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2016 (6) TMI 546 - ITAT JAIPUR

2016 (6) TMI 546 - ITAT JAIPUR - TMI - Trading addition - estimating of profit - rejection of books of accounts - CIT(A) deleted the addition - undisclosed and unexplained expenditure - Held that:- There was a certain payment made to subcontractors M/s Shoora Construction was noted. This was offered for tax in statement recorded during survey. However, in course of assessment proceedings, the assessee explained that the amount so offered is incurred as the expenditure by the assessee with refere .....

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n of books of account U/s 145(3) of the Act. When books of account has been rejected, the only alternate before the Assessing Officer to estimate the income on the basis of past history of the case, general knowledge about civil contract or by comparing the identical case. As all the civil contract has unique type of contract, which cannot be compared squarely. Therefore, the ld Assessing Officer has to consider the past history of the case including the decision of the Coordinate Bench. As subm .....

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ore, we find NP rate applied by the ld CIT(A) @ 7.5% is reasonable. Accordingly, we uphold the order of the ld CIT(A). - Decided in favour of assessee. - ITA No. 419/JP/2015 - Dated:- 28-4-2016 - SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM For The Revenue : Shri Kailash Mangal (JCIT) For The Assessee : Shri P.C. Parwal (CA) ORDER PER: T.R. MEENA, A.M. This is an appeal filed by the revenue against the order dated 11/02/2015 passed by the learned CIT(A)-I, Jaipur for A.Y. 2010-11. The effectiv .....

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uring survey in A.Y. 2010-11. 2. The assessee is a civil contractor. He filed return for A.Y. 2010-11 on 15/10/2010 declaring total income of ₹ 6,04,99,939/-. The case was scrutinized U/s 143(3) of the Income Tax Act, 1961 (in short the Act). Both the grounds of the revenue s appeal are against deleting the trading addition estimated by the Assessing Officer @ 7.5% subject to depreciation and interest and incriminating documents found during the course of survey. The ld Assessing Officer o .....

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ed in the construction of clear separate identifiable projects of civil construction then project-wise books of account are required to be maintained. However, the assessee had not maintained project wise books of account. The ld Assessing Officer verified the books of account during the assessment proceedings and he found that no proper supporting bills and vouchers were available with the assessee. No site wise/project wise books, stock register and vouchers etc. had been maintained. Therefore .....

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in reply that complete bills/vouchers could not be produced as the same were lying at work site and same were misplaced. He had further admitted that it was not possible for him to maintain the proper record and the expenses are not vouched or supported by self made vouchers. There was a survey U/s 143(3A) of the Act on 14/7/2011. In survey proceedings, it was found that the assessee was not recording all his transactions in his books of account. During the survey proceedings, various incrimina .....

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order. Therefore, the ld Assessing Officer concluded that the books of account maintained by the assessee are not reliable. Therefore, correct income from the contract business cannot be deduced. Accordingly he applied Section 145(3) of the Act and rejected the book result and estimated income. It is further held that in earlier year also, the books of account rejected under this Section, which was upheld by the ld CIT(A) up to A.Y. 2009-10. After rejecting the books of account, the ld Assessin .....

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case of civil contractor having gross receipt less than ₹ 40 lacs. The ld CIT(A)-I, Jaipur while deciding the case for A.Y. 2009-10 and adopted NP rate of 10.26% and thereafter accepted the assessee plea that part of increase in net profit rate was on account of proprietory concern having been converted into the partnership firm. This resulted in an increase in profit rate by 1.37% because joint venture charges were no longer payable. The ld CIT(A) after considering the assessee s contenti .....

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Mudaliyer Vs. CIT 61 ITR 644 (Madras) (v) CIT Vs Royala Corporation, 215 ITR 883 (Mad) He further allowed deduction on account of depreciation but interest paid to third person has not been allowed as deduction by considering the past history of the assessee. 3. Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had allowed the appeal partly by observing as under:- 3.1.2 I have duly considered AO's contention and app .....

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009 @ 7% subject to depreciation & interest [ Ref: pg 11 para 7 of ITA No 697 & 776/JP/2011 ]. The facts of the present case are similar to the earlier years. Therefore, following past history and considering the facts of the case, I find it proper and reasonable to apply NP rate of 7.5% subject to depreciation and interest. From this, no further deduction in respect of JV charges will be allowed as the same has been considered while applying NP rate @ 7.5%. However, no separate addition .....

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the ld Assessing Officer that payment of ₹ 40,43,000/- in cash was made to M/s Shoora Construction company proprietor Shri Birbal Singh Shoora as ld Assessing Officer has estimated the income by rejecting book result and applied NP rate @ 8.9%. Therefore, no separate addition is required to be made. 4. Now the revenue is in appeal before us. The Ld. DR vehemently supported the order of the Assessing Officer and argued that there was a survey U/s 133A of the Act on 14/07/2011 and am Ultra- .....

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(A) and further argued that the assessee s case is covered by the Hon ble ITAT, Jaipur Bench decision for A.Y. 2009-10 in ITA No. 815/JP/2012 order dated 24/07/2015. He further submitted that when books of account has been rejected U/s 145(3) of the Act, the ld Assessing Officer has only alternate to estimate the income U/s 144 of the Act, which provides best judgment by considering all material available, which the ld Assessing Officer has gathered, but it should not be an act of dishonestly or .....

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and though there must necessarily be guess work in the matter, it must be an honest guess work. The ld Assessing Officer applied NP rate @ 8.9% arbitrarily and without considering the assessee s own past history. He summarized the past history of the case as under:- A.Y. Gross Contract Receipts N.P. rate declared by assessee (before dep. and interest) N.P. rate applied by A.O. (subject to depreciation) N.P. rate applied by CIT(A) and upheld by ITAT (subject to depreciation and interest) 2010-11 .....

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st. Considering the past history, the ld CIT(A) applied NP rate of 7.5% subject to depreciation and interest, therefore, he prayed to confirm the order of the ld CIT(A). He further placed reliance on the following case laws:- (i) CIT Vs Gupta K.N. Construction Company (2015) 116 DTR 377 (Raj). (ii) CIT Vs Inani Marbles Pvt. Ltd. 316 ITR 125 (Raj.) (iii) Kansara Bearings P Ltd. Vs. ACIT 270 ITR 235 (Raj). (iv) CIT Vs Bhawan Path Nirman (Bohra) & Co. 258 ITR 431. Regarding ground No. 2 raised .....

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