Raj Kumar Babutta, Jaipur vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 346/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2008-09 Raj Kumar Babutta cuke The Addl. C.I.T. 169, Ganpati Plaza, M.I. Road, Vs. Range-2, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACNPB 1052 E vihykFkhZ@Appellant izR;FkhZ@Respondent

vk;dj vihy la-@ITA No. 314/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2008-09

The A.C.I.T. cuke Shri Raj Kumar Babutta Circle-2, Jaipur. Vs. Prop. M/s Vaishno Associates, 169, 1st Floor, Ganpati Plaza, M.I. Road, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACNPB 1052 E izR;k{ksid@Objector izR;FkhZ@Respondent

vk;dj vihy la-@ITA No. 950/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2009-10

The D.C.I.T. cuke Shri Raj Kumar Babutta Circle-2, Jaipur. Vs. Prop. M/s Vaishno Associates, 169, 1st Floor, Ganpati Plaza, M.I. Road, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACNPB 1052 E vihykFkhZ@Appellant izR;FkhZ@Respondent 2 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

vk;dj vihy la-@ITA No. 05/JP/2013 fu/kZkj.k o"kZ@Assessment Year : 2009-10

Shri Raj Kumar Babutta cuke The Addl. CIT Prop. M/s Vaishno Associates, Vs. Range-2, Jaipur. st 169, 1 Floor, Ganpati Plaza, M.I. Road, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACNPB 1052 E vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Dilip Shivpuri (Advocate) jktLo dh vksj ls@ Revenue by : Ms. Neena Jeph Sr. DR.

lquokbZ dh rkjh[k@ Date of Hearing : 08/12/2014 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 13/02/2015

vkns'k@ ORDER

PER: R.P. TOLANI, J.M.

This is a set of cross appeals for A.Ys. 2008-09 and 2009-10 filed

by the assessee as well as the revenue against the order of learned

CIT(A)-I, Jaipur dated 17/01/2012 for A.Y. 2008-09 and 18/10/2012 for

A.Y. 2009-10. Respective grounds of assessee's as well as the revenue's

appeals are as under:-

Grounds in Assessee's Appeal for A.Y. 2008-09 "1. That the learned Commissioner of Income tax (Appeals) is erred in law in fact in confirming the action of learned Assessing Officer of rejection of books of account of the assessee without taking into consideration that books of account and records of the assessee are complete and made according to 3 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

provisions of section 145(1) and 145(2) and therefore these cannot be rejected and provisions of section 145(3) cannot be applied.

2. That the learned commissioner of Income Tax (Appeals) has erred in law and in facts by confirming NP rate at 6.15% without taking into consideration that when books of accounts of assessee are complete in all respects and furthermore, reflects true and fair financial position, there is no requirement of such estimation looking to past history of the case.

3. That the learned Commissioner of Income Tax (Appeals) has erred in law and in facts in not allowing deduction of in-operative expenses including Depreciation, Interest, Bank Charges and Cash brokerage from the estimated rate of net profit.

4. That the appellant may take leave to add, amend, delete, substitute, incorporate any of the grounds of appeal before or at the time of hearing of their appeal."

Ground in Revenue's Appeal for A.Y. 2008-09 "Whether on the facts and in the circumstances of the case and in law the learned CIT(A) is justified in law in directing to apply N.P. rate of 6.15% as against 8% applied by the A.O. even though the rejection of books of accounts have been upheld." Ground in Revenue's Appeal for A.Y. 2009-10 "Whether on the facts and in the circumstances of the case and in law the learned CIT(A) was justified in reducing the N.P. rate to 6.15% as against 8% applied by the A.O. despite upholding the rejection of books of accounts."

Grounds in Assessee's Appeal for A.Y. 2009-10 4 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

"1. That the learned Commissioner of Income tax (Appeals) is erred in law in fact in confirming the action of learned Assessing Officer of rejection of books of account of the assessee without taking into consideration that books of account and records are complete and made according to provisions of section 145(1) and 145(2) and no specific defects were pointed out therein.

2. That the learned commissioner of Income Tax (Appeals) has erred in law and in facts by confirming NP rate at 6.15%.

3. That the learned Commissioner of Income Tax (Appeals) has erred in law and in facts in not allowing deduction of in-operative expenses including Depreciation, Interest, Bank Charges and Cash brokerage from the estimated rate of net profit.

4. That the appellant may take leave to add, amend, delete, substitute, incorporate any of the grounds of appeal before or at the time of hearing of their appeal."

2. Brief facts of the case are as under:-

1. The assessee is a works contractor for Jaipur Vidhyut Vitran Nigam Limited, Jaipur Development Authority, Rajasthan State Road Development Corporation, Urban Improvement Trust, Udaipur, RIICO Limited and Rajasthan Housing Board. Assessee is regularly assessed, proper books of accounts are maintained and audited. Details of assessee's book results for different preceding years as well as year under consideration are as under:-

5 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

Assessment 2006-07 2007-08 2008-09 2009-10 Year Sales/Job 20234111/- 132447407/- 200604674/- 240597598/-

Work Receipts Gross Profit 1587812/- 9647716/- 19266536/- 24850895/-

G.P. Rate 7.84% 7.28% 9.60% 10.33% Operating 789871/- 5166451/- 11168124/- 16817386/- Profit Operating 3.90% 3.90% 5.57% 6.99% Profit Rate Net Profit 585549/- 4873811/- 10073044/- 12209290/- Net Profit 2.89% 3.68% 5.02% 5.07% Rate Income Tax 67789/- 1395495/- 3287173/- 3957780/- Paid as per return

According to assessee above chart depicts that he has been offering better results on year to year basis and despite increased Turnover G.P. rate, operating Profit rate and N.P. rate has shown continuous uptrend. These figures demonstrate that assessee has claimed comparatively lesser expenses on more turnover. Assessee's case for Assessment Year 2006-07 was underken in scrutiny by the Income Tax Officer, ward 2(4), Jaipur and trading addition for Rs.1,22,645l- was made by increasing the net profit rate from 2.89% to 3.50%. In appeal this trading addition was deleted thus the returned income showing operating profit of 3.90% & NP of 2.89% was finally accepted.

ii. For the assessment years 2008-09 and 2009-10 which are in question, though the OP and N.P. rates are far better than earlier years despite increased turnover, ld. AO arbitrarily rejected 6 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

the books of accounts for no justifiable reason, forgetting the past history, estimated the net income at 8% rate in both the years. In first appeal, the N.P. rate is reduced by ld. CIT(A) to 6.15% in both years upholding the arbitrary rejection of books of accounts. Aggrieved both the parties are before us assessee against rejection of books and estimation of NP @ 6.15%; revenue is in appeal against the part relief.

3. Ld. Counsel for the assessee contends that all the contract

receipts are from Government departments or corporations and other

similar bodies; receipts are subjected to tax deduction certificates from

principals, therefore, there is no issue whatsoever about the receipt

side. Likewise all the purchases are made from registered parties and

assessee is subject to verification by Commercial Taxes Department

also. Each of the input Tax credits are verified by them and due refunds

were allowed vide their assessment orders after detailed scrutiny.

3.1 The assessee has maintained day to day stock register, statement

and copies of accounts showing complete quantitative details have been

filed with the Assessing Officer along with assessee's replies from time

to time during the assessment proceedings; they are part of the record.

The stock summary reflecting item wise stock with inward and outward

details were filed, thus it is wrongly held by lower authorities that stock 7 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

registers are not produced. Whatever was asked by AO has been

diligently complied with and there is no allegation of non cooperation

against assessee. In assessment order some mistake pf superficial

nature are pointed out which in fact have been explained within the

parameters of discharge of burden on the assessee. Ld. AO wanted

some information which was not in the reach of assessee and some

statements taken in the absence of assessee have been relied without

opportunity of cross examination. The rejection of books based on such

arbitrary reasons is grossly unjustified. An action which is serious in

nature has been recourse to by authorities below in a very casual

manner.

3.2 During the year, the assessee has incurred about cost of

Rs.27261991/- against total contract of Rs.240597598/- which comes to

11.33% of total receipts which is less than benchmark BSR rate and G-

schedule rate which clearly demonstrates that there is no inflation of

payment in order to reduce profits for avoidance of tax. This in turn

shows that the assessee has got completed govt. tenders on lesser

competitive rates and by diligently incurring lesser input cost has

declared more business income resulting; it suggests total diligence and

discretion from the side of the assessee.

8 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

3.3 The assessee has given a comparative chart of labour cost

incurred on such contracts on PWD-BSR rates as well as G-Schedule,

which are the government prescribed parameters and the labour cost

incurred by the assessee for both the years. These charts are as under:

ASSESSMENT YEAR 2008-09 Computation of comparative labour cost based on PWD BRS rate, G-Schedule rate and labour cost:

Particulars (A) Labour Cost (B) Contract value %age of (C) labour cost to contract value (D=B/C) Labour cost based on 23761995.00 198016627.00 12.00% the PWD-BSR rates Labour cost based on 25742162.00 198016627.00 13.00% the G-schedule Labour cost incurred 22463247.00 198016627.00 11.34% and booked in the books of account

ASSESSMENT YEAR 2009-10 Computation of comparative labour cost based on PWD BRS rate, G-Schedule rate and labour cost:

Particulars (A) Labour Cost (B) Contract value %age of (C) labour cost to contract value (D=B/C) Labour cost based on 23761995.00 198016627.00 12.00% the PWD-BSR rates Labour cost based on 25742162.00 198016627.00 13.00% the G-schedule Labour cost incurred 22463247.00 198016627.00 11.34% and booked in the books of account 9 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

The above charts demonstrate that the assessee's incurred cost is less

than the PWD-BSR rates as well as G-Schedule corroborating the fact

that the assessee has incurred comparatively low labour cost, which

includes the payment to sub-contractors, thus, no adverse inference

qua the sub-contractors can be made under these circumstances.

3.4 Sub letting the work to sub contractors is an essential feature of

assessee's business module. Despite copious compliance qua the sub

contractors' ld. AO without any information to the assessee issued

summons to different sub contractors for examination, out of 13

subcontractors, 3 complied with and their statements were recorded.

Thereafter, assessee was asked to produce the remaining, it was

humbly replied that their works were finished long back and now

assessee does not know their whereabouts; they may presently be

working at different places, it was not possible to produce them in short

span of time being given. Besides their TDS was deducted by assessee

u/s 194C their work may be cross verified from the departmental

record. Despite it assessee could produce 2 more sub contractors

before the learned assessing officer. Thus instead of appreciating the

practical aspects, material available on record and making due enquiries 10 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

from the I T record which was easily accessible to ld. AO, assessee's

books of accounts have been arbitrarily rejected. Ld. CIT(A) also didn't

dwell on these issues in a judicious manner and summarily upheld the

AO's action of rejection of books .

3.5 During the course of assessment, the assessing officer desired

assessee's explanation on various issues for the assessment year 2008-

09 which were replied in details on 18.10.2011 and 8.11.2011; they are

part of the record. Without adverting to or considering the contents of

replies, books have been rejected and NP has been estimated at

humongous 8% without paying any heed to the established past history

which is accepted by the department itself. It is surprising that in AY

2009-10 same allegations and observations are summarily repeated by

ld. AO which can be verified from the contents of both the orders,

which reflects non consideration of merits of assessee's explanation and

non application of judicial mind.

3.6 Ld. Counsel further contends that the alleged defects as pointed

out by the Ld. AO are concerned, they are vague and general in nature

qua which the assessee has given appropriate replies which can be

summarized as under:-

11 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

" AO's Reasons & assesses replies:

(i) Stock registers are not maintained:- It was replied that

they are properly maintained and the details of OB,

inwards, outwards and CB in terms of quantity, rate and

value have been duly filed. Besides, any variation in value

of closing stock is only preponment or postponement of

profits as the difference is allowable in the subsequent

years. Same is essentially revenue neutral.

(ii) Complete vouchers and primary documents of

expenses have not been maintained:- It was submitted

that out of total 2182 no. of vouchers, vouchers numbering

to 2177 were produced for examination under audit except

only five numbers of vouchers for petty expenses given

below:

1. Discount Rs. 21,795/-

2. Staff Medical expenses Rs. 5,000/-

3. Postage & Courier Rs. 400/-

4. Earnest Money forfeited Rs. 40,000/-

5. Compensation Rs. 3,525/-

Rs. 70,720/-

It is pleaded that it is travesty of assessment proceedings

that for not providing of few expenditure vouchers out of a 12 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

mammoth record has been held to be a potential reason

for rejection of books without appreciating that the

assessee has offered more profits in both years.

(iii) Payments made to subcontractors is not verifiable as they

do not exist or some of them have denied transactions:-

Assessee replied that all the subcontractors provide their

identity by PAN card and other documents. After

completion of the part of work the work is verified by the

site supervisor. This report is submitted to the head office

and after proper verification the payment is approved.

Thereafter it is paid by account payee cheques after due

TDS deduction. Thus, assessee has discharged its burden

in proving the identity of subcontractors, the work

executed, and genuineness of expenditure as it is by way

of account payee payments along with due TDS deduction.

Merely because some of the contractors were examined in

the absence of the assessee and did not remember of

transactions; it cannot be held as a means against the

assessee to reject the books of account. In the business of

the assessee, subcontractors keep on changing from site to

13 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

site. Assessee having maintained proper record to

corroborate his transactions has no further burden to

produce such subcontractors. Any adverse statement taken

in absence of the assessee without affording an

opportunity of cross examination is inadmissible evidence.

These invalid observations cannot be used as a means to

reject the books of account.

(iv) The assessee's point to point reply in specific terms is

mentioned under copious submissions made before the ld

CIT(A). Same are referred to by the ld counsel during the

course of hearing to buttress his contentions that the

queries were properly replied and there is no worthwhile

defects in the books of accounts, so as to be casually

rejected U/s 145(3) in order to get a leverage to willy nilly

estimate the profits. No appreciation has been given to the

glaring facts that the assessee's profits are better on every

count and front as compared to earlier years.

3.7 Without pointing out specific defects in the assessee's books of

accounts they cannot be rejected u/s 145(3) in casual manner, without

specifying material defects which make the ascertainment of profits 14 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

impossible for AO. When the evidence submitted by assessee

discharges the onus which lies on it, rejection of books is not

warranted. Assessee's books and record maintenance is proper, sound

and capable of reflecting the correct profits of the business not only by

the marerial available on record but by the accepted past history. It is

further evident from successively better rates of O. P.; G.P. & N.P. rates

declared by assessee despite higher turnover in these two years.

Reliance is placed on following judgments for these propositions

(i) ACIT Vs. Vijay Solvex Limited ITA No. 676/JP/2011 A.Y. 2006-07 dated 210/01/2012.

(ii) DCIT Vs. Vijay Industries ITA 952/JP/2010 A.Y. 2006-07 order dated 23/09/2011.

For the proposition that when day to day stock records of the

assessee are reasonably maintained, the books of account cannot be

rejected and GP cannot be applied.

3.8 Similar situation arose in the case of Pankaj Diamond Vs. ACIT 5

ITR 469 (Trib.) (Ahd.), ld. Assessing Officer insisted on quality wise

details of diamond lots and the assessee had reflected lesser GP, books

were rejected and profits estimated. The Ahmadabad Tribunal quashed

the rejection of books and consequent additions by holding that merely

because the assessee's GP was reduced; it cannot be a reason for 15 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

rejection of books. Assessee's facts are much better inasmuch as the

Profits earned are far better than earlier years. Besides in earlier and

subsequent years, the books of account which are maintained on same

method of voucher and stock keeping, valuation of inventories and

system with sub contractors. Further reliance is placed on the following

case laws:-

(i) DCIT Vs. Associated Stone Industries Limited 22 TW 155 (JP).

(ii) Ambika Textile Industries Vs. DCIT 22 TW 199 (JP).

(iii) Vadayattu Jewellery Vs. State of Kerela (1997) 104 STC 121, 126 (Ker.).

(iv) ST. Terrsa Oil Mills Vs. State of Kerala (1970) 76 ITR 365 (Ker.).

(v) CIT Vs. Smt. Poonam Rani 41 DTR 194 (Del.) (2010).

(vi) CIT Vs. Om Overseas 315 ITR 185 (P&H)

(vii) DCIT Vs. Paras Dyeing and Printing Mills P. Ltd. 4 ITR 29 (Trib.) (Ahd.) (2010).

(viii) CIT Vs. Jacksons House 198 Taxman 385 (Delhi).

(ix) CIT Vs. Jas Jack Elegance Exports 324 ITR 95/233 CTR 398 (Del.) (2010).

3.9 Alternatively ld. Counsel vehemently contends that the adoption

of estimated NP of 8% is highly unjustified, arbitrary and harsh. Merely

because books of accounts are rejected ld. AO cannot jettison the past 16 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

history and adopt an approach to tax the assessee at a presumptive

rate of taxation applicable to very small contractors. If at all the past

history of the assessee is most reliable and scientific way of estimating

the profits. Even if, the alleged nonexistent defects in the books are

assumed, by any stretch of imagination; lower authorities had no

justification in travelling beyond the past history for estimating the

profits. The results of these years being better than earlier years there

is no question of addition if even books of accounts are rejected. Thus

no demonstrative case has been made out by ld. AO or CIT(A), as to

why the earlier history should not be applied. Thus looking from any

angle the additions retained by ld. CIT(A) have no justification to stand,

therefore, they deserved to be deleted.

4. Ld. DR relied on the orders of AO.

5. We have heard the rival contentions and perused the material

available on record. From the record, it clearly emerges that the

assessee's turnover from contract works has increased in this two

years; the profitability on all parameters i.e. O P, G P & N P etc. also

has improved. Thus the assessee despite the competition and increased

turnover has been able to offer better profitability on all relevant

parameters.

17 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

5.1 Apropos the rejection of books of accounts. There is no issue on

the receipt side as they are from government undertakings on which

TDS has been deducted. The issues as pointed by AO are on the

expenditure side. It has not been disputed that in assessee line of

contracts, same is outsourced by appointing the sub-contractors of

nearby localities on piece work basis. It has not been disputed that the

payment to the sub-contractors are made by account payee cheques

and wherever applicable TDS u/s 194C is deducted from the payments

made to them. The accounting years ended on 31/3/2008 and

31/3/2009 and the assessment years were passed respectively on

27/12/2011 and 31/12/2010. Assessee had finished its work on most of

the sites and subcontractors were summoned after a period of about

2½ years in assessment. According to assessee's business module,

once the work is over at a particular site, the same is wound up and

shifted to a new site. The assessee maintains proper stock registers

reflecting quantitative details which has been filed with Assessing

Officer alongwith assessee's relevant replies.

5.2 The Assessing Officer desired to verify the amounts paid to sub-

contractors. The employment of sub-contractors is not disputed likewise

the payment to them through account payee cheques, deduction of TDS 18 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

wherever applicable has not been disputed. The Assessing Officer

wanted their personal attendance; some attended suo motu, some were

produced by the assessee, who confirmed the work. Some were

examined behind the back of the assessee. Some of them admitted

doing work but expressed inability to remember the relevant details

after a period of 2½ years. Likewise some denied having done any

work for the reasons best known to them, in that case AO should have

verified their bank pass books to test the veracity of their depositions.

The assessee was not given an opportunity to cross examine them and

the statements have been held to be true and a tool to reject the books

of assessee u/s 145(3). In our considered view the adverse inference

drawn in this behalf is not tenable. Similarly in contractors cases there

are numerous occasion of drawing self made vouchers as they are

many a times incurred at far away sites. Therefore, self made vouchers

cannot be held to be bogus on face value and a few of them don't have

the propensity to render the books of accounts as liable for rejection u/s

145(3).

5.3 The learned CIT(A) in this case has held that the assessee does

not have a vested right to cross examine the subcontractors who

deposed against him; with respect we don't agree to this finding. Ld. 19 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

Assessing Officer can call a witness, record his statement and draw

suitable inference therefrom, however it is incumbent for him to test the

veracity of deposition from the material available with the department

like PAN no., bank account of the deponent. In our considered view that

the learned CIT(A)'s observation is not tenable in the peculiar facts and

circumstances of the case. It is not disputed that the assessee has

produced any record in support of the claim of expenditure, the account

payee cheuqes, the bank accounts, the assessee's accounts and the

TDS deduction certificates demonstrate that the assessee produced the

primary evidence. In this situation, the Assessing Officer was obliged to

give the assessee an opportunity of cross examining them beside

effectively rebutting the evidence furnished by assessee. In any case,

the Assessing Officer should have confronted the issue of TDS

certificates issued by assessee and bank accounts of such deponent

sub-contractors, no such exercise has been done to establish their

veracity. These sub-contractors statements have been accepted on face

value neither by giving opportunity for cross examination nor

confronting it with the existing record; thus their veracity remains

uncorroborated. Under these circumstances, we are unable to uphold

the findings of the learned Assessing Officer and CIT(A) on this issue as 20 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

they are unsubstantiated and against the fundamental principles of law

of natural justice. Undisputedly the sub-contracting of the work is

essential in this business; the amounts have been paid by bank

account; the bills bear PAN numbers and TDS is deducted. The

assessee has discharged its burden to prove the incurring of

expenditure in this behalf. The Assessing Officer should have rebutted

the same in effective terms, which is not done, besides, if the Assessing

Officer wanted to rely on some material, which is contrary to the record

submitted by the assessee, the same should have been intimated to

him and explanation should have been called. Or it should have been

corroborated from other material which is starkly missing. The assessee

before learned CIT(A) also has given proper explanation for each and

every sub-contractors. Therefore, we are of the view that as far as the

expenditure incurred on sub-contractors is concerned, the assessee has

discharged its primary onus to corroborate the same. Thus books have

been rejected without rebutting the assessee explanation and without

giving opportunity of cross examination of the deviant sub-contractors,

whose statements were recorded behind the back of the assessee.

Thus, no adverse inference can be drawn in this respect on

unsubstantiated depositions.

21 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

5.4 Apropos the allegation that some of the expenditure vouchers are

self made and in cash, in our considered view, the assessee contractor

operates at various sites most of them being inrural area, it will be too

much to expect that for each and every rural worker, vendor, electrician

will get printed bills and give impressive/presentable invoices. It goes

without saying that there are several occasions when the contractors

working on multiple sites have to incur the expenditure in cash on the

report of the site supervisor; they make a self made voucher which are

considered as an evidence of expenditure. This difficulty cannot be held

as a leverage by the AO to reject the books of account maintained by

the assessee without appreciating the surrounding circumstances. At

the most, the Assessing Officer may have disallowed part of the

amount, which depends on various factors including identification of the

items to be disallowed.

5.5 In our considered opinion, in the facts and circumstances of

facts; the adverse inference drawn in respect of the stock register,

payments to sub-contractors and expenditure incurred on self made

vouchers do not have the propensity of recoursing to the harsh action

of rejecting the books of accounts u/s 145(3) in these circumstances.

And more so when all the results are much better than earlier years.

22 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

Therefore, we hold that the assessee's books have been wrongly

rejected U/s 145(3) of the Act, the same deserves to be uphold. This

ground of assessee is allowed.

5.6 Before parting we may like to mention that even if worst is

assumed against the assessee in respect of rejection of books of

accounts; in the eventuality of rejection, the Assessing Officer cannot

adopt the harsh presumptive rate of taxation glossing over the accepted

previous history of the assessee. The OP, G.P. and N.P. in these years

are better than earlier years. In this hypothetical eventuality of rejection

of books also, therefore, no question of such addition arise. On merits

also, we have held that the assessee has discharged its primary onus to

demonstrate that the stock register, sub-contractors payments and self

made vouchers are properly made. There is no effective rebuttable from

the side of Assessing Officer or learned CIT(A) to counter it. Under

these circumstances, we are of the view that there is no scope of any

addition on merits. Therefore, all the additions, which are sustained, are

deleted.

6. In the result, the assessee's appeals are allowed and revenue's

appeals are dismissed.

23 ITA 346, 314, 950JP/2012 & ITA 05/JP/2013_ Addl.CIT Vs. Raj Kr. Babutta

Order pronounced in the open court on 13/02/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated 13/02/2015.

*Ranjan.

vkns'k dh izfrfyfi vxzsf'kr@Copy of the Order forwarded to:

1. vihykFkhZ@The Appellant- Raj Kumar Babutta, Jaipur.

2. izR;FkhZ@ The Respondent- The Addl. C.I.T.,Range-2, Jaipur/ A.C.I.T.,Circle-2, Jaipur/ D.C.I.T.,Circle-2, Jaipur

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr¼vihy½@The CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA 346, 314, 950JP/2012 & ITA 05/JP/2013)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar