TaxTMI 
TaxTMI 
2013 (9) TMI 226
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....TDS u/s 194 1 on payment of rent to one of the directors of the company." Grounds in Cross Objection 1. On the facts and in the circumstances of the case, Ld. CIT(A) has grossly erred in confirming the provisions of section 145(3) of the Income Tax Act, 1961 as invoked by the Ld. Assessing Officer, arbitrarily. 2. On the facts and in the circumstances of the case, Ld. CIT(A) has grossly erred in upholding the profit rate of 7% on the gross receipts of Rs. 46,28,68,976/- in contract activity resulting into the confirmation of the addition of Rs. 46,28,690/-, the same being uphold without any material on record and without properly appreciating the special circumstances and nature of job carried out by the assessee in arbitrary manner, thus the addition of Rs. 46,28,690/- as uphold by Ld. CIT(A) deserves to be deleted. 3. On the facts and in the circumstances of the case, Ld. CIT(A) has grossly erred in upholding the gross profit rate of 4.25 on the gross turnover of Rs. 5,00,07,802/- in manufacturing activity, resulting into the confirmation of the addition of Rs. 3,02,290....
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.... action of rejection of books of account is justified. Since true profits could not be deduced from the books of account of the assessee, he after applying provisions of Section 145(3) of the Act, estimated its income by applying gross profit rate on receipts of Rs. 74,03,86,895/- and thus made trading addition of Rs. 1,48,81,776/-. Likewise in the manufacturing activities, the Assessing Officer after applying provisions of Section 145(3) of the Act, estimated the profits by applying a gross profit rate of 7% on the total turnover of Rs. 5,00,07,802/- and worked out a trading addition of Rs. 16,77,406/-. 4. The Ld. CIT vide para 3.1 of the impugned order found that the reasoning taken by the Assessing Officer in discarding the revised return is not on valid grounds. It was noticed that the Assessing Officer has not accepted revised return on the sole ground that the assessee revised return after its processing u/s 143(1)(a) of the Act. He, however, opined that the processing of return u/s 143(1)(a) of the Act cannot be termed as an assessment and since the revision was on discovery of wrong statement in the original return and the assessee revised its return within the period pr....
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....r nor cited any comparable case whereas the appellant company had declared gross profit rate in the range of 5.38% to 5.90% in the preceding year with increase in turnover by 660% as compared to those years. He, therefore, directed the Assessing Officer to apply the gross profit rate of 4.25% and thus estimated the income at Rs. 21,25,330/- as against the income of Rs. 18,23,041/- declared by the assessee and thus sustained trading addition of Rs. 3,02,250/-. 7. The revenue in ground No. 1 in appeal has assailed the action of Ld. CIT(A) to accept revised return despite fact that the same was taken by the assessee after processing done u/s 143(1)(a) of the Act. 8. Heard parties with reference to material on record. The assessee had filed original return of income on 30/9/2009 and filed a revised return of income on 23/3/2011 for the reason that it has discovered a wrong statement to the fact that the contract receipts of Rs. 27,75,17,919/-, which were declared as receipts of AOP namely M/s Kiran Tirupati Mangla, JV, were assessed independently under PAN AAAAK6305M such receipts were wrongly included as receipts of the appellant company. On all such receipts tax at source was a....
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....uch as Traffic, Safety, Electricity etc. so that the installation of signalling system can be done as 'ON LINE' working resulting into delays and co-ordination expenditure. With regard to the defects noticed by the Ld. AO in the books of accounts for invoking the provisions of section 145(3) of the Income Tax Act, 1961, it is submitted as under: 1. The assessee company has followed the mercantile system of accounting which has been followed consistently by the assessee since 1997 i.e. even after the amendment u/s 145A of the Income Tax Act, 1961. 2. The job involved is material intensive which is necessarily to be procured from the suppliers authorized by Railway Quality Control Department known as RDSO and before supply the material is physically inspected by concerned railway authorities which is the precondition of tender. After inspection the goods were supplied which is required to be delivered to the Railway authorities directly which will subsequently be issue to assessee by the depot incharge for execution. Thus the material involved in the execution is required to undergo various checks by the Railway authorities a....
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....iture incurred by the assessee on the various work sites are most reasonable and moderate looking to the nature of work which are duly supported by the relevant invoices and vouchers maintained for the expenditure claimed. The allegations of the ld. AO regarding the maintenance of books of account are general in nature and no specific material has been brought on record in support of the allegations made by the ld. AO. The Hon'ble Rajasthan High Court in the case of Malani Ramjivan Jagannath v. ACIT reported in 316 ITR 120 it has been held that merely lower G.P. rate or mere deviation in G.P., trading addition was not justified. 10.1 With the above background, it is submitted that assessee cannot be compared with the normal civil contractor and the fine points distinguishing the assessee from a civil contractor are summarized as under: (i) That the assessee company absolutely dealing with Indian Railways and solely executing the works contract for them, it cannot be taken at par with other civil contractors particularly when it has not done any civil works. (ii) The entire contract work done is highly specialized and is ....
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....both the authorities below and while estimating the income, such explanation was not taken into consideration. There is no dispute that the assessee is dealing with the Railways and solely executing contract for them. The work executed by the assessee is of specialized and technical nature which cannot be compared with normal civil contractors. The assessee is declaring a gross profit rate of 6% approx. in each of preceding year including the impugned year. Therefore, the AO is not justified in making the addition without considering the explanation of the assessee in the impugned year. It appears that the department has adopted a practice of making certain additions each year and follow the same in the following year without considering the explanation of the assessee, which is not justified. Though the assessee is not in appeal before us, therefore, we cannot comment upon the sustained portion of the addition. Hence we have no alternative but to confirm the order of the Ld. CIT(A)." (vii) The Ld. CIT(A) by following the decision of Hon'ble ITAT, Jaipur bench given in assessee own case reduced the profit rate to 7%. The relevant observations as containe....
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....45(3) of the Act. The Appellate Tribunal has confirmed the application of net profit rate of 7% in preceding years i.e assessment years 2003-04 to 2007-08 and for ready reference, the order of Appellate Tribunal in ITA Nos. 1069, 1070, 1071/JP/2008 has been reproduced at internal page 15-16 in the impugned order wherein the Appellate Tribunal has rejected the revenue grounds in appeal for reducing the gross profit rate at 7% as against the rate of 8% applied by the Assessing Officer. The said portion is reproduced as under:- "We have heard the rival contentions and perused the facts of the case. The assessee is not maintaining sitewise expenditure and sitewise wage bills/vouchers. The assessee is not maintaining the attendance or labour control register and also no day to day consumption details are maintained. Therefore, books of account cannot be said to be complete and correct and we find no infirmity in the order of the Ld. CIT(A) who has rightly confirmed the application of section 145(3) of the Act. As regards the estimation of income, the Ld. Counsel for the assessee Shri O.P. Agrawal, Chartered Accountant argued that the assessee firm absolutely ....
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....ompared with normal civil contractors. The assessee is declaring a gross profit rate of 6% approx. in each of preceding year including the impugned year. Therefore, the Assessing Officer is not justified in making the addition without considering the explanation of the assessee in the impugned year. It appears that the department has adopted a practice of making certain additions each year and follow the same in the following year without considering the explanation of the assessee, which is not justified. Though, the assessee is not in appeal before us, therefore, we cannot comment upon the sustained portion of the addition. Hence we have no alternative but to confirm the order of the CIT(A). Thus, ground No. 2 of the revenue is dismissed." 11.1 It is thus contended that the revenue's appeal needs to be allowed and assessee's appeal be rejected. 12. The appellant in the rejoinder sought to explain his case with reference to the contracts it has undertaken from the Indian Railways as the contracts have not been appreciated by the authorities below nor by the earlier Tribunal in right perspective in coming to the conclusion for rejecting its accounts as well as in applying bli....
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....fiable. Since the complete record of good purchased/material received and accounted for the books of the assessee vis a vis quantitative receipt thereof in the railway yard and subsequent issue thereof to the assessee for use in execution of the contract with reference to M.B. goes to show that all purchase and store materials and their consumption are fully accounted for and verifiable. For convenience, he has made reference to various clauses of the contract as under:- (a) Procurement of material: [APB 106] Miscellaneous and consumable stores: 1.23.1 For the execution of the work, the tenderer shall procure all items of materials inclusive of miscellaneous and consumable items of stores from approved lists of suppliers. [APB 159, 237 and 259] Materials and Workmanship: 4.16.10.1 All the items which are to be procured as per IRS/RSDO specifications shall be procured from RDSO approved firms (RDSO approved firms shall be form the Part 1 only. In case there is no firm in Para I, material fr....
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.... of account even after rejection thereof gave true and correct position of the profits/income of the year under consideration. 14. We have heard parties with reference to material on record. The books of account and vouchers as are maintained by the assessee were directed to be produced with specific direction to produce the details of payment made to labour etc. The assessee has produced books of account and other requisite details on 16/4/2013 when its appeal came to be heard by this Tribunal. Upon test check of such record, it was noticed that the appellant did not produce a complete record to satisfy the Tribunal that all the materials it has purchased have actually been received by railway depot though payment on that basis made to him has been accepted by the Assessing Officer. The appellant has also not produced all the muster rolls/ attendance register for our verification as he claimed that all the payments to labour were made through the muster roll and no separate voucher are required to be maintained. Likewise the vouchers for other expenses on site are not found fully verifiable. The Assessing Officer had rejected the accounts for similar reasons. The AO after exami....
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....ort receipt for their delivery to railway depot. These materials are further issued from time to time to the appellant for carrying out the contract awarded to him and stands accounted for in the books of account on that basis alone. The Assessing Officer did not point out nor brought on record any instance to show that any of such purchase made by the assessee are without making actual delivery of goods therein to railway depot. The consumption of such materials as alleged by the Assessing Officer was in fact capable of verification from the record kept by railway authorities in the measurement book as well as transaction register maintained at the store yards. The Assessing Officer is not found to have made any adverse comment nor recorded any finding on such verification aspect but made casual remarks only that the consumption of materials is not verifiable. In fact, in the appellant's case, all the quantitative details were duly appended with the audit report and were laid by the assessee alongwith return of income filed by it. Under these circumstances, the Assessing Officer could not have estimated income by applying a higher gross profit rate on this count even after the acc....
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....rted by proper voucher. The Ld. CIT(A) is also not found to have considered these peculiar facts when he based his decision on the estimate resorted by the Ld. CIT(A) in the earlier years and sustained by the Appellate Tribunal when revenue preferred an appeal against that order. The appellant, though claims to be not satisfied with the earlier years estimation yet did not prefer any appeal against the order of Ld. CIT(A) in those years for various reasons including the fact that it wanted to set the controversy at rest. Finding that the department is amused in raising controversy and has disregarded the factual position of correctness of accounts, the appellant has filed cross appeal in this year so that the justice is rendered to it. The appellant, therefore, has contested that the true profits can be deduced from the rejected accounts as well. We, therefore, having regard to the judgment rendered by the jurisdictional High Court in the case Kanhaiaya Lal Jangid v. Asstt. CIT[2008] 217 CTR 354 (Raj.) and considering the over all conspectus as well as circumstances and peculiar facts of this case and also the earlier in issued judgments, find no rational in such estimation in the ....