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TMI Blog2015 (8) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000 respectively were shown as sundry creditors. First of all, it is not possible to believe that a labour contractor can extend continuous credit of such huge amounts regularly. Secondly, whatever cheques were issued later on were shown as receipts which is quite clear which means that this is a book entry for sundry creditors. Similarly, in the case of Shri Murari Lal, from the receipt side of the day book i.e., document Nos. 1 to 111 of Annexure A-6 it was found that amount was entered as cash. Therefore, in our opinion, the profit should be estimated in this case at a little higher rate or a separate addition for creditors should have been made. Since the Assessing Officer himself has not made separate addition for creditors, in our opinion, considering the peculiarity of this case we estimate the profit at 11 per cent. - Decided partly in favour of revenue. - IT(SS)A No. 13/Chd/2003, IT(SS)A No. 15/Chd/2003 - - - Dated:- 28-1-2015 - SHRI BHAVNESH SAINI AND SHRI T.R. SOOD, JJ. For the Appellant : Shri Sudhir Sehgal For the Respondent : Shri Manjit Singh ORDER T. R. Sood (Accountant Member).- The appeal filed by the assessee and Revenue are is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence, i.e., the affidavit as well as the statements of the alleged creditors namely Sh. Santosh Kumar, Sh. Satish Kumar Kainthla and Sh. Jatinder Kumar Gul eria recorded during the course of assessment proceedings, which were duly rebutted and proved to be incorrect during the course of assessment proceedings as well as before the learned Commissioner of Income-tax (Appeals). The comments/report submitted by the Assessing Officer on the written submissions made by the counsel of the assessee and showing therein the falacity in those affidavits has not been considered by the Com missioner of Income-tax (Appeals). (v) The learned Commissioner of Income-tax (Appeals) has erred both in law and on the facts of the case in not affording reasonable opportunity to the Assessing Officer before disposing of the appeal and putting reliance on the various orders/judgments of the hon'ble Income-tax Appel late Tribunal Benches and High Courts. (vi) The learned Commissioner of Income-tax (Appeals) has erred both in law and on the facts of the case in directing the Assessing Officer to compute the income by applying net profit rate of 8.5 per cent. without considering the fact that inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In response to the query it was explained that in assessment year 1995-96 the return was filed under section 44AD by declaring a net profit of 8 per cent. It was further stated that trial balance contained only part of the expenses and did not contain the expenditure which was incurred from the head office. Further, the Assessing Officer did not accept this explanation because it was found that expenditure like salary, tender papers, electricity, insurance, secured loans etc., did match with the final balance sheet and these expenses could not be called site expenses whereas the figures of site expenses like wages, labour, welfare etc., were not matching. It was also noticed that a sum of ₹ 5,81,550 was shown as bribe paid to the official which could not be allowed. In this background, the actual expenses only were allowed and balance amount of ₹ 22,59,175 was added to the income of the assessee. Similarly, in assessment year 1996-97, the sum of ₹ 5,67,844 was added to the income of the assessee. 6. During next assessment year 1997-98, it was submitted that the assessee has disclosed income of ₹ 9,69,608 which gives net profit rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f audited books were only an after thought. He also contended that trial balance contain the ledger folio and also were signed by the assessee which shows that these were actual details of the expenses. In respect of sundry creditors he pointed out by referring to paragraph 5 of the assessment order that in case of these creditors various cheques were said to have been issued but these cheques had never gone into the bank account of these parties and the amounts shown in the cheques were withdrawn through bearer cheques. The Assessing Officer has also noticed that there was no person in the name of Gulam Mohidheen. There was a person by the name Gulam Mohamad, who was working as labour supply contractor. The credit shows in the name of Gulam Mohidheen were ₹ 14,01,013, ₹ 13,28,813, ₹ 17,53,813 and ₹ 14,70,413 during year ending March 31, 1997, March 31, 1998, March 31, 1999 and March 31, 2000 respectively. It was further noted by the Assessing Officer that cheques totalling ₹ 2,83,400 were issued in financial year 1999-2000 to square up the account of Gulam Mohidheen but document No. A-50 seized from the premises shows that these cheques were taken on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 103362/31-1-2k 5,000 Drawn self cheques 103365/31-1-2k 1,00,000 Drawn self cheque. Amounts introduced in page Nos. 93, 94, and 95 in the name of fictitious persons Similar is the situation with other creditors. However, the Assessing Officer has not made the separate addition because he has already disallowed the expenses and therefore, the addition on account of disallowance of expenses was justified. 10. On the other hand learned counsel for the assessee submitted that no evidence was found during search or otherwise regarding undisclosed investments in purchase of fixed deposit receipts, machinery, cars or agricultural land and the Assessing Officer has made only general remarks in respect of these items. The purchase of agricultural land was duly disclosed and the Assessing Officer has made addition on the basis of the statement from the seller for on money without gathering further evidence. All the statements were recorded behind the back of the assessee without providing any adequate opportun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 8, 'the audited report does not reflect the true state of business affairs' (d) Page 10, 'the assessee is showing inflated and bogus expenses in his audited accounts' (e) Page 12, 'As discussed in the preceding paragraphs that audited reports are not at all reliable' (f) Page 15, 'As audited accounts do not reflect the true state of business affairs' (g) Page 16, 'in the audited accounts the assessee is debiting expenses under the head wages and payment to sub-contractors to a huge amount. On the perusal of the audited accounts. . . as the audited accounts of the assessee are not reliable' (h) Page 18, 'as claimed by the assessee in the audited accounts ' (i) Page 20, 'For this assessment year two types of account books have been found and seized' (j) Page 21, 'These books are, therefore, not relied upon' (k) Page 23, 'During the course of search and seizure, books of accounts like cash book and ledger were seized' 2.6 The above reference to the audited books of account clearly ordain the contentions of learned counsel that the Assessing Officer has simply brushed aside the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies at appro priate times, and it was only after such strict checkings that these payments came to be made to the Assessing Officer as well as his successor, have not doubted the veraciousness of the receipts which have been accepted in toto. (vi) The Assessing Officer as well as his successor seems to be overwhelmed by the get of passing an order under section 158BC. The effort has been to compute a certain figure on the basis of the so called evidences found during the search in total disregard of the well enunciated principles of natural justice and harmonious construction. No judicious person will consider assessing a contractor on a net profit rate of 61.45 per cent. as just and reasonable. The Assessing Officer has arrived at the net income at 61.45 per cent. by repudiating totally and ignoring whatever the appellant had to say in the matter. There is force in the contentions of the learned authorised represent atives that the assessment under Chapter XIV-B has to be made only of undisclosed income by way of any bullion, jewellery or other valuable articles or things or any income based on any entry in the books of account or documents, where such money, bullion, jewellery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1999] 64 TTJ (Ahd) 543, Chapter XIV-B provides for computation of total income in accordance with the provisions of Chapter IV which includes section 44AD. The hon'ble Income-tax Appellate Tribunal Chandigarh Bench, Chandigarh have also held in the case of Sat Pal Singh v. Asst. CIT [2000] 67 TTJ (Chandigarh) 602 that the provisions of Chapter IV and Chapter VI-A are available while framing block assessments. Chapter XIV-B nowhere excludes the application of section 44AD. The Assessing Officer's action in rejecting the return filed on the basis of section 44AB is therefore, incapable of being sustained. Therefore, I direct the Assessing Officer to delete the addition made in this regard. (viii) As regards escalation charges, the Assessing Officer's conclusion that the same were received by the appellant against bogus claims of wages does not seem to be correct because the escalation charges arose as a result of the revision of daily wages of unskilled labourers with effect from April 1, 1994 in consequence of an order of the hon'ble Supreme Court. These escalation charges were released by M/s. Nathpa Jhakri Power Corporation Ltd. after proper verifica tion of mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y corroborate this. There is force in the contentions of learned counsel for the assessee that the reliance on the trial balance by the Assessing Officer was not correct as the same was on incomplete trial balance. This trial balance was stated to be a draft on prepared by the site book keeper and not by the accountant. There is logic in the contentions of learned counsel that a trial balance cannot be made the basis of arriving at the real profits because if that were so, there would be no need to prepare a profit and loss account, or a balance-sheet. There is force in the averments of learned counsels that the Assessing Officer has not been consistent in choosing items of income and expenditure, as in the assessment years 1995-96 and 1999-2000, the expenditure has been taken from the so called trial balance, bur the receipts have been taken from the audited accounts. In the assessment year 1996-97, there has been a rampant pick and choose, the reliance on a judgment of the hon'ble Supreme Court in the case of Indore Malwa United Mills Ltd. v. State of M. P. [1966] 60 ITR 41 (SC), wherein it has been held that it is not open for the Assessing Officer to pick and choose only th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essments in respect of which have also been completed. (xi) The Assessing Officer has gone on record with his assertion that the appellant, 'used to pay huge payment of bribes. Numerous instances of payments of bribe in cash and also in king (like the gift of expensive jewellery of ₹ 85,000 and ₹ 27,500 as found recorded in annexure A-22/43 and A-2241). The payments in cash runs in several lakhs.' To my mind, jumping to such conclusions without carrying out any concomitant enquiry/investigation so as to reach a conclusion of this type, cannot be considered a very balanced approach because by making such allegations against responsible persons, the Assessing Officer has tried to cast aspersions on their integrity, without any cogent evidence for which the Assessing Officer could have made himself 'liable for defamation' as the learned authorised representatives have averred. (xii) The Assessing Officer has gone on record with his claim that the payment of own money is rampant in land transactions. But he has not corroborated his conclusion with any evidence. The affidavit of the land seller has been completely ignored. So also is the fact that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of these three years. That leaves us with assessment years 1997-98 to 2000-2001. Coming to the crunch, after going though the entire gamut of the search, port-search, assessment, and now appellate proceedings, I consider it just and fair to determine the income of the appellant in respect of the above four assessment years by applying a net profit rate of 8.5 per cent. which is the profit rate shown by the appellant himself in the assessment year 1996-97, and which is considered quite just, taking into account the orduous and difficult nature of the works erected in remote areas. However, for doing so, the escalation charges, amounting to ₹ 56,98,175, would be excluded in view of the discussion in para (viii) above. The gross receipts in respect of the aforesaid assessment years (1997-98 to 2000-01) therefore, come to ₹ 3,57,29,222. Income at 8.5 per cent. on these receipts would come to ₹ 30,37,043. Since the appellant has already declared income to the tune of ₹ 23,12,968 in respect of these assessment years, therefore, the net addition sustainable would come to ₹ 7,24,075 only. All the balance addition made by the Assessing Officer are ordered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5000 682804 dated 31-12-1999 85 5,000 682806 dated 3-1-2000 5000 682806 dated 3-1-2000 86 5,000 103368 dated 12-2-2000 10,000 103368 dated 12-2-2000 95 10,000 103369 dated 12-2-2000 10,000 103369 dated 12-2-2000 95 10,000 103370 dated 15-2-2000 10,000 103370 dated 15-2-2000 96 10,000 103373 dated 15-2-2000 5000 103373 dated 15-2-2000 96 5, 000 103371 dated 12-2-2000 10,000 103371 dated 18-2-2000 97 10,000 103372 dated 21-2-2000 10,000 103372 dated 21-2-2000 98 10,000 103375 dated 22-2-2000 10,000 103375 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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