TMI Blog2013 (7) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has derived income from contract work and bank interest. Audit report u/s. 44AB was filed. Gross receipts of the assessee from business is ₹ 39,77,88,561/- as per trading account. The assessee failed to produce the books of account before the AO. Therefore, the AO issued show cause notice to the assessee as to why addition should not be made of unconfirmed creditors and that why the books of account should not be rejected and 50% of the expenses should not be disallowed. The AO noticed in the assessment order that the assessee incurred various expenses and in the absence of any objection to the notice, 50% of the expenses under various heads were disallowed in a sum of ₹ 9,16,55,092/-. The AO made addition of ₹ 1,25,33,911/- as unconfirmed creditors. Both the additions were challenged before the ld. CIT(A). The assessee submitted that initially the assessee could not appear because of the illness. It was submitted in the written submissions that various details, all list of bills and material, details of monthly expenses under different heads, bank statement and other details were produced before the AO and form part of the record. It was submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Govt. agencies. In respect of the creditors, it was reported that the assessee has submitted a chart wherein he compared the outstanding balances of the creditors as on 31.03.2008 with last year as on 31.03.2007. The assessee claimed that on 31.03.2007, a balance of ₹ 4,37,12,147/- was outstanding to 39 creditors but during the year, 12 creditors were paid full outstanding amount and in remaining cases, part payment was made or they increased during the year. During the remand proceedings, the assessee filed list of creditors with their address and confirmation on affidavit. Affidavits were filed in 24 cases. The creditors were test checked through Sr. TA of the Circle. Only 8 creditors living in Etah and nearby were identified and 133(6) on creditors were served and their confirmations of outstanding balances and affidavits issued by them were obtained. The Sr. TA reported that all these persons were found to exist and given address and they confirmed that they work for assessee and the amount was due at the end of the year. The assessee, however, failed to file confirmation in respect of three credits, which are IOC, Rajeev Vashishtha and Boby Gitti. These creditors w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of account were produced in remand proceedings but non-production of books during assessment raises element of doubt on the authenticity and reliability of these books. (ii) Some portion of expenses are unverifiable, as reported by the AO. (iii) However, most of the creditors balances are verified and confirmed. Besides above, I find that the appellant s own case for A.Y. 2005- 06 was completed u/s 143(3) at a NP rate of 3.1% while the appellant had declared NP of 2.1% thus, by addition of 1% N.P. The N.P. declared by the appellant for this year is of around 4.5%. I hold that in view of non-production of books during assessment, and non-verifiability of the expenses; some additions is justified. Considering the totality of facts and circumstances, I hold that it will be meet both the ends of justice if the appellant s income is assessed by adopting N.P. rate of 7%. This rate of 7% is chosen because in assessee s business, if books are not maintained, then the presumptive rate of tax is 8% quite many civil contractors declare an NP of 7-8%. The AO is directed to compute the income accordingly. 4. The ld. DR merely relied upon the order of the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not in dispute that the assessee produced books of account and vouchers before the AO at the remand proceedings, which have been examined and test checked by the AO. The assessee is in the business of contractor and was doing civil contract work mostly for the government agencies as per explanation of the assessee, where the profit margin is always low. Some of the expenses were also verified by the AO at the remand proceedings and fund to be correct. Thus, the reasons given by the assessee for non-production of the complete details at the assessment stage as such was fully explained that due to political rivalry and registration of criminal cases against the partners of the assessee firm, complete details could not be produced at the assessment stage. Therefore, the ld. CIT(A) was justified in considering such circumstances for deciding the issue on merit and considering the evidences and material available on record. The ld. CIT(A) found that in assessment year 2005-06, assessment was completed u/s. 143(3) at the NP rate of 3.1%. In the assessment year under appeal, the assessee has declared NP rate of 4.5%. Therefore, the ld. CIT(A) considering the history of the assessee cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey have confirmed their debit balances. The AO, however, noted that in the remaining three cases, no confirmations were filed but in the paper book, similar three creditors confirmations have been filed. Creditors in their confirmations have confirmed that they have supplied Mitti, Dust, bricks, cement, pipes etc. to the assessee in the year 2007-08 and there were outstanding balance lying with the assessee. In some other cases, creditors have supplied road rollers, JCB machine on rent to the assessee and the some amounts were outstanding at the end of the year. The assessee also filed balance sheet of earlier year ending on 31.03.2007 with list of Sundry creditors. The same is also compared with the list of sundry creditors of this year and most of the outstanding balances are coming from earlier year. Therefore, finding of the AO cannot be sustained. It is not in dispute that the creditors have provided building material for civil construction work and road roller and JCB machine to the assessee for the business activities of the assessee. Therefore, on use of building material and above machines, if some outstanding amount is left due at the end of financial year, which is conf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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