2014 (11) TMI 1213 - AT - Income Tax

Rejection of books of account u/s 145(3) - GP estimation - HELD THAT - The assessee s turnover increased substantially compared to immediate preceding year. The G.P. has gone down slightly whatever discrepancies pointed out by the learned Assessing Officer without quoting Section 145(3) of the Act are sufficient to reject the book result in case of civil contractor. The various courts held that procedural lapse does not allow to assessee to get benefit on account of default of any procedure. However, the estimation made by the learned CIT(A) appears to higher side as he applied the previous year G.P. rate in current year, therefore, in the interest of justice, we apply 6.5% G.P. rate on total sales as against confirmed by the learned CIT(A) @ 6.79%. Accordingly, the assessee gets relief partly. The Assessing Officer is directed to calculate the income @ 6.5% G.P.. Non-payment of TDS amount - addition u/s 40(a)(ia) - HELD THAT - The Hon ble Rajasthan High Court in the case of CIT Vs. Udaipur Dugdh Udpadak Sahkari Sangh Ltd 2014 (8) TMI 677 - RAJASTHAN HIGH held that TDS was deducted and paid before the due date of return is allowable U/s 40(a)(ia) of the Act, Therefore, we delete the addition confirmed by the learned CIT(A) Characterization of income - Agricultural income or income from other sources - HELD THAT - The assessee has furnished the relevant agricultural record as well as crop grown on agricultural land. The land belongs to the family members, which was later on gifted to him by his father. It is immaterial whether the assessee has shown any agricultural income or not as it is facts that agricultural income mostly depended on nature. Further the learned Assessing Officer has not discharged his onus to disprove the evidences filed by the assessee, therefore, we delete the addition and Assessing Officer is directed to treat the agricultural income as such. Accordingly, we allow this ground in favour of the assessee and against the revenue. Addition for household expenses - HELD THAT - D.R. had not controverted the findings given by the learned CIT(A) and the Assessing Officer also has not brought on record any adverse material that the assessee incurred more than expenses on household withdrawals except made addition on surmises and conjectures, which is not permitted under the law. Therefore, we confirm the order of the learned CIT(A) on this ground.

Summary

Issues Involved:
1. Rejection of books of accounts under Section 145(3) of the Income Tax Act, 1961.
2. Application of Net Profit (N.P.) rate.
3. Addition on account of non-payment of TDS within the due date.
4. Treatment of agricultural income as income from other sources.
5. Addition for household expenses.

Detailed Analysis:

1. Rejection of Books of Accounts under Section 145(3) of the Income Tax Act, 1961:
The assessee, a civil contractor, filed a return declaring a total income of Rs. 39,71,000. The Assessing Officer (A.O.) scrutinized the return and observed discrepancies such as non-maintenance of a stock register and purchases made in cash with kachha bills. The A.O. disallowed 10% of total purchases and various other expenses, leading to a significant addition. The CIT(A) confirmed the rejection of books of accounts but limited the addition to a G.P. rate based on past history, reducing the disallowance significantly. The Tribunal found the procedural lapse by the A.O. in not explicitly invoking Section 145(3) did not invalidate the rejection of books. However, the Tribunal adjusted the G.P. rate to 6.5% instead of 6.79%, providing partial relief to the assessee.

2. Application of Net Profit (N.P.) Rate:
The A.O. applied a higher N.P. rate based on discrepancies in the assessee's books. The CIT(A) applied the previous year's N.P. rate of 6.79%, leading to a reduced addition. The Tribunal further adjusted this to a 6.5% N.P. rate, acknowledging the significant increase in turnover and the nature of the business, thus providing partial relief to the assessee.

3. Addition on Account of Non-Payment of TDS within the Due Date:
The A.O. disallowed Rs. 25,019 under Section 40(a)(ia) for non-payment of TDS by the due date. The CIT(A) confirmed the disallowance. However, the Tribunal, referencing the Rajasthan High Court's decision in CIT Vs. Udaipur Dugdh Udpadak Sahkari Sangh Ltd., held that TDS paid before the due date of return filing is allowable, thus deleting the addition.

4. Treatment of Agricultural Income as Income from Other Sources:
The A.O. treated Rs. 2,75,000 shown as agricultural income as income from other sources, citing that the land did not belong to the assessee during the relevant period. The CIT(A) upheld this view. The Tribunal, however, found that the assessee had provided sufficient evidence of agricultural activities and the land being a family property later gifted to him. The Tribunal deleted the addition, treating the income as agricultural.

5. Addition for Household Expenses:
The A.O. added Rs. 1,20,000 for household expenses, doubting the adequacy of withdrawals shown by the assessee. The CIT(A) deleted the addition, noting the A.O.'s reliance on assumptions without concrete evidence. The Tribunal upheld the CIT(A)'s deletion, emphasizing the lack of adverse material evidence from the A.O.

Conclusion:
The Tribunal provided partial relief to the assessee by adjusting the G.P. rate to 6.5%, deleting the addition for non-payment of TDS within the due date, and treating the agricultural income as such. The addition for household expenses was also deleted, affirming the CIT(A)'s findings. The revenue's appeal was dismissed, and the assessee's appeal was partly allowed.