TaxTMI 
TaxTMI 
2015 (8) TMI 762
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3. Interest under section 158BFA has been charged wrongly. I. T. (SS)A. No. 15/Chd/2003 4. In this appeal the Revenue has taken up following grounds : (i) The learned Commissioner of Income-tax (Appeals) has erred both in law and on the facts of the case in holding that apart from 29 bighas of agricultural land, no asset was found to the search party. The assessee had invested the earned income in the shape of fixed deposits receipts, machinery, agricultural land (the registered value plus on money paid by him) and cars, etc., which is evident from the seized record and had duly been discussed in the assessment order framed by the then Assessing Officer. The learned Commissioner of Income-tax (Appeals) has failed to appreciate the facts of the case. (ii) The learned Commissioner of Income-tax (Appeals) has erred both in law and on the facts of the case in holding that the net profit rate of section 44AD is to be applied overlooking thereby the fact that assessment in this case had been, framed in view of the provisions contained in Chap ter XIV-B of the Act and on the basis of such material/documents found during the course of search, which had dir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sider the issue of bogus liabilities which called for a separate addition under section 68/69 of the Income-tax Act., even in a case where business income of a contractor is to be computed by applying the provisions of section 44AD. 5. After hearing both parties we find that a search operation was conducted in the business as well as residential premises of the assessee. During assessment proceedings the Assessing Officer noticed that for assessment year 1995-96 the document No. 39 of serial No. 48 of annexure A was seized from the premises of the assessee which is a trail balance. He noticed that this trial balance was duly signed by Shri M. C. Puri, i.e., the assessee. Further, there were differences between the expenses shown in this trial balance and final account shown by the assessee. The difference has been noted as under : Description of head of account Ledger folio No. as per trial balance Amount as per trial balance (in Rs.) Amount as per audited trading profit and loss account and balance-sheet To wages 200 5,86,207 2067.264 To labour welfare 91 670 10950 To consumables 72 83,551 3,14,205 To building materia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or the broken period i.e., April 1, 2000 to April 20, 2000 and addition of Rs. 6 lakhs was made towards undisclosed income. 7. On appeal, it was mainly contended that books of account from assessment years 1997-98 to 1999-2000 were audited and, therefore, additions could not be made without pin-pointing any defects. For assessment year 1995-96, the assessee has himself filed return on presumption basis under section 44AD declaring income at 8 per cent. The Assessing Officer has only few figures of the trial balance and compared without audited final statement which is not justified. If the profit calculated by the Assessing Officer is accepted then net profit rate of 61.45 per cent. would be there in assessment year 1995-96 which is not possible in construction business. The Assessing Officer has not found any difference in the contract receipts by the assessee. No assets as suggested by the Assessing Officer was found during the search. 8. The learned Commissioner of Income-tax (Appeals) after considering these submissions ultimately estimated the profit at 8.5 per cent. and allowed partial relief. 9. Before us the learned Departmental representative referred to the findi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....12-1999 25,000 103350/20-12-1999 81 25,000 103359/21-1-2k 10,000 103359/21-1-2k 91 10,000 103364/21-1-2k 7,000 103364/21-1-2k 91 7,000 103360/22-1-2k 10,000 103360/22-1-2k 92 10,000 103361/24-1-2k 10,000 103361/24-1-2k 92 10,000 103362/31-1-2k 5,000 Drawn self cheques 103365/31-1-2k 1,00,000 Drawn self cheque. Amounts introduced in page Nos. 93, 94, and 95 in the name of fictitious persons Similar is the situation with other creditors. However, the Assessing Officer has not made the separate addition because he has already disallowed the expenses and therefore, the addition on account of disallowance of expenses was justified. 10. On the other hand learned counsel for the assessee submitted that no evidence was found during search or otherwise regarding undisclosed investments in purchase of fixed deposit receipts, machinery, cars or agricultural land and the Assessing Officer has made only general remarks in respect of these items. The purchase of agricultural land was duly disclosed and the Assessing Officer has made addition on the bas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l occasions as under : (a) Page 3, 'Comparison of trial balance and the audited books of account reveals' (b) Page 4, 'the audited report does not reflect the true state of affairs' (c) Page 8, 'the audited report does not reflect the true state of business affairs' (d) Page 10, 'the assessee is showing inflated and bogus expenses in his audited accounts' (e) Page 12, 'As discussed in the preceding paragraphs that audited reports are not at all reliable' (f) Page 15, 'As audited accounts do not reflect the true state of business affairs' (g) Page 16, 'in the audited accounts the assessee is debiting expenses under the head wages and payment to sub-contractors to a huge amount. On the perusal of the audited accounts. . . as the audited accounts of the assessee are not reliable' (h) Page 18, 'as claimed by the assessee in the audited accounts ' (i) Page 20, 'For this assessment year two types of account books have been found and seized' (j) Page 21, 'These books are, therefore, not relied upon' (k) Page 23, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... venture like M/s. Nathpa Jhakri Power Corporation Ltd. on the strength of bogus bills, is to my mind, carrying things to a bit too far. The appellant has got these payments in lieu of work actually done, the quality whereof was duly test checked, and certified by the requisite authorities at appro priate times, and it was only after such strict checkings that these payments came to be made to the Assessing Officer as well as his successor, have not doubted the veraciousness of the receipts which have been accepted in toto. (vi) The Assessing Officer as well as his successor seems to be overwhelmed by the get of passing an order under section 158BC. The effort has been to compute a certain figure on the basis of the so called evidences found during the search in total disregard of the well enunciated principles of natural justice and harmonious construction. No judicious person will consider assessing a contractor on a net profit rate of 61.45 per cent. as just and reasonable. The Assessing Officer has arrived at the net income at 61.45 per cent. by repudiating totally and ignoring whatever the appellant had to say in the matter. There is force in the contentions of the le....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r seems to be an error in ignoring the provisions of section 44AD in respect of assessment year 1995-96, return whereof had duly been filed by the appellant on a presumptive basis under section 44AD. As held in the case of Balaji Construction v. Asst. CIT [2000] 72 ITD 559 (Pune), and Kishor Mohanlal Telwala v. Asst. CIT [1999] 64 TTJ (Ahd) 543, Chapter XIV-B provides for computation of total income in accordance with the provisions of Chapter IV which includes section 44AD. The hon'ble Income-tax Appellate Tribunal Chandigarh Bench, Chandigarh have also held in the case of Sat Pal Singh v. Asst. CIT [2000] 67 TTJ (Chandigarh) 602 that the provisions of Chapter IV and Chapter VI-A are available while framing block assessments. Chapter XIV-B nowhere excludes the application of section 44AD. The Assessing Officer's action in rejecting the return filed on the basis of section 44AB is therefore, incapable of being sustained. Therefore, I direct the Assessing Officer to delete the addition made in this regard. (viii) As regards escalation charges, the Assessing Officer's conclusion that the same were received by the appellant against bogus claims of wages does not s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tter dated February 11, 2002 and page 6 of their reply dated February 22, 2002. The appellant has all along being filing returns along with audit reports, and assessments for the assessment years 1995-96 to 1999- 2000 had duly been framed. This does prove that the books of accounts by the Assessing Officer in his assessment order only corroborate this. There is force in the contentions of learned counsel for the assessee that the reliance on the trial balance by the Assessing Officer was not correct as the same was on incomplete trial balance. This trial balance was stated to be a draft on prepared by the site book keeper and not by the accountant. There is logic in the contentions of learned counsel that a trial balance cannot be made the basis of arriving at the real profits because if that were so, there would be no need to prepare a profit and loss account, or a balance-sheet. There is force in the averments of learned counsels that the Assessing Officer has not been consistent in choosing items of income and expenditure, as in the assessment years 1995-96 and 1999-2000, the expenditure has been taken from the so called trial balance, bur the receipts have been taken from the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso stand completed. The appellant could not be saddled with the accusation of non disclosure now especially as the factum of the books of account stands admitted by the Assessing Officer by his myriad reference to the books of account in his assesment order, and the returns and audited statements having been filed year after year, assessments in respect of which have also been completed. (xi) The Assessing Officer has gone on record with his assertion that the appellant, 'used to pay huge payment of bribes. Numerous instances of payments of bribe in cash and also in king (like the gift of expensive jewellery of Rs. 85,000 and Rs. 27,500 as found recorded in annexure A-22/43 and A-2241). The payments in cash runs in several lakhs.' To my mind, jumping to such conclusions without carrying out any concomitant enquiry/investigation so as to reach a conclusion of this type, cannot be considered a very balanced approach because by making such allegations against responsible persons, the Assessing Officer has tried to cast aspersions on their integrity, without any cogent evidence for which the Assessing Officer could have made himself 'liable for defamation' ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s called for in respect of the assessment year 1995-96 and the period from April 1, 2000 to June 20, 2000. Similarly, no addition was necessary in respect of the assessment year 1996-97 also where the appellant has himself declared a net profit rate of 8.56 per cent. The Assessing Officer is therefore, directed to delete all the additions made in respect of these three years. That leaves us with assessment years 1997-98 to 2000-2001. Coming to the crunch, after going though the entire gamut of the search, port-search, assessment, and now appellate proceedings, I consider it just and fair to determine the income of the appellant in respect of the above four assessment years by applying a net profit rate of 8.5 per cent. which is the profit rate shown by the appellant himself in the assessment year 1996-97, and which is considered quite just, taking into account the orduous and difficult nature of the works erected in remote areas. However, for doing so, the escalation charges, amounting to Rs. 56,98,175, would be excluded in view of the discussion in para (viii) above. The gross receipts in respect of the aforesaid assessment years (1997-98 to 2000-01) therefore, come to Rs. 3,57,29....