2002 (9) TMI 875 - AT - Income Tax

Tribunal Upholds Profit Rate, Penalty for Loan Transactions in Appellant's Tax Appeal

GOYAL CONSTRUCTION CO. Versus ASSISTANT COMMISSIONER OF INCOME-TAX

The Tribunal upheld the rejection of the appellant's books of account and the application of a 12.5% profit rate for the assessment year 1990-91, ... - Issues:1. Rejection of books of account and application of section 145 for assessment year 1990-91.2. Dispute regarding the rate of profit applied by the Assessing Officer and confirmed by CIT(A).3. Appeal against penalty levied under section 271D for contravention of section 269SS.Analysis:Issue 1: Rejection of books of account and application of section 145 for assessment year 1990-91The appellant, engaged in civil contract business, faced issues during assessment due to defects in the books of account. The Assessing Officer invoked section 145, rejecting the books and applying a profit rate of 12.5% on contract receipts. The CIT(A) upheld this action, emphasizing the low profit rate declared by the appellant. The appellant argued based on past history, showing profit rates of previous years. However, the Tribunal noted the differences in operations for the current year, leading to a low declared profit of 3.97%. Citing precedents, the Tribunal affirmed the rejection of books and the profit rate applied, dismissing the appeal.Issue 2: Dispute regarding the rate of profit applied by the Assessing Officer and confirmed by CIT(A)The appellant contested the profit rate of 11% set by CIT(A), as opposed to the 12.5% applied by the Assessing Officer. The appellant argued based on historical profit rates and operational challenges faced during the year. However, the Tribunal found the declared profit significantly lower at 3.97%, justifying the application of section 145 and the profit rate set by CIT(A). Relying on legal precedents, the Tribunal upheld the CIT(A)'s decision, dismissing the appeal.Issue 3: Appeal against penalty levied under section 271D for contravention of section 269SSThe appellant faced a penalty under section 271D for contravening section 269SS related to loan transactions. The Assessing Officer deemed cash deposits as loans, contrary to the appellant's explanation of transactions with a partner. The Tribunal reviewed evidence presented, highlighting discrepancies in the loan transaction between entities. The Tribunal found the transaction doubtful, with funds not directly routed to the appellant firm. Considering the facts and legal provisions, the Tribunal affirmed the penalty levied under section 271D, dismissing the appeal.In conclusion, the Tribunal upheld the decisions regarding the rejection of books of account, the profit rate applied, and the penalty under section 271D, dismissing both appeals of the appellant.