TMI Blog2012 (8) TMI 1206X X X X Extracts X X X X X X X X Extracts X X X X ..... Chandi/2011 has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that the rejection of books of account by the Assessing Officer was not in order, without appreciating the fact that there were a number of defects in the books of accounts as discussed at Page-2 of the assessment order by the Assessing Officer. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that the rejection of books of account by the A.O. was not in order, without appreciating the fact Cheques in transit, trade creditors and bank balance as per books did not tally with the Balance-sheet filed by the assessee. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 11,73,861/- made by applying net profit @ 12% of total receipts of Rs. 97,82,181/- following the judgement of Hon ble Punjab Haryana High Court in the case of M/s Prabhat Kumar Contractor, Sirs in ITA No. 293of 2008 dated 14.11.200. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 8,04,948/- made on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The ground No.4 raised by the Revenue is against the deletion of addition of Rs.8,04,948/- on account of raw material and work in progress. 10. The brief facts of the case are that the assessee was a civil contractor and during the year under consideration had declared net profit rate of 0.21% on gross receipts of Rs.97,82,181/-. The assessee during the year under consideration had declared GP rate of 3.71% as against GP rate of 8.02% declared in the preceding year. The reasons for fall in GP rate were explained by the assessee to be on account of rapid increase in cost of raw material, labour and increase in turn over. The Assessing Officer requisitioned the assessee to produce the books of account and the same were though produced but after many opportunities allowed by the Assessing Officer. The Assessing Officer asked the assessee to establish that the said books of account were maintained in the regular course of contract business. 11. The Assessing Officer rejected the books of account in view of the provisions of section 145 of the Act and estimated the income from contract work receipt of Rs.97,82,181/-, in view of the judgment of Hon'ble Punjab Haryan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avoid the provisions of section 40A(3) of the Income Tax Act. iv) Muster roll /quittance roll were not maintained. v) The assessee declared the contract receipts on receipt basis whereas per column 11 (a) of the audit report, the assessee firm was following mercantile system of accounting. vi) The gross profit declared was 3.71% of the gross payment which is 'which is extremely on lower side. The assessee firm merely stated that it was all due to rapid increase in the cost of raw material and labour and increase in turnover. It is worthwhile to mention that in the preceding year the assessee firm declared G.P. @8.02%. vii) The- assessee firm claimed a-consolidated amount of expenditure of Rs.90,30,3397/- under The sub head for raw- material, labour and Misc Expenses etc. No separate records were maintained raising a serious doubt over the genuineness of the books of account maintained by the assessee firm. viii) No direct expenses on account of salary paid to staff, telephone, electricity, printing and stationery were declared by the assessee firm. ix) The cheques in transit declared by the assessee firm, the balance sheet at Rs.658561/- were already received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and also discrepancies in the Balance Sheet, there was no merit in the order of the CIT (Appeals) and the rejection of books of account is upheld. In view thereof, where the books of account of the assessee have been rejected, there is no option but to estimate the net profit rate in the hands of the assessee in order to compute the income for the year under consideration. 18. We find no merit in the order of the Assessing Officer in adopting net profit rate of 12% to determine the income of the assessee. We find that similar issue of adoption of net profit rate to determine the income in the hands of the assessee, where the books of account had been rejected, arose before the Tribunal in Shri Sukhwinder Singh Vs. ITO. The Tribunal in Sukhwinder Singh Vs. JCIT, Kurukshetra in ITA No.1461/Chd/2010 vide dated 24.11.2011 held as under : 10. The second issue to be addressed in the case is the application of NP ratio. The Tribunal (supra) in assessee s own case relating to assessment year 2005-06 had directed the application of net profit rate of 1.08% to the gross receipts of Rs.3.22 crores in comparison to net profit rate of 6.5% to the total receipts applied by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome in the hands of the assessee in line with our directions in paras hereinabove. Ground Nos.1 and 2 raised by the Revenue are partly allowed. 20. The last issue raised by the assessee is against the deletion of Rs.8,04,948/-. The said addition was made in the hands of the assessee as the Assessing Officer noted that though the assessee had declared Rs.8,04,948/- under sub-head work in progress in the Balance Sheet but the same was missing in the trading account. The Assessing Officer thus made the addition of Rs.8,04,948/-. 21. The CIT (Appeals) deleted the addition observing as under: 6. With regard to the addition of Rs. 804948/- on account of work in progress, contested in ground no. 3 of appeal, the AR submitted that this has already been taken into account in the total works cost as under:- (a) Opening stock of material at site W.I.P. 15,43,693/- (b) Add; Purchase of Material during the year 56,94,626/- (c ) Add; Labour Charges 25,45,759/- (d) Add; other Expenses 51,309/- (e) Less; Closing st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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