TaxTMI 
TaxTMI 
2013 (8) TMI 1023
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....jection of books of account. 3. That Ld. CIT(A) has erred in law and on facts in holding that net profit rate of 8% be applied on the gross contract receipt/turnover with total disregard to the declared results for the current year and for the preceding years as a result of which the order passed by the Ld. CIT(A) is perverse. 4. That in any case the rate of net profit at 8% is highly excessive keeping in view the quantum of total contract receipts and past history of the case in which the book results have always been accepted barring small disallowance and additions. 5. That the ld. CIT(A) while estimating net profit @ 8% has wrongly not allowed. a) claim of depreciation amount to Rs. 33,43,247/- b) Deduction of the following amounts from the gross contract receipts. i) value of materials supplied by the contractees amounting to Rs. 55,78,979/-. ii) VAT/Sales Tax - Rs. 97,24,885/- iii) Labour Cess - Rs. 5,06,243/- 6. That the order of the CIT(A) is bad in law and on facts. 7. That the appellant craves leave to add to or amend the aforesaid grounds before disposal of appeal." 2. The Revenu....
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....t in the absence of stock register, real estimate in the assessee's case is not acceptable. 6. For earth purchases of Rs. 2,56,85,500/- only hand made vouchers with thumb impression of the seller was produced without addresses of the seller. No bills were annexed to the vouchers. 7. The AO also pointed out irregular payments made to M/s. Saini Store Crushers for purchases made and cash payments, for which no bills are available, made to M/s. Satkar Stone Crusher. 8. The AO observed that purchases account has debited the same amount which would have been debited in the event of carrying the raw materials by seller truckers and thereby inflating his purchases by debiting the similar amount whether he uses his own vehicles to the vehicles of the seller." 4. Before the Ld. CIT(A), the assessee made the submissions which are very relevant for our decision and are being reproduced for the sake of clarity from pages 4 to 11 of CIT(A)'s order as under: "The appeal is directed against the action of the Assessing Officer in rejecting the books of accounts u/s 145(3) of the I.T.Act,1961and in completing the assessment at 10% of the gross receipts avoidably in terms of the....
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....ion with evidence in rebuttal as tendered under cover of appellant's letters to the AO dated 16.12.11 (two rep's) 28.212.11, 26.12.11 and other oral implorations were all arbitrarily ignored or rejected out of hand. 4. The first objection cited by the AO is with regard to the inability of the appellant to confirm wages payable through direct enquiries from 42 out of over 1000 labourers. As to the deficiencies as cited by the AO in the impugned order, they are both farcical and fallacious. The AO sought confirmation from around 42 labourers in respect of wages payable to them for a part of the month of March, 2009. Seven of these enquiry letters were not dispatched because the addresses were apparently incomplete. Further eleven of them were returned by the postal authorities unserved. But as to the fate of the rest of the twenty four, letters sent out for verification, there is no even a whisper of a comment by the AO. It was explained to the AO in great detail that the appellant's job is labour intensive and that the labourers were hard to seek and very difficult to beget. They came in batches through the good offices of Head-men and were retained for work as they c....
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....r records. No conceivable objection could be taken by any one for such a practice. At any rate the complying wages to receipt ratio ought to have dispelled all manner of doubts with the A.O. 6. The other objection which was taken by the AO was with regard to non-maintenance of stock register. It was explained to the AO that the material like sand, soil, bajri, cement, bitumen, bricks etc. are all stacked near hot-mix plant which are then poured into the hot-mix plant during the laying operations. It was also explained that none of these items are capable of pilferage, mis-use of mis-appropriation by anyone. They were all low cost items and came in a huge mass. Any abstraction, if any, was just of no consequence. The Chowkidar at the site looked after their safety and security. The site staff vigilantly monitored their consumption and use. It was also explained hat Diesel Oil (LDO) was retained in tanks near hot-mix plant under the strict vigilance and control of the supervisory staff. There was a rigorous procedure in vogue for the issue of the LDO to the various tankers, tippers and trucks owned by the appellant. The requisite recordings were made in the relevant register....
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....e. 10. The Assessing Officer in paragraph (iii) of page No. 7 and 8 of the assessment order has stated that the assessee's purchase rate are same as supplied through outsource trucks and assessee's own trucks. We never claimed that purchase rate are different but there is saving of freight on goods received through assessee's own trucks. Freight of Rs. 28,85,945/- has been paid by the assessee for the goods received through outsource trucks, Whereas no freight has been paid for goods received in assessee's own trucks. As the assessee has saved huge amount of freight as well as timely supply of goods. 11. As to other discrepancies pointed out by the A.O. it was stated that they are misconceived, imaginary and uncalled for e.g. nondeduction of TDS for civil works of Rs. 75 lacs by the contractors. If the contractor making the payment to the Appellant had not made any deduction at his end, it was at his peril. There could be several reasons such as he was no so qualified to make any deduction. 12. The so called deficiencies as pointed out by the A.O. were thus either erroneous or inconsequential. Petty deficiencies would not even taken cumulatively form the ....
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....ll results for the year are most favourable comparable to that of the previous years has also been ignored. All this was done because the A.O. was under the pre-conceived bent of mind that a 10% rate was required to be applied some-how in terms of the decision of the Hon'ble Punjab & Haryana High Court in the case of Shivam Construction Co. 16. It is also to be noted that the A.O. herself did not know of the nature and contents of the rule enunciated by the Hon'ble Punjab and Haryana High Court in the case of Shivam Construction Co. Perhaps she had come to know only vaguely that a 10% rate was approved in that case. Despite specific request made to the A.O. by the assessee in writing several times the A.O. was unable to provide a copy of the Hon'ble High Court order in the case of Shivam Construction Co. because she herself did not have any. She had thus not appraised herself of the true nature of the facts of that case and similarity or otherwise with the facts of the Appellant. Multiple requests for providing a copy of the cited High Court judgment to the Appellant remained un-complied with by the A.O. Naturally in such circumstances it was not open to the A.....
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....spect of the assessee's cases pleading for a 2% rate enhancement. When so approached the Hon'ble High Court confirmed the 10% rate chosen by the Tribunal. In such circumstances it would be blatantly erroneous to contend that the Hon'ble High Court had applied a 10% rate for the several contracts of Shivam Construction Co. The fact of matter is that Shivam Construction Co. had itself offered 10% return on gross receipts which rate came to be confirmed by the Hon'ble High Court. In this case the assessee - Shivam Construction Co. was the victor. Possibly due to the non-availability of the Hon'ble High Court judgment the A.O. could not fathom this facet of the matter and so the erroneous observations ensued in the impugned assessment order. 20. The several citations as pressed before the A.O. for perusal and support are mentioned at page 9 of the assessment order. All of them are on the simple point that where books of account are available, the results are to be taken as per those books if they are free of any serious discrepancy. In the subject case no discrepancy of any consequence or significance having been pointed out by the A.O., all those cases apply t....
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....dorsed the same as true and correct and certified them as bereft of any material deficiency or other defaults. The books commend themselves for ready acceptance and also the profits reflected by them." 5. The Ld. CIT(A) forwarded the said submissions to the Assessing Officer, who submitted the report dated 07.05.2012 and there was a rebuttal dated 17.7.2012 by the assessee. On the supplementary report of the AO in the remand and assessee's rebuttal dated 1.12.2012 to the said report and the rejoinder, the Ld. CIT(A) finally confirmed the action of the A.O. for rejecting the books of account and applied Net Profit Rate of 8% without allowing depreciation vide para 7 & 8 of his order. 6. The Ld. counsel for the assessee, Mr. Ashwani Kalia, CA made his arguments on the same lines as the various submissions made before the ld. CIT(A), in particular, as submitted hereinabove. He argued that the assessee had submitted all the wages register and receipts of the Headman who is group leader for the wages received on behalf of the labourers under him and there is no dispute to the fact. Therefore, the books of account cannot be rejected on this account. As regards the stock register no....
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....abourers. In this regard, it was submitted that the assessee had given the wages to the Headman to collect on behalf of group of labourers. Such Headman has signed the wages sheet on behalf of such labourers. This fact is not in dispute. Also it is not a matter of dispute that the assessee is having thousands of labourers but the AO directed to enquire in the case of 42 labourers and that too in respect of wages payable for the month of March, 2009. Seven of these enquiries were not dispatched and 11 of them were returned by the postal authorities. But with respect of 24 others, there is no whisper or comment of the A.O. whether they have been confirmed or not. Therefore, in the facts and circumstances of the case, it cannot be presumed that the wages for the month of March, 2009 with respect to these 42 persons are bogus. There is no finding in this regard by the ld. CIT(A) or the A.O. As regards the percentage of wages to the gross receipts during the year, which is 25.26% as against 26.67% in the preceding year which is lesser cannot be made unforeseen. Moreover, it also not under dispute and which is also part of record that wages payable for the month of March, 2009 have been ....
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....ear and the AO straightway has to jump to the results of the preceding year of the assessee or comparable cases. First of all, in the present case, we have to see the facts and circumstances of the present case while estimating the income even if the books of account have been rejected and in such circumstances the books so rejected cannot be completely avoided since estimation of income has to be done in the facts and circumstances of the impugned year and not of the preceding year or of comparable cases. If it is not possible to estimate income of the impugned year then if the facts of the present year are identical to the facts of the preceding year and such identical facts have been brought on record either by the assessee or authorities below then the past results has to be considered. If this is also not possible then comparable cases have to be considered for which there should be identical facts on record with the present case. 11. Accordingly, with our observations hereinabove and looking to the facts and circumstances of the present case, while rejecting the books of account, we have given our findings with regard to the non-maintenance of the wages register and it was....