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TMI Blog2019 (11) TMI 700X X X X Extracts X X X X X X X X Extracts X X X X ..... (a)(ia) and 40A(3) - payment made for JCB hire charges - HELD THAT:- In this Act, the JCB is included in Goods Carriage. According to Section 194C (6), no deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of contract during the course of business of plying, hiring or leasing goods carriage, on furnishing of his PAN Number to the person paying or crediting such sum so that assessee company was not liable to deduct TDS as the JCB owner has submitted his PAN for non-deduction of TDS. Coordinate Bench in various cases have held that when the profit is estimated by rejecting books of account, no disallowance U/s 40(a)(ia) of the Act is to be made. Disallowance made u/s 40A(3) we found that the assessee has made the payment to the parties as they insist for payment on the very day. Due to genuine hardship of the parties, assessee has to pay in cash. Technically, the payment are covered by the provisions of Section 40A(3) but the same was considered along with Rule 6 DD (b) as it existed then which duly provided for the genuine hardship that may be caused to the taxpayer. Nowhere the A.O. found that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, wherein it was established fact that the assessee had violated the provision of section 40A(3) 40(a) (ia) of the Act. ? (iv) The appellant craves leave to add, alter, amend, withdraw or insert any ground or grounds of appeal before or at the time of hearing of the appeal. 3. Rival contentions have been heard and record perused. The facts in brief are that the assessee company is a civil construction contractor for last five years. Its books of account are regularly audited U/s 44AB of the Act. During the course of scrutiny assessment, the A.O. after pointing out defects in the books of account, invoked the provisions of Section 145(3) of the Act and rejected the book results and estimated net profit @ 8.5% of the total receipts by observing that in the preceding A.Y. 2012-13, books of account was rejected by the A.O. and action of the A.O. was confirmed by the ld. CIT(A). 4. By the impugned order, the addition so made by the A.O. was substantially deleted by the ld. CIT(A) after observing as under: I have perused the record I find that the Assessing officer apply 8.5% Net profit rate without gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st income is also business income. The precise observation of the ld. CIT(A) was as under: The Assessing officer treated the FDR Interest of ₹ 27,37,478/- as income from other sources. The A/R of the appellant submission had that the assessee had to make FDR for taking the contract work from the department. The assessee has to deposits the FDR as security in the departments for obtaining contract work, which are purely for business purposes. The Interest received from the FDR relate to the profit of business income and not income from other sources. The A/R of the appellant relied upon the following case laws the HONBILE I.T.A.T. JODHPUR BENCH has also admitted in the assessment year 2010-11. 2011-12 and 2012-13, is also held that the A.O. has ignored the contention of the assessee that FDR were purchased for taking contract work and therefore the interest occurring on these F.D.R. would become as business income. The assessee wed copies of FDR which were pledged with various government departments. The A.O or the Id. CIT Appeals has not disputed the above mention facts. In our consideration opinion his interest income would partake the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt on the very day. Due to genuine hardship of the parties the assessee has to pay in cash. Technically the payment are covered by the provision of sec. 40 (A)(3) but the same was considered along with rule 6DD (b) as it existed then which dully provided for the genuine hardship that may be caused to the tax payers. The intention of the provision was to curve the use of black money. However it was never intended right from the inception of this section, read with rule circular issue explaining the reason for such provision, to restrict the trading activities of the assessee or the tax payers. The A/R of the appellant relied upon the case of the Allahabad High court in the case of CIT Vs. BANWARI LAL BANSIDHAR reported in 148 CTR 533 and CIT Vs G. K. CONTRACTOR 19 DTR 305 (Raj.) has held that when no deduction was allowed in regards to the purchases of the assessee, there was no need to look in to the provision of sec. 40(A)(3) and rule 6DD as no deduction was allowed to and claimed by the assessee in respect of the purchases. When the gross profit rate as applied, that would take care of everything and there was no need for the assessing officer to make scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the assessee. The amount was already paid during the previous year and not payable at the end of the year. Thus, it is clear that the contention raised by the assessee before us that after rejection of books of account and estimation of income of ITA No. 58/JP/2013 ACIT v M/s Choudhary Brothers, Jaipur the assessee, no further addition can be made by the Assessing Officer, has not been considered or decided by the ld. CIT(A). We find that the Coordinate Bench of this Tribunal in the case of Rakesh Construction Co. Vs. ACIT (supra) while dealing with the identical issue has held in para 2.4 as under: 2.4 We have heard the rival contentions and perused the material available on record. In the instant case, the books of accounts were rejected u/s 145(3) of the Act and thereafter the AO has estimated net profit @ 5.05% on contract receipt after deduction of depreciation, interest and remuneration paid to partners as against net profit of 2.39% declared by the assessee. From the perusal of the assessment order, it is noted that there have been discussions between the AO and the assessee in terms of estimating the net profit rate once the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d High Court in case of Geep Industrial Ltd. vs. CIT 232 ITR 456. Following the earlier decision of this Tribunal we decide this issue in favour of the assessee and against the Revenue. Therefore following the above cited decision of various cases as discussed above I am the view that addition made u/s 40(a))(ia) of ₹ 2,50,000/- and addition made u/s 40A(3) of I.T. Act of ₹ 11,25,460/- is not required. Hence, I direct the Assessing Officer to delete the addition made by the Assessing Officer of ₹ 2,50,000/- u/s 40(a)(ia) and ₹ 11,25,460/- u/s 40A(3) of I.T. Act. These grounds are allowed. 8. Against the above order of the ld. CIT(A), the revenue is in further appeal before the ITAT. 9. The ld AR of the assessee placed on record the order of the Tribunal in assessee s own case for the A.Y. 2010-11 to 2012-13 and contended that after accepting rejection of books of account, the Tribunal have upheld the addition by estimating NP rate @ 1% of the gross receipts. The ld AR also placed on record, order of the Hon ble Jurisdictional High Court dated 17/11/2015 confirming the order passed by the Tribunal. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1275779.00 1.85% Accepted the N P rate 2011-12* 235650422 1063786.70 4.51% 1688746.00 0.71% 1% confirmed 2012-13 199135193 9392348.11 4.71% 1531462.60 0.76% 1% confirmed 2013-14 379449445 16657123.00 4.39% 8499935.00 0.92% Ld. CIT Appeal adopt 1% as per previous order of Hon'ble ITAT Jodhpur 13. We had carefully gone through the order of the Tribunal for the earlier assessment years and found that in the A.Y. 2011-12, the assessee had shown gross receipts of ₹ 23.56 crores wherein G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factual position normally the profit rate declared and accepted in the preceding year, constitutes a good basis for working out the gross profit. So, Jurisdiction of Hon ble Rajasthan High Court give support to verdict of lower authorities. That ITAT Jodhpur Bench confirmed the N.P. Rate in the assessee s own case as follows: A.Y. N.P. Rate declared by Assessee Finding of ITAT Jodhpur 2011-12 0.71% 1.00% 2012-13 0.76% 1.00% So, ld. CIT (A) followed the finding of the ITAT Jodhpur based on past history. Department of Income Tax also preferred an appeal against the order of the ITAT before the Hon ble Jurisdictional High Court which was dismissed by the Hon ble High Court. The ITAT Jodhpur mentioned From the above chart it is clear that for A.Y. 2010-11, the assessing officer had applied N.P. Rate at 8.50%, however, the ITAT Jodhpur Bench has accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, no separate disallowance U/s 40A(3) of the Act is warranted. The Co-ordinate bench in the case of ACIT vs. M/S Choudhary Brothers Jaipur ITA no. 58/JPR/2013 dated 18/1/2018 held that, once the NP Rate is estimated, the AO cannot base this disallowance on the same books of accounts for the purpose of disallowance by invoking provisions of Sec 40 (a) (i) of the Act or general disallowed u/s 37 of the Act. In the case of Malpani Houses of stone vs CIT (2017) 395 ITR 385 (RAJ), the Hon ble High Court has held that when income is estimated and while assessing it and rejecting the books of accounts, it would not be appropriate to rely on the books of accounts for any addition other than the estimate made by Assessing Officer. Where books are rejected by the AO, no further addition can be made by relying on the same books of accounts as held by the Hon ble Jurisdictional High Court in the case of G.K. CONTRACTOR (2009) 19 DTR 0305 (Raj). The Coordinate Bench of Jaipur ITAT in the case of Nardev Kumar Gupta [2013] 142 ITD 303 (Jaipur - Trib.) held that There is no dispute to the fact that the AO rejected the book results u/s 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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