2015 (10) TMI 164 - AT - Income Tax

Appeal Dismissed Due to Lack of Records: Importance of Proper Record-Keeping for Civil Contractors

The appellant's appeal against the rejection of books under section 145(3) of the Income Tax Act, 1961 was dismissed due to lack of necessary records. The ... Addition of net profit rate @ 8% - Held that:- In past, in assessee’s own case for A.Y. 2001-02 and 2002-03 had decided N.P. rate @ 8% subject to allowance of interest and depreciation. The assessee has relied upon the various case laws before us but their financial results are not available for verification wherein N.P. rate was reduced to 5% by the Hon’ble ITAT. The learned AR had not controverted the findings given by the learned CIT(A). He had accepted the defects in the books of account by not pressing the ground of appeal for rejection of book result. Therefore, we upheld the order of the learned CIT(A). - Decided against assessee. Issues involved:1. Rejection of books under section 145(3) of the Income Tax Act, 1961.2. Addition of net profit rate @ 8% by the CIT(A).Issue 1: Rejection of books under section 145(3) of the Income Tax Act, 1961:The appellant's appeal against the rejection of books under section 145(3) was dismissed as the ground was not pressed by the appellant. The Assessing Officer rejected the book result due to the absence of day-to-day stock registers, consumption registers, and other essential details. The appellant, a civil contractor, failed to maintain necessary records and vouchers, leading to the rejection of the book result under section 145(3) of the Act. The Assessing Officer provided an opportunity for the appellant to estimate net profit, which the appellant agreed to range from 4% to 4.5%. Previous judgments upheld a net profit rate of 8% for the appellant, subject to depreciation and interest.Issue 2: Addition of net profit rate @ 8% by the CIT(A):The CIT(A) confirmed the addition of net profit rate @ 8% after considering the appellant's submissions. The appellant's net profit on total receipts was questioned due to inadequate record-keeping and lack of supporting documents for expenses. Previous judgments and the appellant's own case history supported the application of an 8% net profit rate. The appellant's appeal contended that all regular books of account were maintained, but the Assessing Officer found deficiencies. The appellant's argument to delete the addition was not supported, and the 8% net profit rate was deemed reasonable for a civil contractor. The Tribunal upheld the CIT(A)'s decision based on past judgments and the lack of financial results for cases where a lower net profit rate was applied.In conclusion, the appeal by the appellant against the addition of net profit rate @ 8% was dismissed by the Tribunal. The decision was based on the appellant's failure to maintain adequate records, past judgments supporting the 8% net profit rate, and the reasonableness of the rate for a civil contractor. The Tribunal upheld the CIT(A)'s decision, emphasizing the importance of proper record-keeping and consistency in applying net profit rates.