9911796707
TMI Blog2000 (2) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of the authority that the signature of the payees have been obtained on the printed vouchers of the appellant is no good ground for non-acceptance of payment. And further contention of the assessing authority that there are 75 per cent vouchers in respect of transportation expenses, site expenses, assessing expenses and repairs of vehicles is absolutely incorrect. The addition made is unwarranted and at any rate excessive." 3. The Revenue has raised the following ground in their appeal:- "On the facts and in the circumstances of the case the learned CIT(A) has erred in directing to allow depreciation to the assessee without appreciating the fact that the AO has applied moderate NP rate of 10% with the specific mention that the element of depreciation is covered therein and the learned CIT(A) has himself held in his order dt. 9th May, 1994. In Appeal No. 343/94-95 in the case of Shri Ratan Singh Gehlot that NP rate of 11 per cent inclusive of depreciation and all other expenses is reasonable." At the outset the learned counsel appearing on behalf of the assessee submitted that so far as the ground raised by the Revenue in their appeal is concerned, it is squarely covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 52,13,242 shown in the preceding year. Shri Balia, the learned Advocate, submitted that the explanations for such low net profit shown by the assessee given before the AO and CIT(A) have not been properly considered. It was explained before the learned Departmental authorities that the assessee has maintained proper books of account and that all the entries recorded therein are supported by vouchers, wages registers, etc. The AO, therefore, should compute the assessee's income as per books of account in accordance with s. 145(1). There is no material on record which can justify application of proviso to s. 145(1) or s. 145(2) in the present case. As regards low net profit rate, a specific explanation was given that the assessee on the basis of oral instructions of MES authorities executed extra work for which a claim of Rs. 16,00,260 was made, but the MES authorities made payment of Rs. 9,33,000 only and did not make payment for the balance of Rs. 6,67,260. If this amount of Rs. 6,67,260 would have been paid by the MES authorities, the net profit rate in the year under consideration would have been matching with the net profit rate of the preceding year. 6. The learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to such purchases comes to Rs. 3,83,315 which is quite negligible in view of the volume of contract work carried out by the assessee. The AO has further pointed out that vouchers for expenditure of Rs. 2,218 and Rs. 6,440 were not available. The non-availability of vouchers only in two cases out of hundreds of vouchers aggregating to Rs. 8,658 cannot justify the rejection of books of account. Likewise the third point mentioned by the AO is that the vouchers in respect of transportation expenses, site expenses, messing expenses and repairs of vehicle are available only to the extent of 75%. The total amount of such expenses comes to Rs. 1,56,416. Even assuming that the AO's observation is right, 25% of such expenses comes to less than Rs. 40,000. The AO has further observed that voucher for Rs. 4,000 in respect of advertisement expenses is also not available with the assessee. The learned counsel pointed out that all these so called defects pointed out in para 8 indicate insignificant and points about the non-availability of vouchers about obtaining signatures on printed vouchers and forms instead of obtaining regular bills from those persons. The total amount of instances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tune of Rs. 7,07,336 seems to be the difference between the figure of assessed income and income declared by the assessee (7,22,492-15,156). Since the CIT(A) has directed the AO to grant depreciation as claimed by the assessee, and such a relief granted by the CIT(A) has been upheld by us in earlier part of this order, the addition confirmed by the CIT(A) which can be the subject-matter of assessee's appeal will only be Rs. 6,30,511 (7,07,336- depreciation allowed by the CIT(A) Rs. 76,825). It is, therefore, clear that the addition made on account of application of net profit rate by the AO and confirmed by the CIT(A) comes to Rs. 6,30,511. The AO has given various instances of expenses which are not fully supported by vouchers or which are not supported by proper vouchers. The AO has also pointed out other defects and has relied upon the past history of assessee's case. He has specifically mentioned that the assessment for the immediately proceeding year i.e. 1990-91 was completed under s. 143(3) and the AO had applied net profit rate of 10% subject to allowing depreciation. The assessee did not file any appeal against the assessment for asst. yr. 1990-91. The accounts for the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work and were deleted from the bill. The assessee in reply to the aforesaid letter of MES produced the relevant copies of the bills and records before the AO as discussed in para 12 of the assessment order. The dispute relating to non-approval of the assessee's claim for extra work to the tune of Rs. 6,67,260 seems to be real and substantial as is apparent from the fact that the army authorities have appointed an arbitrator vide letter dt. 29th Oct., 1998. The assessee has incurred expenditure for carrying our such extra work pursuant to oral directions of the MES authorities, for which the contractor claimed Rs. 16,00,260. Out of the said amount, the MES authorities approved and paid Rs. 9,33,000. This also shows that the extra work was, in fact, done and certain expenditure was incurred by the assessee. The dispute relates to the balance amount of Rs. 6,67,260. 12. Therefore the question which arises for our consideration is that whether the assessee should have shown the income of Rs. 6,67,260 for which a bill had been given by the assessee to MES authorities in the year under consideration or the assessee could validly contend that income in respect of such unadmitted claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted in principle by the Government or authorities concerned. If the assessee had not followed a special pattern in maintenance of accounts, i.e., in entering the same only when the Government accepted the bills, things would have been different, but as the assessee was following a particular pattern of accounting, his claim ought to be judged in that background. That was the actuality of the situation in the case of Chanchani Bros. The Hon'ble Patna High Court in the case of Jaiswal Ceramic Industries relying upon the judgment of Hon'ble Supreme Court in A. Krishnaswamy Mudaliar (1964) 53 ITR 122 (SC), observed as under at p. 464 of 169 ITR : "In the words of Hidayatullah J. in the case of CIT vs. A. Krishnaswamy Mudaliar (1964) 53 ITR 122, 127 (SC) this was one of the examples of maintenance of accounts on a hybrid or a heterogeneous system. The pattern of execution of works and payments therefor by the Irrigation Department is that the bills are not prepared by the contractor himself but they are prepared by the departmental officers themselves which is signed by the assessee. Thus until any item has been approved, no bill is prepared for the contractor. Not having lodged th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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