TaxTMI 
TaxTMI 
2018 (1) TMI 1608
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....d. CIT(A) erred in confirming the rejection the books of account and application of Section 145(3) of the I.T. Act, 1961 made by the ld. A.O. 2. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in confirming the trading addition of Rs. 49,19,121/- by estimating the NP rate of the assessee at 5.1% on the declared turnover of Rs. 9,64,53,345/- as against the trading addition of Rs. 77,16,268/- made by ld A.O. by estimating net profit @ 8% of the total contract expenses of Rs. 9,64,53,345/-. 3. On the facts and in the circumstances of the case and in law the ld. CIT(A), erred in confirming addition of Rs. 38,67,086/- by estimating the NP rate of grit business of assessee at 5.1% on the declared turnover of Rs. 7,58,25,218/- as against the estimation of profit by ld. A.O. at 5.5% and addition of Rs. 41,70,387/- made by ld. A.O." 4. In the grounds No. 1 to 3 of the appeal, the assessee has challenged the rejection of books of account and applying the provisions of Section 145(3) of the Income Tax Act, 1961 (in short the Act) and confirming the trading addition of Rs. 16,73,698 + 34,56,257/- totaling to Rs. 51,29,955/- by estimating t....
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.... books of accounts are also common, therefore it is not practically possible to prepare the separate books of account for both businesses. It is further relevant to mention here that during the course of assessment proceedings the assessee submitted the tentative profit distribution chart between grit business and contract business. On the basis of this chart, the ld AO held that the assessee has shown profit @ 1.06% from contact business which is very low. In this regard, we submit that this chart was prepared merely on estimation and same of common expenses has been taken as expenses of contract business. This chart is not based on vouchers. However, the assessee is maintaining common set of books of accounts for both the business activities where from the income and expenses of the assessee are verifiable in which no defects has been pointed by ld. AO, therefore the books of accounts of the assessee cannot be rejected on this ground. Further in AY 2011-12 and AY 2012-13 also the assessee was maintaining the common set of books of accounts for both type of business and the same was accepted by same ld. AO. ii) Detail of day to day expenses and consumpti....
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.... 83.92% 2013-14 15,82,78,563 13,02,74,691 82.31% Thus during the year under consideration the contract expenses are below to the contact expenses incurred in past years despite to the facts that gross receipts increased in comparison to previous year. Hon'ble Rajasthan High Court in the case of CIT Vs Bhawan Va Path Nirman (Bohra) & Co (No. 1) 258 ITR 431 has held that the past history of the assessee is best guiding factor. Hon'ble ITAT Jaipur Bench in the case of M/s Asian Construction Co. Vs ITO 34 Taxworld 89 has held that the past history of assesses case is the best reflector of the true trade results. Thus where the books of account have been rejected and there is no material change in the circumstances from previous years the past history of the assessee should be follow. B) Regarding estimation of profit from Grit business and business other than Grit. i) The assessee is maintaining proper books of account which were audited by Chartered Accountant. After examining the books of account, the auditors gave their report certifies the true and fairness of the profit. The ld AO has examined the books of account and no any mate....
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....ned by ld CIT(A). The facts of this case are similar to the AY 2011-12. The copy of order of ITAT for AY 2011-12 is at PB pg 33-54. Despite of this fact, the ld CIT(A) relied upon the NP rate of 5.10% applied by Hon'ble ITAT in AY 2010-11. However, the facts of AY 2013-14 and AY 2011-12 are different than AY 2010-11 in respect to depreciation. Due to new purchase of plant and machinery there is huge increase in depreciation. This may be seen from following chart:- Particulars AY 2010-11 AY 2011-12 AY 2013-14 Difference in between AY 2010-11 & AY 2013-14 Depreciation 58,97,727 82,65,004 85,46,112 26,48,385 If we compare the GP of the assessee of last few years it comes as under: - AY Total Turnover Gross Profit GP Rate 2013-14 15,82,78,563 1,39,60,383 8.82% 2012-13 15,62,50,053 1,36,71,879 8.75% 2011-12 15,50,02,341 1,27,29,257 8.21% D) NP @ 8% of gross receipts subject to further deduction on account of depreciation and interest was held by Hon'ble Rajasthan High Court and ITAT Jaipur as reasonable. a) CIT vs Jain Construction co & Others [2000] (Raj) 245 ITR 527 ....
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....Vs Gotan Lime Khanij Udhog (2002) 256 ITR 243 (Raj). ii) J.C.Sharma Vs ITO 33 Taxworld 80 ITAT Jaipur Bench In view of the above no further trading addition deserves to be made and the humble assessee prays your honor to delete the addition of Rs. 51,29,955/- sustained by ld CIT(A). In view of the above submission, the humble assessee prays your honor kindly to allow the appeal filed by the assessee." 6. On the other hand, the ld DR has relied on the orders of the authorities below. 7. The Bench have heard both the sides on these issues. Although, the assessee has maintaining the books of account, which was accepted by the Assessing Officer in A.Y. 2011-12 & 2012-13, however, considering the various aspects recorded by the authorities below, the Bench are of the view that the rejection of books of account is justified. However, with regard to claim of estimation of net profit of business other than the grit business, the Bench find that the ld. CIT(A) has relied on the findings of the ITAT in the case of A.Y. 2010-11. However, in the decision for the A.Y. 2011-12, the ITAT has found that the declared profit of the assessee was more than 8% of the gross recei....
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....der section 256(2) of the Act filed by the Revenue are hereby rejected." In assessee's case, the net profit rate subject to deduction of depreciation and interest comes @8.09% of the gross receipts, which is more than 8%. The working of the same as under: Particulars Amount Amount Profit shown by assessee As per P & L A/C PB pg 11 36,56,252 Less:- Profit from sale of Fixed Assets 6,28,379 Profit from contract and grit business 30,27,873 Add Depreciation 85,46,112 Interest Paid 39,20,689 Received -15,48,252 Net Interest Paid 23,72,437 Total business profit before interest and depreciation 1,39,46,422 Gross Receipts against contract 9,64,53,345 Gross Receipts against grit (As taken by AO) 7,58,25,218 Total receipts 17,22,78,563 % of profit on gross receipts 8.09% It is also pertinent to note that wherever even books of account are rejected by the Assessing Officer then also no trading addition is required to be made as held by the Hon'ble Rajasthan High ....
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.... the book result on the ground that required details of contract expense were not submitted before him. Therefore, we confirm the order of rejection U/s 145(3), which has not been challenged by the assessee. However, estimate made by the ld Assessing Officer and confirmed by the ld CIT(A) is higher side, which would give net profit rate of 12.84% before depreciation, which is not possible in contract business. It is also fact that required details of contract expenses were not submitted before the Assessing Officer and net profit has declined for which the assessee explained that price has gone up. He also referred the cost of inflation index for this purpose, which supports the assessee's claim. The lower authorities also have not compared the case with other assessee's for estimating the NP rate, therefore, in the interest of justice, we apply N.P. rate @ 5.1% on turnover of Rs. 14,71,70,861/- and remaining addition is deleted. The Assessing Officer is directed to calculate the income as per the above finding.'' It is also noted that the facts of this year is different than last year in respect of depreciation, Royalty, Labour cess and Sales Tax. It is also noted that du....