, some of the bills are not even signed or stamped, therefore, the bills and vouchers of the assessee firm cannot be relied upon fully. He, therefore, upheld the action of the Assessing Officer in rejecting the book results. 5. So far as the adoption of GP profit @20% adopted by the Assessing Officer as against 13.60% by the assessee is concerned he observed that the assessee was not able to explain the fall in GP rate from 19.26% .....

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8% then the net profit will be ₹ 69,50,123/- as against net profit of ₹ 47,21,819/- leaving the difference of ₹ 22,28,304/-. However, considering the fact that certain percentage has been retained by M/s. Right Construction from whom the assessee has received some contract work, he held that a lumpsum addition of ₹ 20 lakhs will meet the ends of justice. He accordingly directed the AO to restrict the addition of ₹ 20 lakhs. 6. Aggrieved with such part relief given .....

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ted accounts of the assessee. 3) On the facts and in the circumstances of the case, Learned CIT (Appeals) erred in maintaining the addition of ₹ 20 lacs made by the assessing officer by estimating the gross profit of the assessee. 4) Any other grounds of Appeal that may be raised at the time of hearing of the appeal." Grounds by Revenue : "1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in restricting the addition made by the A .....

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oks of accounts. 3. Whether on the facts and in the circumstances of the case and in law the CIT(A) was justified in restricting the addition made by the AO on account of fall in gross profit when the assessee could not prove the allocation of cost among sub-let, sub contract and other contracts alongwith supporting purchases and expenses bills for such work. 4. The appellant craves leave to add, amend or alter any of the above grounds of appeal" 7. The Ld. Counsel for the assessee strongly .....

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rt expenses do not give the mode of transport and vehicle number etc., and (3) the payment to sub contractors are not fully verifiable due to incomplete address and most of the payments are made by cash. 8. So far as the signature of the labourers in English is concerned he submitted that the same cannot be a ground for rejection of the book results. Now-a-days even highly educated persons are doing labour work, therefore, merely because some of the labourers have signed in English the same cann .....

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ed by him he submitted that since Shri Khilari Balasaheb has issued the bills giving full details, PAN Number and TDS has been made, therefore, the AO should not have disbelieved the transportation charges. He submitted that the other transportation charges are hardly about ₹ 13,000/- paid to 4 persons. Therefore, in absence of any adverse material before the AO, the AO should not have rejected the book results on account of transportation charges. 9. Explaining the payments made to the su .....

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attention of the Bench to page 93 of the paper book where the date was overwritten, i.e. as against 28-02-2009 it was earlier written as 28-02-2008. He submitted that mistake can happen by anybody and since it was a hand written bill merely because there is some overwriting the book results cannot be rejected on this trivial defect. 10. Referring to page 102 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the profit and loss account and submitted that as ag .....

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and 12.18% on other contract work. Therefore, when the assessee receives the contract amount from the principal contractor as a sub contractor profit percentage cannot be higher like that of a contractor. 11. Referring to the assessment order for A.Y. 2006-07 he submitted that in that year the assessee had not given the list of sundry debtors, sundry creditors and work in progress for which the book results were rejected. However, for the current year there is no such defect. The assessee has f .....

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ble Bombay High Court in the case of R.B. Jessaram Fatechand (Sugar Department) Vs. CIT reported in 75 ITR 33 he submitted that the Hon'ble High Court in the said decision has held that books of accounts cannot be rejected and profit estimated merely on the ground that address of the assessees are not mentioned in the case of cash transactions. He accordingly submitted that the CIT(A) was not justified in upholding the rejection of books of account and sustaining addition of ₹ 20,00,00 .....

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have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case is engaged in the business of Civil Construction. It has received contracts from Government Departments as well as from private parties as sub contractor. The gross profit declared by the assessee during the impugned assessm .....

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of the transport bills do not contain the mode of transport and the vehicle numbers etc. Further, the payments made to the sub contractors are made in cash and the bills issued by them do not give complete address and contact numbers and registration no. etc. Further, there was overwriting of date in one bill. In view of the above and considering the fact that the GP for the impugned assessment year is less than the preceding assessment year, he rejected the book results and adopted 20% GP. 14. .....

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made from the transportation charges. The balance amount is paid to 4 persons totalling to ₹ 13,210/-. Further, complete address of all the 5 transports are given. Therefore, under these circumstances, we are of the considered opinion that the Assessing Officer should not have disbelieved the transportation charges. Similarly, the other ground on which the AO rejected the books of account is that some of the signatures are in English in the wage register and that is an incomplete wage reg .....

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k that the assessee has given complete address of the 17 labour contractors giving their name, address, etc. The assessee has given PAN Numbers in all cases and TDS has been deducted from such payments. Under these circumstances we do not find any justification for rejecting the book results. So far as the other observation of the Assessing Officer that in one of the bill there is some overwriting the same in our opinion is too silly and cannot be a ground for rejecting the entire book result. 1 .....

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