Sh. Bahadur Pandey, Gonda vs Department Of Income Tax

Income Tax Officer v. Shri. Shiv Bahadur Pandey Gonda Vill. Bahorpurwa, Janki Nagar, Gonda TAN/PAN:ANSPP6162H (Appellant) (Respondent)

C.O. No.26/LKW/2014 [ In ITA No.201/LKW/2014] Assessment Year:2009-10

Shri. Shiv Bahadur Pandey v. Income Tax Officer Vill. Bahorpurwa, Gonda Janki Nagar, Gonda TAN/PAN:ANSPP6162H (Cross-Objector) (Respondent)

Department by: Shri. Pramod Kumar, CIT (DR) Assessee by: Shri. Abhinav Mehrotra, Advocate Date of hearing: 18 02 2015 Date of pronouncement: 27 02 2015

ORDER

PER SUNIL KUMAR YADAV:

This appeal is preferred by the Revenue against the order of the ld. CIT(A), inter alia, on various grounds which are as under:-

1. that the Id. CIT(A)- II, Lucknow has erred on facts and circumstances of the case and in law in deleting the estimation of income from contract receipts @ 8% by the assessing officer but disallowing Rs. 9,10,000/- out of material, labour, freight :-2-:

and other expenses when the Id. CIT(A)-II observed justified the rejection of books of accounts in Para 14 of the appellate order.

2. that the Id. CIT(A)-II, Lucknow has erred on facts and circumstances of the case and in law by not appreciating the facts of the case and material available on record and by observing in Para 17 of the appellate order that "Further the appellant himself shown N.P. rate 2.2% in preceding assessment year 2008-09...." whereas the case for the assessment year 2008-09 was completed under section 143(3) of the Income Tax Act, 1961 and after assessment the net profit rate comes to 3.47% of the gross receipts.

3. that the order dated 29.11.2013 passed by the Id. CIT(A)- II, Lucknow in appeal No.01/131/ITO/Gonda/Lko/12-13 relating to assessment year 2009-10 being erroneous in law and on facts deserves to be cancelled and order of the A.O. deserves to be restored.

2. The addition sustained by the ld. CIT(A) is also challenged by the assessee by filing cross objection, in which the order of the ld. CIT(A) is assailed on the ground that he has erred in law and on facts in sustaining the addition of Rs.9.10 lakhs out of material, labour, freight and other expenses, on estimation, without any cogent material or evidence, having ignored the N.P. rate shown in earlier years.

3. Since the appeal of the Revenue and cross objection of the assessee are heard together, the same are being disposed of through this consolidated order.

4. The facts in brief borne out from the record are that the assessee is a civil contractor and executed civil construction and supply of material assigned to him by different Government agencies and the profit and loss account reflects gross receipts from contract work at Rs.2,91,09,510/-. :-3-:

During the course of assessment proceedings, none appeared on behalf o the assessee despite various opportunities afforded to him, therefore, in the absence of production of the books of account, bills, vouchers, etc, the expenditure claimed by the assessee were unverifiable and the Assessing Officer accordingly rejected the books of account under section 145 of the Act and estimated the net profit rate at 8% of the gross receipts and computed the net income from business contract at Rs.23,28,761/-.

5. Aggrieved, the assessee preferred an appeal before the ld. CIT(A) with the submission that the Assessing Officer has estimated the net profit without citing any comparable case and more so past record of the assessee was not taken into account by the Assessing Officer while estimating the net profit for the impugned assessment year. The ld. CIT(A) re-examined the claim of the assessee, and he was of the view that the rejection of the books of account was proper, as the assessee did not produce the books of account, bills and vouchers before the Assessing Officer though it was claimed that the assessee has maintained the books of account in respect of contract business and the same are duly audited under section 44AB of the Act. Taking into account all these aspects, the ld. CIT(A) has restricted the addition to 9.10 lakhs besides other addition made on account of interest at Rs.2,46,570/-.

6. Aggrieved with the order of the ld. CIT(A), the Revenue has preferred an appeal before the Tribunal and the assessee has filed the cross objection.

7. During the course of hearing of the appeal, the ld. D.R. has contended that in earlier assessment year, the assessment was completed under section 143(1) of the Act, therefore, there was no occasion of application of minding by the Assessing Officer to the book results declared by the assessee. The Assessing Officer has applied the net profit rate @ 8% in the light of the provisions of section 44AD of the Act. :-4-:

8. The ld. counsel for the assessee, on the other hand, has submitted that the assessee has maintained the books of account and has duly audited under section 44AB of the Act. Therefore, the net profit rate should be estimated on the basis of net profit declared in the past.

9. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the authorities below, we find that undisputedly the assessee did not appear before the Assessing Officer despite various opportunities afforded to him. The Assessing Officer issued various notice under section 143(2) and 142(1) of the Act, but the assessee has not made any compliance thereof. Since the assessee did not produce the books of account before the Assessing Officer, the Assessing Officer had no option but to reject the books of account and complete the assessment under section 144 of the Act by estimating the net profit. The Assessing Officer accordingly applied the net profit rate at 8% of the gross receipts and made the addition of Rs.23,28,761/-. The ld. CIT(A) re- examined the claim of the assessee and having taken into account all the relevant factors has reduced this addition to Rs.9.10 lalkhs and granted relief of Rs.11,62,350/-.

10. We have also carefully examined the orders of the lower authorities and we find that in earlier assessment years assessee had declared net profit rates between 2.22 and 0.88%, but the assessment was completed under section 143(1) of the Act. Therefore, there is no application of mind by the Assessing Officer in any of those assessment years. In the impugned assessment year, the assessee has not produced the books of account and the Assessing Officer had no other option but to estimate the income. The ld. CIT(A) has also estimated the income at Rs.9.10 lakhs. Since the income was estimated by the lower authorities, to which none of the parties are satisfied, we are of the view that under the given facts and circumstances of the case, the books of account were rightly rejected and :-5-:

after rejection of the books of account, the option available with the Assessing Officer was to estimate the net profit rate. The Assessing Officer has estimated the net profit rate at 8%, which was reduced to 3.66% by the ld. CIT(A), according to the assessee. We are of the view that estimation made by the lower authorities appears to be on higher side. We accordingly reduce the same from 3.66% to 3%. Accordingly, the Assessing Officer is directed to re-compute the net profit at 3% of receipts.

11. In the result, appeal of the Revenue is dismissed and the cross objection of the assessee is partly allowed.

Order was pronounced in the open court on the date mentioned on the captioned page.

Sd/- Sd/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED: 27th February, 2015 JJ:1802

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR Assistant Registrar