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PRINCIPAL COMMISSIONER OF INCOME-TAX-21 Versus M/s MEHTA CONSTRUCTION CO.

2018 (2) TMI 881 - DELHI HIGH COURT

Rejection of books of accounts - G.P. Rate determination - Held that:- In the present case, it is quite evident that the Assessee had maintained the books of accounts. On that score, the ITAT is correct, however, the proceedings before the Assessing Officer and his order would reveal that there are gaps with respect to the materials sought but omitted to be produced. These related to various aspects of the Assesee’s road contract construction activity such as: (i) specific contracts entered into .....

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oubtedly reflects that queries were made from various sub-contractors, however, as to what was stated by them or what material was produced by them has not been discussed at all. - The court is of the considered view that the ITAT and the CIT(A) rather superficially examined the material and set aside the findings of the Assessing Officer. At the same time, the Assessing Officer’s order also is incomplete. In the peculiar circumstances, the matter is remitted to the CIT(A), who shall render .....

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ppeals is as follows:- Whether the lower Appellate Authority erred in setting aside the order of the Assessing Officer, who had rejected the Assessee s books of accounts for the AYs 2007-08, 2008-09, 2009-10 & 2010-11 and applied the G.P. Rate of 5% (for three years) and 3.5% for the AY 2008-09? 2. With the consent of counsel for parties, these appeals are heard finally. 3. Assessee is a Road Contractor. He, for the relevant assessment years, which are the subject matter of the present appea .....

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iture and net profit rate of 0.46%, 0.88%, 1.5% for different years, and on a best judgment basis, invoking his powers under Section 145, imposed the GP Rate of 5% and 3.5% in the one year i.e. AY 2008-09. The relevant position with respect to the turnover claimed, the GP Rate imposed and the orders made, are reproduced by way of a Chart which is as follows: ITA No. 316/2016 314/2016 315/2016 317/2016 AY 2007-08 2008-09 2009-10 2010-11 AO Order 30.12.2009 31.12.2010 26.12.2011 30.03.2013 Rate of .....

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of Appeals, who considered the Assessee s contentions was of the opinion that the Assessing Officer s rejection of the books was not justified. It was held that after considering the ratio of various judgments, the CIT(A) for the AY 2007-08 and 2008-09 held as follows: I have carefully considered the facts of the case, the important aspects which immerge from the present appeal are- 1. The Method of accounting has been accepted for several years on same set of facts. Reliance is placed on 294 I .....

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ntained by the appellant which were also duly audited and no adverse inference was drawn by the auditor. If expenses claimed remained unexplained, A.O could have disallowed the same without rejecting the books of accounts 325 ITR 13 (Delhi) Commissioner of Income-Tax v. Paradise Holidays. 4. The appellant has not been provided with details of comparable cases relied upon 68 ITR 796(Kerala) Joseph Thomas and Brothers. V. Commissioner of Income-Tax, Kerala & 210 ITR 103 (Calcutta) Commissioner .....

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ence and material 8 STC 770 (SC) Raghubar Mandal harihar Mandal v. the State of Bihar 7. Best judgment assessment to be made (estimation shall have a rational nexus to the available material and the circumstances of the cases 60 ITR 239 (SC) State of Kerala C. Velukutty. In view of the facts and circumstances of the case and judicial pronouncements relied upon by the appellant, the Assessing Officer was not justified in rejecting the books of accounts, by applying section 145(3) of the IT Act an .....

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s "Must Roll as the requirement of Labour Law for the business and Assessing Authority has failed in appreciating the expenses incurred" such like. The expenditure are closely connected, and incidental to the work of the execution of contract without which the contracts cannot be completed. The appellant has stated in his reply that 'sitewise details of labour charges details are filed'. No such, details were filed during appellate proceedings. The appellant was therefore, aske .....

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in cash. All these payments are through self made vouchers. The claim of such expenses lacks third, parties verification. The assessee has not furnished for verification the labour musters to examine the genuineness of claims of such expenses. Considering the facts mentioned in the asstt. order, the appellant's arguments are not acceptable and the AO. had no alternative but to estimate the net profit. 13. The explanation given for the low N.P. rate is too vague and general. The rate of net p .....

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ncurred any expenditure on earning this income. Regarding non-exceptional items, the AO. has estimated net profit @ 5% of these receipts. In fact, in the same line of business, a higher rate of net profit has been upheld in the following decisions: 1. Zora Singh v CIT (2008) 173 Taxman 76 (P&H) 2. Bandi Co-op. Labour & Construction Society v CIT (2008) 300 ITR 102 (P&H) 3. CIT v Bhawan & Park Nirman (2002) 258 ITR 676 (Raj) 4. Arihant Builders Dev. & Inv. P Ltd. v ACIT (2007) .....

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entire receipts, he would have applied a higher N.P. rate. However, he has separately estimated income for both the heads and the net profit rate applied is justified in this context. 7. The ITAT-whose orders are impugned before this court under Section 260 A, was of the opinion, firstly, that the Assessing Officer did not render any specific finding as to how correct profits could not be deducted from the books of accounts maintained by the Assessee. Earlier, it was noticed that the Assessee h .....

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Tax v. B.N. Aggarwal and Others 259 ITR 754 (SC). As a consequence, all the appeals of the Revenue were rejected and the appeals of the Assessee for the two Assessment Years were allowed. The Revenue relies upon the findings of the Assessing Officer and highlights that besides the absence of Stock Register, the respondent-Assessee did not produce any material evidence in the form of invoices, contracts with its various sub-contractors and suppliers, the proof of quantities involved, muster roll .....

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ssing Officer had made inquiries by issuing notices under Section 131 and also conducted survey inquiries under Section 133 (6) by which various suppliers/sub-contractors were asked to appear in the proceedings. The Assessing Officer s order is absolutely silent on the justification or otherwise of the materials given by such third parties or the statements recorded by them. It was submitted that this established the genuineness of the expenses claimed by the Assessee. It was also highlighted th .....

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