Ram Kumar , Sangrur vs Department Of Income Tax

Ram Kumar Govt. Contractor, Vs. The D.C.I.T., C/o Ashok Kumar Bansal, Circle Sangrur. Ch.Brij Lal Street, Club Road, Sangrur. PAN: AAEFR7094R And

ITA No.1055 /Chd/2014 (Assessment Year : 2011-12)

The D.C.I.T., Vs. Ram Kumar Govt. Contractor, Circle Sangrur. C /o Ashok Kumar Bansal, Ch.Brij Lal Street, Club Road, Sangrur. PAN: AAEFR7094R (Appellant) (Respondent)

Assessee by : Shri Brij Bhushan Bansal Department by : Shri S.K.Mittal, DR

Date of hearing : 16.02.2015 Date of Pronouncement : 16.02.2015

PER BHUVNESH SAINI, J.M.:

Both the cross appeals are directed against the order of

the learned Commissioner of Income Tax (Appeals), Patiala

dated 28.9.2014 for the assessment year 2011-12. 2

2. Briefly, the facts of the case as noted in the impugned

order are that the Assessing Officer noticed various defects in

the books of account maintained by the assessee. The same

are highlighted in the assessment order and show cause

notice was issued to the assessee to explain various points as

no stock register of material has been maintained and no

details of raw material used in the construction work were

produced for verification. No purchase registers for issue of

raw material goods for construction work and issue of

diesel/petrol used for vehicles/cars have been maintained.

No measurement book has been produced for verification. The

assessee has not maintained muster roll register and day-

today consumption register. No details of truck owners or

drivers have been maintained through which the building

material was purchased. No quantitative details of the

material have been produced. Certain expenditure have not

been debited to the Profit & Loss Account. No details of

miscellaneous receipts have been furnished. There was also

difference between the gross receipts received from various

departments. No documentary evidence of payments made to

the labour through site munshis has been furnished. No

agreements with the sub-contractors have been produced. It

was, therefore, proposed why the books of account may not be

rejected. The assessee, however, explained that no stock

register is maintained because he is not trader of these

commodities and raw material have been used at different

sites. It was submitted that there was no necessity to

maintain the stock register of raw material as the same are 3

consumed in day or two. The assessee purchased diesel

directly from the petrol pump whenever required. It was

submitted that the assessee has not maintained measurement

book because the assessee is engaged in bridge work. The

muster roll was not maintained. The Assessing Officer was,

therefore, of the view that there was no verification of

consumption of stock and raw material and no other details

have been maintained. There is discrepancy in the receipts

from different departments. The Assessing Officer, therefore,

rejected the book results under section 145(3) of the Act and

computed the profit by applying the profit rate of 10% on the

gross receipts of Rs.20.64 crores and computed the income

accordingly. Since the assessee is a firm, therefore, interest

and salary paid to the partners were allowed. However,

interest on depreciation has not been allowed as was not

allowed in the earlier year.

3. The assessee challenged the computation of income

before the learned CIT (Appeals) and written submission of the

assessee is reproduced in the appellate order in which the

assessee has submitted that the books of account from time to

time have been produced and have been audited by the

Chartered Accountant. The depreciation has not been allowed

without any reasons and also referred to other decisions to

the fact that in other cases even profit rate of 6% or below

have been applied and even the depreciation has also been

allowed. The learned CIT (Appeals) confirmed the finding of

the Assessing Officer with regard to rejection of books of

account because no documentary evidence was furnished to 4

justify the consumption of raw material and corresponding

value of the stock at the year end. There was difference in

the receipts also. However, considering the profit rate

estimated in assessment year 2010-11 in which profit was

estimated @ 6.5% against 5.29% shown by the assessee

directed the Assessing Officer to apply profit rate of 7.5% and

as per the decision of the I.T.A.T. Chandigarh Bench in the

case of Harbhajan Singh & Co. Vs. JCIT, Sangrur Range,

Sangrur directed to allow depreciation as well. The appeal of

the assessee was thus partly allowed.

4. The assessee in its appeal challenged the application of

profit rate of 7.5% and enhancement of the gross receipts

from 20.43 crores to 20.64 crores.

5. The Revenue in their appeal challenged the order of the

learned CIT (Appeals) in reducing the profit rate from 10% to

7.5% on the basis of the last year profit estimate. It is also

stated that the decision in the case of Harbhajan Singh & Co.

(supra) has been challenged in High Court by the Department.

Therefore, the learned CIT (Appeals) should not follow the

decision.

6. We have heard the learned representatives of both the

parties and perused the material available on record. The

Assessing Officer has given various reasons for rejection of

books of account. The assessee is not in appeal against the

rejection of books of account by the Assessing Officer and

confirmed by the learned CIT (Appeals). Therefore, it stands

established on record that the assessee's books of account 5

were not reliable and as such, no option was left with the

authorities below except to estimate the profit of the assessee.

Similarly, the Revenue merely contended that for grant of

depreciation the learned CIT (Appeals) should not follow the

decision of the Tribunal in the case of Harbhajan Singh & Co.

(supra) because it has been challenged in High Court. Merely

because the appeal of the Department is pending in High

Court is no ground to challenge the decision of the Tribunal

The learned CIT (Appeals) was bound to follow the decision

of the Tribunal unless it is reversed. The only question left

in both the cross appeals is the estimate of the profit by

applying profit rate of 7.5%. The learned CIT (Appeals)

considered the history of the assessee in which the profit was

estimated last year by applying profit rate of 6.5% and

accordingly applied the profit rate of 7.5%. The I.T.A.T.

Chandigarh Bench recently in the case of Ashok Kumar in ITA

No.340/Chd/2014 and C.O.No.24/Chd/2014 vide order dated

6.2.2014 considered the facts of the case and the decision of

Hon'ble High Court relied upon by the learned D.R for the

Revenue directed to apply net profit rate of 8%. Since it is a

case of firm, therefore, the Assessing Officer has allowed

statutory deduction which could not be subject matter in

challenge before the Tribunal. Further the assessee has not

reconciled the receipts before the CIT (Appeals) as well as

before us. Therefore, no further interference is called for in

the estimate of total receipts. The assessee's appeal thus

would have no merit and is liable to be dismissed. Similarly,

the learned CIT (Appeals) considering the history of the 6

assessee in which lower profit rate have been applied by the

Assessing Officer in preceding year 2010-11 have already

applied the profit rate of 7.5% for the purpose of estimating

the profit of the assessee. Therefore, the departmental appeal

would have also no merit and is liable to be dismissed. In

view of the above discussion, we do not find any merit in both

the cross appeals. Therefore, both the cross appeals are

accordingly, dismissed.

6. In the result, both the cross appeals filed by the assessee

and Revenue are dismissed.

Order pronounced in the open court on this 19th day of

February, 2015.

Sd/- Sd/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : 19 t h February, 2015

*Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarh