2016 (12) TMI 607

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....lment of income and furnishing inaccurate particulars of income. The ld CIT(A) confirmed all the addition/disallowances. Against the order of CIT(A), assessee filed an appeal before the ITAT. The ITAT vide its order dt. 31.05.2011 in ITA No. 1177/JP/2010 deleted the additions made by AO u/s 68. However, in respect of disallowance out of various expenses, the ITAT partially confirmed the additions and at Para 8 of its order held as under :- "It is seen that N.P. rate shown by assessee during the year is 10.07% against 10.82% in immediately preceding year. Therefore, we are of the view that instead of disallowing various expenses under the individual head, it will be better if a reasonable net profit rate is applied. Keeping in mind the past history of the case and defects noted by the AO, we are of the view that if a N.P. rate of 11.5% is applied, then it will meet the ends of justice. Accordingly, the AO is directed to recompute the profit by applying N.P. rate of 11.5% against N.P. rate of 10.07% shown by the assessee. For the sake of clarification, the ld. counsel of the assessee has stated that instead of disallowing expenses head-wise, a reasonable N.P. rate should be applie....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....upheld the imposition of penalty u/s 271(1)(c). He further held that the reports of the statutory auditor and the conduct of the appellant during the assessment proceedings by not producing the bills/vouchers and other details required by the AO also establish the means rea. Similar defects in account books of the appellant were also found in earlier years. Thus, penalty of Rs. 29,05,775/- levied by AO u/s 271(1)(c) was upheld. 2.2 The ld. AR has submitted that at the outset, it may be noted that the tax auditor has qualified the audit report by specifying that in most of the cases vouchers have not been prepared and do not have proper supporting. The AO after referring to these qualifications made by the auditor and after considering the unverifiability of expenses under the head wages, repair & maintenance, diesel & petrol, freight, job work and hire charges made adhoc disallowance of 10% out of these expenses i.e. Rs. 80,80,238/- and also made disallowance of Rs. 59,14,632/- on account of outstanding wages, totaling to Rs. 1,39,94,87/-. The Ld. CIT(A) confirmed the action of AO as per his finding at Page 6 Para 2.3 of the order dt. 05.08.2010 (PB 10). The fact that assessee h....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....would work out at Rs. 23,99,326/-. The fact that the N.P. rate of 11.5% applied by Hon'ble ITAT is subject to depreciation, interest and remuneration to partners and interest to third parties is also evident from the order of Hon'ble ITAT in ITA No. 897/JP/11 for A.Y. 08-09 where in Para 2.10 (PB 43-45) it was held that in A.Y. 07-08 also, the Tribunal taking into consideration the N.P rate of 10.07% directed to apply N.P. rate of 11.5%. In the year under consideration also, the Ld. CIT(A) has directed to apply the N.P. rate of 11.5% subject to depreciation, interest and remuneration to the partners on the basis of the order of the Tribunal of the immediately preceding year and accordingly the order of CIT(A) is confirmed. Thus, it is clear that N.P. rate of 11.5% applied by Hon'ble ITAT is subject to depreciation, interest and remuneration to partners and interest to third parties whereas the AO while calculating the addition has not considered the allowance of depreciation, interest and remuneration to partners and interest to third parties. Therefore, the correct addition after the Hon'ble ITAT is Rs. 23,99,326/- as against Rs. 86,32,725/- computed by the AO and therefore the....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... * Naresh Chand Agarwal Vs. CIT (2013) 357 ITR 514 (All.) (HC) * Harigopal Singh Vs. CIT (2002) 258 ITR 85 (P&H) * CIT Vs. Vijay Kumar Jain 38 DTR 345 (Chattisgarh) * CIT Vs. Suresh Kumar Bansal 254 ITR 130 (Punj. & Har.) 2.3 The ld DR is heard who has vehemently argued the matter and relied upon the order of the lower authorities. 2.4 We have heard the rival contentions and perused the material available on record. Firstly, regarding the contention of the ld AR regarding the quantum of additions sustained by the ITAT in quantum proceedings and consequent levy of penalty levied by the AO, it was submitted that the ITAT has confirmed the trading additions by application of N.P rate of 11.5% as against 10.07% disclosed by the assessee in its return of income. The N.P rate so confirmed by the ITAT was before depreciation, interest, remuneration to partners and interest to third parties as N. P rate of 10.07% disclosed by the assessee was before depreciation, interest, remuneration to partners and interest to third parties. It was thus submitted that additions so sustained by the ITAT in quantum proceedings comes to Rs. 23,99,326 as against Rs. 86,32,725 computed by the ....