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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 ..... High Court in the case of CIT Vs Jain Construction Co ors. [ 1999 (9) TMI 26 - RAJASTHAN HIGH COURT ] . In assessee s case, the net profit rate subject to deduction of depreciation and interest comes @8.09% of the gross receipts, which is more than 8%. Wherever even books of account are rejected by the Assessing Officer then also no trading addition is required to be made as held in the case of CIT Vs Gotan Lime Khanij Udhyog [ 2001 (7) TMI 19 - RAJASTHAN HIGH COURT ] . CIT(A) was not justified in sustaining the part addition in both business of the assessee. Hence, appeal of the assessee stands allowed. - SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM For The Assessee : Shri Vijay Goyal (CA) For The Revenue : Shri Jagdish Chand Kulhari (JCIT) ORDER PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A)-3, Jaipur dated 27/10/2017 for the A.Y. 2013-14. 2. The return of income was e-filed on 30/09/2013 declaring total income of ₹ 42,78,480/-. The Assessing Officer rejected the books of account and estimated the net profit @ 8% and made addition of ₹ 77,16,268/- on the contract receipts of ₹ 9,64,53,345/-. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Assessing Officer on contract business. The ld. CIT(A) has also applied net profit @ 5.1% on the declared turnover of grit business and sustained the addition of ₹ 34,56,257/-. 5. While pleading on behalf of the assessee, the ld AR has submitted as under: A) Regarding rejection of books of accounts a) The ld. AO rejected the books of accounts for the following reasons: - i) No separate account of contract business and grit business has been maintained by the assessee. ii) Detail of day to day expenses and consumption of material are not maintained. iii) On perusal of expenses debited in trading P L account for the year ended on 31.03.2013, it is seen that assessee has debited major expenses under the single head i.e. contract expenses amounting to ₹ 13,02,74,691/-. During the course of verification proceedings, it was seen that contract expenses purchases were not fully backed by the vouchers showing the proper evidences. No vouchers in support of expenses claimed in P L account such as drilling blasting, Repair Maintenance were found to be fully maintained. b) Regarding defects pointed by ld. AO we may submit as under: - i) Regarding no separate account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses have been debited in single head Contract Expenses but the Income Tax Act does not provide any particulars procedure for maintenance of books of accounts. The Act provides method form which profit of Business ascertained and not the particular method of maintaining books of accounts and in fact we have debited all the expenses in single head contract Expenses and out audited contract account also showing all the expenses in single head as we have stated above Income tax Act does not provide any particular method of maintaining books of accounts and the profit can be ascertained on the basis of total of Expenses Shown in the contract. Further the nature of contractor ship business is somewhat of unorganized nature. Many a times a lot of small expenditure such as petty repairs of machines, procurement of small goods from local market. The business expediency also some times leads to procuring of some material without vouchers but these are of very small amount and that even does not mean that such expenditure are not made or bogus under the light of above mentioned judicial pronouncements. The comparative contract expenses of the assessee of some years are as under: - Asstt Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld A.O. has rejected the books of accounts of the assessee and invoked provisions of section 145(3) of Income Tax Act and estimated the income of the assessee by applying section 144 of Income Tax Act. The rejection of books of account does not give unfettered power to assess the income of a person. Section 144 of Income Tax Act provides best judgment assessment meaning thereby the A.O. is bound to assess a fair income by considering the results of inquiries conducted by him, past history of the assessee and comparative cases. In this case the ld. A.O. has not taken into account past history of the assessee and no any comparative case was cited in support of the income assessed by the A.O. b) Estimation not fair and not supported by past history and comparative case:- The ld. CIT(A) estimated the NP @ 5.10% on contract business and grit business. The ld CIT(A) has relied upon the findings of Hon ble ITAT for AY 2010-11 ((PB pg 55-70) and ignored the findings of Hon ble ITAT in the case of assessee for AY 2011-12 (PB pg 33-54). The Hon ble ITAT in the case of assessee for AY 2011-12 found that the declared profit of the assessee is more than 8% of gross receipt (subject to further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts which is more than 8% therefore no further trading should be made as held in above cases by Jaipur ITAT. This may be seen from the following chart:- Particulars Amount Amount Profit shown by assessee As per P L A/C PB pg 11 36,56,252 Less:- Profit from sale of Fixed Assets 6,28,379 Profit from contract and grit business 30,27,873 Add Depreciation 85,46,112 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% d) No trading addition even books are rejected: - Even the books of accounts are rejected on the basis of defects pointed out by the ld. AO no addition deserves to be made. Reliance is placed on the following decisions: i) CIT Vs Gotan Lime Khanij Udhog (2002) 256 ITR 243 (Raj). ii) J.C.Sharma Vs ITO 33 Taxworld 80 ITAT Jaipur Bench In view of the above no further trading addition deserves to be made and the humble assessee prays your honor to delete the addition of ₹ 51,29,955/- sustained by ld CIT(A). In view of the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is a finding of fact and does not give rise to the question of law for reference under section 256(2) of the Act, and thereby rejected the applications seeking reference of similar questions. In the instant case, the Tribunal while allowing the appeal has directed the assessing authority to recompute the total income as estimated by him and allow relief on account of payment of interest and claim of depreciation. The finding recorded by the Tribunal is purely a finding of fact, based on proper appreciation of material on record and the evidence produced by the assessee. As no question of law arises out of the order passed by the Tribunal, we find no fault with the order of the Tribunal declining to refer the question for our opinion. Consequently, all the applications filed under section 256(2) of the Act filed by the Revenue are hereby rejected. In assessee s case, the net profit rate subject to deduction of depreciation and interest comes @8.09% of the gross receipts, which is more than 8%. The working of the same as under: Particulars Amount Amount Profit shown by assessee As per P L A/C PB pg 11 36,56,252 Less:- Profit from sale of Fixed Assets 6,28,379 Profit from contract a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 145(3), which has not been challenged by the assessee. However, estimate made by the ld Assessing Officer and confirmed by the ld CIT(A) is higher side, which would give net profit rate of 12.84% before depreciation, which is not possible in contract business. It is also fact that required details of contract expenses were not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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