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TMI Blog2018 (1) TMI 1608X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of account and application of Section 145(3) of the I.T. Act, 1961 made by the ld. A.O. 2. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in confirming the trading addition of Rs. 49,19,121/- by estimating the NP rate of the assessee at 5.1% on the declared turnover of Rs. 9,64,53,345/- as against the trading addition of Rs. 77,16,268/- made by ld A.O. by estimating net profit @ 8% of the total contract expenses of Rs. 9,64,53,345/-. 3. On the facts and in the circumstances of the case and in law the ld. CIT(A), erred in confirming addition of Rs. 38,67,086/- by estimating the NP rate of grit business of assessee at 5.1% on the declared turnover of Rs. 7,58,25,218/- as against the estimation of profit by ld. A.O. at 5.5% and addition of Rs. 41,70,387/- made by ld. A.O." 4. In the grounds No. 1 to 3 of the appeal, the assessee has challenged the rejection of books of account and applying the provisions of Section 145(3) of the Income Tax Act, 1961 (in short the Act) and confirming the trading addition of Rs. 16,73,698 + 34,56,257/- totaling to Rs. 51,29,955/- by estimating the net profit @ 5.1% on turnover of Rs. 9,64,53,345/- on the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account for both businesses. It is further relevant to mention here that during the course of assessment proceedings the assessee submitted the tentative profit distribution chart between grit business and contract business. On the basis of this chart, the ld AO held that the assessee has shown profit @ 1.06% from contact business which is very low. In this regard, we submit that this chart was prepared merely on estimation and same of common expenses has been taken as expenses of contract business. This chart is not based on vouchers. However, the assessee is maintaining common set of books of accounts for both the business activities where from the income and expenses of the assessee are verifiable in which no defects has been pointed by ld. AO, therefore the books of accounts of the assessee cannot be rejected on this ground. Further in AY 2011-12 and AY 2012-13 also the assessee was maintaining the common set of books of accounts for both type of business and the same was accepted by same ld. AO. ii) Detail of day to day expenses and consumption of material are not maintained. Looking to the nature of business of the assessee it is not practically possible for assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts that gross receipts increased in comparison to previous year. Hon'ble Rajasthan High Court in the case of CIT Vs Bhawan Va Path Nirman (Bohra) & Co (No. 1) 258 ITR 431 has held that the past history of the assessee is best guiding factor. Hon'ble ITAT Jaipur Bench in the case of M/s Asian Construction Co. Vs ITO 34 Taxworld 89 has held that the past history of assesses case is the best reflector of the true trade results. Thus where the books of account have been rejected and there is no material change in the circumstances from previous years the past history of the assessee should be follow. B) Regarding estimation of profit from Grit business and business other than Grit. i) The assessee is maintaining proper books of account which were audited by Chartered Accountant. After examining the books of account, the auditors gave their report certifies the true and fairness of the profit. The ld AO has examined the books of account and no any material discrepancy was pointed out by him. Therefore, the trading results shown by books of account should be accepted. ii) The assessee is maintaining common books of accounts for grit business and contract business. All the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of AY 2013-14 and AY 2011-12 are different than AY 2010-11 in respect to depreciation. Due to new purchase of plant and machinery there is huge increase in depreciation. This may be seen from following chart:- Particulars AY 2010-11 AY 2011-12 AY 2013-14 Difference in between AY 2010-11 & AY 2013-14 Depreciation 58,97,727 82,65,004 85,46,112 26,48,385 If we compare the GP of the assessee of last few years it comes as under: - AY Total Turnover Gross Profit GP Rate 2013-14 15,82,78,563 1,39,60,383 8.82% 2012-13 15,62,50,053 1,36,71,879 8.75% 2011-12 15,50,02,341 1,27,29,257 8.21% D) NP @ 8% of gross receipts subject to further deduction on account of depreciation and interest was held by Hon'ble Rajasthan High Court and ITAT Jaipur as reasonable. a) CIT vs Jain Construction co & Others [2000] (Raj) 245 ITR 527 (Copy at PB pg 78-81) b) ITO vs Kumawat Contractors ITA No 115/JP/2013 order dated 09/10/2015 ITAT Jaipur Copy at PB 82-88. In this case estimation of profit by applying 6% of gross contract receipts subject to further deduction of depreciation, interest and remuneration to partner held as reasonable. c) Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on the orders of the authorities below. 7. The Bench have heard both the sides on these issues. Although, the assessee has maintaining the books of account, which was accepted by the Assessing Officer in A.Y. 2011-12 & 2012-13, however, considering the various aspects recorded by the authorities below, the Bench are of the view that the rejection of books of account is justified. However, with regard to claim of estimation of net profit of business other than the grit business, the Bench find that the ld. CIT(A) has relied on the findings of the ITAT in the case of A.Y. 2010-11. However, in the decision for the A.Y. 2011-12, the ITAT has found that the declared profit of the assessee was more than 8% of the gross receipts subject to deduction on account of depreciation and interest, therefore, the addition was deleted. It is also established that the facts with regard to the claim of depreciation for A.Y. 2011-12 and for the assessment year under consideration were different from the facts of A.Y. 2010-11, for the reason that there is a huge increase in the claim of depreciation on account of purchase of new plant and machinery. In the A.Y. 2010- 11, the claim of depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,112 Interest Paid 39,20,689 Received -15,48,252 Net Interest Paid 23,72,437 Total business profit before interest and depreciation 1,39,46,422 Gross Receipts against contract 9,64,53,345 Gross Receipts against grit (As taken by AO) 7,58,25,218 Total receipts 17,22,78,563 % of profit on gross receipts 8.09% It is also pertinent to note that wherever even books of account are rejected by the Assessing Officer then also no trading addition is required to be made as held by the Hon'ble Rajasthan High Court in the case of CIT Vs Gotan Lime Khanij Udhyog (2002) 256 ITR 243 (Raj) and J.C. Sharma Vs ITO 33 Taxworld 80 ITAT Jaipur Bench. In assessee's own case for the A.Y. 2011-12, the Coordinate Bench of the ITAT, Jaipur has held as under: "2.5 We have heard the rival contentions and perused the materials available on record. In this case, the AO observed that the assessee had debited a sum of Rs. 14,00,93,774/- to the P&L account under the head contract for which the AO required the specific query with regard to such contract expenses vide note u/s 142(1) dated 5-09-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 Rs. 14,71,70,861/- and remaining addition is deleted. The Assessing Officer is directed to calculate the income as per the above finding.'' It is also noted that the facts of this year is different than last year in respect of depreciation, Royalty, Labour cess and Sales Tax. It is also noted that due to new purchase of plant and machinery, there is increase in depreciation. It is also noted that the labour cess was not in A.Y. 2010-11 while the same was paid by the assessee in A.Y. 2011-12. We have also noted that there was substantial increase in sales tax and royalty during this year in comparison to last year and all these factors resulted into lower net profit in spite of the fact that over all gross profit of the assessee was more than the last year as per following chart. Particulars In AY 2010-11 In AY 2011-12 Difference Depreciation 58,97,727 82,65,004 23,67,277 Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X
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