TMI Blog2018 (1) TMI 1608X X X X Extracts X X X X X X X X Extracts X X X X ..... JASTHAN HIGH COURT] . In assessee s case, the net profit rate subject to deduction of depreciation and interest comes @8.09% of the gross receipts, which is more than 8%. Wherever even books of account are rejected by the Assessing Officer then also no trading addition is required to be made as held in the case of CIT Vs Gotan Lime Khanij Udhyog [2001 (7) TMI 19 - RAJASTHAN HIGH COURT] . CIT(A) was not justified in sustaining the part addition in both business of the assessee. Hence, appeal of the assessee stands allowed. - ITA No. 986/JP/2017 - - - Dated:- 24-1-2018 - SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM For The Assessee : Shri Vijay Goyal (CA) For The Revenue : Shri Jagdish Chand Kulhari (JCIT) ORDER PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A)-3, Jaipur dated 27/10/2017 for the A.Y. 2013-14. 2. The return of income was e-filed on 30/09/2013 declaring total income of ₹ 42,78,480/-. The Assessing Officer rejected the books of account and estimated the net profit @ 8% and made addition of ₹ 77,16,268/- on the contract receipts of ₹ 9,64,53,345/-. The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst addition of ₹ 44,70,845/- made by the Assessing Officer on contract business. The ld. CIT(A) has also applied net profit @ 5.1% on the declared turnover of grit business and sustained the addition of ₹ 34,56,257/-. 5. While pleading on behalf of the assessee, the ld AR has submitted as under: A) Regarding rejection of books of accounts a) The ld. AO rejected the books of accounts for the following reasons: - i) No separate account of contract business and grit business has been maintained by the assessee. ii) Detail of day to day expenses and consumption of material are not maintained. iii) On perusal of expenses debited in trading P L account for the year ended on 31.03.2013, it is seen that assessee has debited major expenses under the single head i.e. contract expenses amounting to ₹ 13,02,74,691/-. During the course of verification proceedings, it was seen that contract expenses purchases were not fully backed by the vouchers showing the proper evidences. No vouchers in support of expenses claimed in P L account such as drilling blasting, Repair Maintenance were found to be fully maintained. b) Regarding defects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n) iii) Major expenses debited under the single head i.e. contract expenses The A.O. has stated in his order that all the expenses have been debited in single head Contract Expenses but the Income Tax Act does not provide any particulars procedure for maintenance of books of accounts. The Act provides method form which profit of Business ascertained and not the particular method of maintaining books of accounts and in fact we have debited all the expenses in single head contract Expenses and out audited contract account also showing all the expenses in single head as we have stated above Income tax Act does not provide any particular method of maintaining books of accounts and the profit can be ascertained on the basis of total of Expenses Shown in the contract. Further the nature of contractor ship business is somewhat of unorganized nature. Many a times a lot of small expenditure such as petty repairs of machines, procurement of small goods from local market. The business expediency also some times leads to procuring of some material without vouchers but these are of very small amount and that even does not mean that such expenditure are not made or bogus under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on guess and estimation. The assessee is maintaining the common set of books of accounts, therefore the trading results of the assessee should have been compute commonly and this practice has been adopted and accepted by ld. AO in AY 2011-12 and AY 2012-13, therefore there is no reason to change in such practice. It is further relevant to mention here that while estimating the NP of the assessee of both business the NP rate of 5.10% has been applied by ld CIT(A) C) Further to above submission the assessee submit that : - a) the ld A.O. has rejected the books of accounts of the assessee and invoked provisions of section 145(3) of Income Tax Act and estimated the income of the assessee by applying section 144 of Income Tax Act. The rejection of books of account does not give unfettered power to assess the income of a person. Section 144 of Income Tax Act provides best judgment assessment meaning thereby the A.O. is bound to assess a fair income by considering the results of inquiries conducted by him, past history of the assessee and comparative cases. In this case the ld. A.O. has not taken into account past history of the assessee and no any comparative case was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross contract receipts subject to further deduction of depreciation, interest and remuneration to partner held as reasonable. c) Assistant Commissioner Of Income Tax Vs. Prabhu Dayal Kanojiya ITA NO. 418/JP/2010; ASST. YR. 2007-08 11th November, 2010 (2011) 137 TTJ 0004 (UO) : [2011] 8 ITR 45 Copy at PB 71-75 Rejection of books of accounts - Net profit rate - Held that: - CIT(A) was justified to the extent that the net profit rate should be allowed subject to depreciation and interest. Since the net profit rate subject to depreciation and interest is more than 8 per cent., therefore, there was no case of confirming the addition of ₹ 3 lakhs. d) DCIT Circle-5, Jaipur Vs Rishabh Construction Pvt Ltd ITA No 1081/JP/2011 order dated 30/08/2012 Asstt Year 2008-2009, of Jaipur Bench (Copy at PB Pg 76-77) wherein the NP rate of 8% subject to deduction of depreciation and interest was held as reasonable in the case of civil contractors. In assessee s case the NP rate subject to deduction of depreciation and interest is 8.09% of gross receipts which is more than 8% therefore no further trading should be made as held in above cases by Jaipur ITAT. This may be seen f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account is justified. However, with regard to claim of estimation of net profit of business other than the grit business, the Bench find that the ld. CIT(A) has relied on the findings of the ITAT in the case of A.Y. 2010-11. However, in the decision for the A.Y. 2011-12, the ITAT has found that the declared profit of the assessee was more than 8% of the gross receipts subject to deduction on account of depreciation and interest, therefore, the addition was deleted. It is also established that the facts with regard to the claim of depreciation for A.Y. 2011-12 and for the assessment year under consideration were different from the facts of A.Y. 2010-11, for the reason that there is a huge increase in the claim of depreciation on account of purchase of new plant and machinery. In the A.Y. 2010- 11, the claim of depreciation was 58,97,727/- while in the year under consideration, it was 85,46,112/-. Further the gross profit rate of assessee of last few years are summarized as under: AY Total Turnover Gross Profit GP Rate 2013-14 15,82,78,563 1,39,60,383 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Profit from contract and grit business 30,27,873 Add Depreciation 85,46,112 Interest Paid 39,20,689 Received -15,48,252 Net Interest Paid 23,72,437 Total business profit before interest and depreciation 1,39,46,422 Gross Receipts against contract 9,64,53,345 Gross Receipts against grit (As taken by AO) 7,58,25,218 Total receipts 17,22,78,563 % of profit on gross receipts 8.09% It is also pertinent to note that wherever even books of account are rejected by the Assessing Officer then also no trading addition is requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer. The ld Assessing Officer applied Section 145(3) and rejected the book result on the ground that required details of contract expense were not submitted before him. Therefore, we confirm the order of rejection U/s 145(3), which has not been challenged by the assessee. However, estimate made by the ld Assessing Officer and confirmed by the ld CIT(A) is higher side, which would give net profit rate of 12.84% before depreciation, which is not possible in contract business. It is also fact that required details of contract expenses were not submitted before the Assessing Officer and net profit has declined for which the assessee explained that price has gone up. He also referred the cost of inflation index for this purpose, which supports the assessee s claim. The lower authorities also have not compared the case with other assessee s for estimating the NP rate, therefore, in the interest of justice, we apply N.P. rate @ 5.1% on turnover of ₹ 14,71,70,861/- and remaining addition is deleted. The Assessing Officer is directed to calculate the income as per the above finding. It is also noted that the facts of this year is different than last year in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parison to AY 2010-11 (8265004-5897727) -2367277 Less Interest Increase in Labour Cess in 2011-12 in comparison to AY 2010-11 (313993-0) -313993 Received 2745305 Increase in Sales Tax in 201112 in comparison to AY 201011 (1075725-654678) -424047 Paid 2461386 Increase in Royalty in 2011-12 in comparison to AY 2010-11 (789592-209219) -580373 Net Surplus in Interest (+)28391 9 Total Income before Interest 4219429 Profit as per Estimation 4419103 Interest Profit shown by assessee 4737173 Paid 2461386 Further Addition if any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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