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TMI Blog2015 (10) TMI 2421X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 ₹ 14,71,70,861/- and remaining addition is deleted. The Assessing Officer is directed to calculate the income as per the above finding. - Decided in favour of assessee partly. Disallowance of interest and bank charges - Held that:- As decided in Ganesh Chawala Vs. Income Tax Officer [2008 (5) TMI 651 - ITAT JAIPUR] is squarely applicable wherein it has been held that the assessee having purchased properties in the preceding years out of interest-free funds, no disallowance of interest having been made in those years and there being no material on record to show that loans raised for business purposes were utilised in purchasing properties in personal name of the assessee and therefore, AO was not justified in disallowing interest The facts and circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of compliance was fixed for 30/09/2011, nobody was attended nor any written reply was filed nor any application for adjournment was filed. In response to the notice U/s 142(1) alongwith detailed questionnaire on 07/2/2012 whereby the date of compliance was fixed for 16/2/2012, no body attended nor any written reply was filed nor any application for adjournment was filed, therefore, the ld Assessing Officer issued a letter for non-compliance on 14/5/2012 whereby it was duly pointed out to the assessee that the details and documents including books of account and other evidence called vide notice U/s 142(1) dated 07/2/2012 had not been produced. An opportunity was granted to submit the details and produced the books of account on 05/6/2012. In compliance thereof, a letter requesting adjournment was filed on 04/6/2012. Again the case was refixed for 12/6/2012. On this date also he has not attended the hearing and no details were furnished and no application of adjournment was filed. Thereafter number of notices issued but the assessee s attitude was noncooperative with the Assessing Officer. The assessee s C.A. Shri M.S. Dhankar appeared on 24/08/2012 before the Assessing Officer bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original have been repeatedly required to be produced for verification, first by way of notice U/s 142(1) dated 07/02/2012, than by way of specified notice U/s 142(1) dated 01/08/2012 and lastly by way of order sheet entry dated 24/08/2w012. He is also appraised of the fact that even the copy of the audit report has not been furnished till date despite specific requirement in the notice U/s 142(1) dated 07/02/2012 at Sr. No. 3 of the questionnaire. Sh. Manu Dhankar, CA submits that books of accounts shall be produced at the time of next hearing. Copy of the audit report is submitted which is placed on record. A written reply containing certain information in respect of details called for in the questionnaire dated 07/02/2012 is submitted which is placed on record. Case is adjourned for hearing on 03/10/2012 at 3.00 P.M. He further observed that on the appointed date of compliance i.e. 03/10/2012, the assessee failed to furnish any written submission or produce books of account as required. Therefore, another notice U/s 142(1) dated 09/10/2012 was issued fixing the date of compliance on 30/10/2012 wherein it was specifically required to furnish reply of notice U/s 142(1) dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, the ld Assessing Officer has to estimate the income of the assessee U/s 144 of the Act on the past history of the case but past history of the assessee s case is not to be considered an appropriate method for finalizing the assessment because the figure disclosed in the P L account and balance sheet are also not reliable. BY mere filing of return alongwith copy of balance sheet and P L account is not sufficient to prove the transaction correct and complete. The statute is provided scrutiny of the case U/s 143(3) of the Act. It is further held that even in past, the assessee s GP and NP had been accepted by the department, the assessee is not absolve for maintaining books of account under the law and also scrutinize the case U/s 143(3) of the Act. The assessee has shown marginal increase in GP rate and NP rate compared to earlier year. However, such facts by itself cannot render the assessment proceedings meaningless. Therefore, each of the relevant contents of the return of income, the balance sheet and the P L account are hereby considered separately for the purpose of estimating the true and correct income of the assessee. The ld Assessing Officer compared the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich interest amounting to ₹ 17,48,663/-has been debited to the P L account. Accordingly he disallowed the interest debited in the P L account at ₹ 17,48,663/-. The ld Assessing Officer asked to furnish detail of contract expenses debited at ₹ 13,40,53,661/- vide letter dated 07/2/2012. The assessee submitted reply vide letter dated 10/09/2012 wherein it was submitted that contract expenses debited in single head contract expenses and it is not possible to bifurcate in different heads of expenses. The ld Assessing Officer held that the assessee has deliberately chosen not to furnish the specific details called for and given a vague and unacceptable excuse for not furnishing the details. The assessee has debited contract expenses at ₹ 13.4 crores as against total contract receipts of ₹ 14.71 crores, which constitutes to 91.09% of the cross receipts. The ld Assessing Officer found these percentage of expenses not wholly and exclusively incurred for the business purposes in absence of required details and evidences and burden of proof lies on the assessee as he claimed correct and genuine expenses. The assessee had not furnished details in headwise and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the appellant has maintained constant N.P. and G.P. rate and that even when the case written submissions completed under scrutiny assessment in the past the income was assessed @ 5 to 6% subject to claim of depreciation interest payment and remuneration to the partners. It is also contended that before disallowing 3% of contract expenses the A.O. has not given any proper opportunity of being heard or any show cause notice. On careful consideration of relevant facts it may be noted that the A.O. has fixed the proceedings on different dates as mentioned in the chart on page No. 3 and though the attendance of the appellant on some of the proceedings may not be disputed by the fact remains that the appellant neither produced the regular books of accounts for examination nor furnished specific detail in respect of different heads of contract expenses amounting to ₹ 13.40 crores. It may be noted that such specific query for furnishing of bifurcated account of contract expenses under different heads was made by the A.O. vide notice U/s 142(1) dated 07/02/2012 and which was repeatedly requested for on the subsequent dates of hearing but the appellant never complied with such s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant case is that the GP/NP of the assessee is broadly consistent and that the same A.O. has completed the assessment for A.Y. 2009-10 by making lump sum addition of ₹ 5 lac. In this connection it may be stated that the facts of the earlier assessment years were different with the facts of the assessment years under consideration inasmuch as in the year under consideration the books of account and particularly the contract expenses were not subject to proper verification. In this background it may be stated that during the assessment proceedings the appellant was required to furnish the details of contract expenses in respect of earlier two assessment years viz a viz its comparison with the total turnover and the appellant furnished such details as under:- Asstt. Year Total turnover Contract Exp. Percentage 2008-09 119.86 104.17 86.90 2009-10 279.88 250.20 89.54 2010-11 147.17 134.05 91.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the contract expenses, which gives the contract percentage of total receipt at 89.21%. It means the ld Assessing Officer had accepted the inflation @ 2.31%. He further argued that cost of inflation index also increased from preceding year to the year under consideration. If this inflation is applied on the contract receipts, the percentage of contract expenses on contract receipt would be 91.09%. The difference in A.Y. 2010-11 and compared to A.Y. 2009-10 was only 1.55% as against the difference of 2.31% in A.Y. 2009-10 in comparison to A.Y. 2008-09. Therefore, these differences deserved to be accepted, no disallowance on account of contract expenses should be made. He further relied on the decision of Hon ble Rajasthan High Court in the case of CIT Vs Bhawan Va Path Nirman (Bohra) Co (No. 1) 258 ITR 431 and argued that past history of the assessee s case is the best guiding factor to decide the assessee s income U/s 144 of the Act. He further argued that it is not necessary to make addition by the Assessing Officer even books of account had been held rejectable U/s 145(3) of the Act as held in the case of CIT Vs Gotan Lime Khanij Udhog (2002) 256 ITR 243 (Raj). The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehemently supported the order of the ld CIT(A) and argued that the assessee s attitude was not cooperative. He has not produced the books of account before the Assessing Officer on fixed date. It is a fact that the ld Assessing Officer had given number of opportunities to the assessee but required details were not submitted before him. Even the assessee had not produced books of account before the ld CIT(A). Therefore he prayed to confirm the order of the ld CIT(A). 6. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee has shown total turnover during the year at ₹ 14.71 crores on which net profit has been shown @ 5.02%, which was ₹ 27.98 crores and net profit rate @ 5.77% in immediate preceding year. The assessee claimed that he produced the books of account but the Assessing Officer was not available in the office but books were examined by the Inspector on behalf of the Assessing Officer. The ld Assessing Officer applied Section 145(3) and rejected 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2.81 crores, the deployment of capital in the business use stood at ₹ 3.00 crores and the remaining investments including on personal assets and advancement of interest free loan was out of interest bearing borrowed fund. The A.O. has accordingly held that the interest bearing borrowed fund amounting to ₹ 1.72 crores were not used for business purposes and that the same were used for acquiring personal assets etc. Accordingly, interest paid amounting to ₹ 17,48,663/- was disallowed. On the other hand the appellant case is that all such personal assets amounting to ₹ 1.54 crores were purchased from the business profits and not from interest bearing borrowed funds. The appellant has also furnished individual balance sheet of Sh. S.K. Khetan and according to such balance sheet such personal assets were acquired out of his own capital. As regards the advancing of interest free loans to Smt. Babita Khetan and M/s Vaishali Stone Crushers the appellant has not furnished any specific explanation or jurisdiction. On careful consideration of all relevant facts it may be noted that the appellant has not been able to point out any specific mistake in the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much more than the investment in non income bearing investments. Therefore, no disallowance on account of interest paid can be made. He further submitted that the lower authorities have considered that the capital of the assessee has utilized in business assets and borrowed funds were utilized in non business assets. Hon ble ITAT Jaipur Bench has considered this aspect in the case of ACIT Vs Ram Kishna Verma and held that when there are mixed funds then non-interest bearing funds are to be considered as utilized for non interest bearing funds. The ld CIT(A) held that if the investment in plots and interest free advances would have not been made by the assessee then such money would have been available for business and to that extent it may not have been necessary to borrow the funds from bank. He placed reliance on the following case laws:- (i) CIT vs. Shoorji Vallabhdas Co. (1962) 46 ITR 144 (SC). (ii) Assistant Commissioner of Income Tax Vs. Ram Kishan Verma ITAT, Jaipur B Bench ITA NO. 589/JP/2011; ASST. YR. 2006-07 order dated 31st October, 2011 (2011) 30 CCH 0561 Jaipur Trib (2012) 143 TTJ 0001 (UO). (iii) Satish Katta vs. Assistant Commissioner of Income Tax ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the order of the ld CIT(A) and argued that the assessee has invested ₹ 1.55 crores in immovable properties including agricultural land and also had interest bearing borrowing from the banks on which substantial interest has been paid. The interest bearing funds had been utilised in these assets by the assessee. Therefore, interest to that extent is rightly confirmed by the ld CIT(A). 10. We have heard the rival contentions of both the parties and perused the material available on the record. During the year, the assessee had made additional investment at ₹ 17.25 lacs, remaining investment in land and plots of more than ₹ 1.37 crores was coming from the previous year. The ld Assessing Officer has not disallowed even in scrutiny assessment made in A.Y. 2009-10. The case law relied upon by the ld AR in the case of Ganesh Chawala Vs. Income Tax Officer ITA No. 762/JP/2007, order dated 16th May, 2008 (2008) 9 DTR 0162 is squarely applicable wherein it has been held that the assessee having purchased properties in the preceding years out of interest-free funds, no disallowance of interest having been made in those years and there being no material on record to sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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