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TMI Blog2021 (12) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... on for making any trading addition. The ld. CIT(A) has given part relief out of the addition made by the AO. The ld. CIT(A) has not given any cogent reason for not accepting the assessee s plea completely. The ld. CIT(A) has held that the AO should be considered and taken into the account the explanation furnished by assessee in respect of fall in NP rate instead of simply applying the NP rate. But the ld. CIT(A) further has not substantiate for applying the GP rate of 3.70% without pointing out any specific defect or commenting on the expenditure debited in P L A/c specifically. Average rate of last two years can be applied in case of GP application only. But where application of NP rate is concerned then you have to pointed out specific defect for the expenditure debited in P L A/c which has not been done by the ld. AO as well as ld. CIT(A). Therefore, considering the totality of the facts and circumstances, we direct to delete the addition sustained by the ld. CIT(A) Addition u/s 69 r.w.s. 115BBE - HELD THAT:- CIT(A) has himself held that addition u/s 69 cannot be made on the basis estimate - AO did not bring any evidence on record to substantiate his claim that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. The brief facts of the case are that the assessee is an individual and enjoying income from engineering job work. Return was filed on 12/09/2013 declaring total income of ₹ 30,23,330/-. The A.O. completed the assessment U/s 143(3) of the Income Tax Act, 1961 (in short, the Act) on 23/03/2016 determining total income of assessee at ₹ 1,04,53,410/- by making the trading addition of ₹ 30,63,237/- and addition of ₹ 43,17,473/- u/s 69 r.w.s. 115BBE of the Act. 4. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions of both the parties as well as material placed on record given part relief to the assessee. Against the said order of ld. CIT(A), the assessee is in present appeal before the ITAT on the grounds mentioned above. 5. Ground No. 1 of the appeal relates to challenging the order of the ld. CIT(A) in sustaining the addition of ₹ 15,34,087/- out of addition of ₹ 30,63,237/- made by the AO by applying the NP rate of 3.70% as against 2.30% declared by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are from semi-govt agencies such as JDA-Jodhpur, JVVNL-Jaipur, UIT, Kota,JDA-Jaipur(work payment), RIICO-Jaipur, etc. In view of this when the receipts are from semi govt agencies the Ld. A.O. should not have doubted the receipts of the assessee and should have not rejected the books of accounts that the q.tally was not maintained. (iii) The Ld. A.O. has also objected that it was not the assessee who raised the bills of job done and works executed. Bills were rather prepared by the concerned semi-govt department. In the view of the Ld. A.O. this delayed the booking of receipts in the books of accounts. The objection of the Ld. A.O. is totally irrelevant. Whether bills are raised by the concerned department or by the assessee is not a material thing. What is material is passing of the bills and payment thereof. The assessee would account for the receipts only when payment is received and bills are passed. If the bills were prepared by the assessee there were chances of objection by the concerned department. So in order to have smooth sailing in the affairs of business it was in the fitness of things that bills were prepared by the concerned department. In view of the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation of ₹ 256320/-. Thus the expenditure in the P L A/c in Assessment Year 2013-14 was more by ₹ 3647343/- (3391023+256320). It because of this expenditure that NP rate has gone down. It is submitted that assessee did not charge any such taxes from the govt agencies on job work executed.. The Ld. A.O. made addition of ₹ 30,63,237/- where the assessee has incurred more expenditure of ₹ 36,47,343/-. Thus the fall in NP rate is fully explained. If the Ld. A.O. had taken into consideration this factor of more expenditure there would have been no case for addition. If the expenditure to the expenditure of ₹ 36,47,343/- is taken out from the P L A/c is NP would increase to ₹ 69,40,599/- and the NP rate would work out to 6.35% which is far more than 5.11% as applied by the Ld. A.O.. In other words even on increased receipts the assessee has disclosed better net profit. Thus there is no case for applying higher NP rate. There is totally no justification for making any trading addition. The ld. CIT(A) has given part relief out of the addition made by the ld. AO. The ld. CIT(A) has not given any cogent reason for not accepting the assessee s plea comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious defect was pointed out. In view of this the A.O. was not justified in rejecting the books accounts on the grounds as under: - (i) The assessee was not maintaining stock register therefore, consumption of material cannot be ascertained. It is submitted that the assessee is engaged in job work and the consumable items run in a large numbers for which stock register cannot be maintained. The assessee is not a trader but is a job worker and contractor where maintenance of stock register is almost impossible. (ii) Quantitative tally of closing stock not available with the assessee. The nature of job carried on by the assessee and the contract executed by him make it impossible to maintain quantitative tally. However the total receipts of the assessee are fully vouched and they are from semi-govt agencies such as JDA-Jodhpur, JVVNL-Jaipur, UIT, Kota, JDA-Jaipur (work payment), RIICO-Jaipur, etc. In view of this when the receipts are from semi govt. agencies the A.O. should not have doubted the receipts of the assessee and should have not rejected the books of accounts that the quantitative tally was not maintained. (iii) The A.O. has also objected that it was not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be rejected as unreasonable, if important transactions are omitted or if proper particulars and vouchers are not forthcoming or if they do not include entries relating to a particular class of business. 9. We also observed that the rejection of books of account is no ground for application of higher net profit even if books of accounts are rejected on one or the other ground, this in itself does not give liberty to the A.O. for making trading addition unless something specific is pointed out. In this regard, we draw strength from the decision in the case of S. Sarabhaiah Setty Sons V. CIT[1967] 64 ITR 175 (AP) wherein it has been held as under: Assessee must be given opportunity to rebut estimate. Where the ITO did not state the basis of the estimate and no opportunity was given to the assessee to rebut that basis, his order was liable to be set aside. We also draw strength from the decision in the case of Yaggina Veeraraghavulu Mavuleti Sanaraju Co. V. CIT[1966] 62 ITR 528 (AP) wherein it has been held as under: Where after rejecting the accounts of the assessee, an estimate of the turnover and gross profit is fixed to the detriment of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (i) Vat Exp against Work Contract tax 1793548.00 (ii) Work contract Composition Exp 1100200.00 (iii) Work Contract Tax exp Against EC 497275.00 Total 3391023.00 Besides this, the claim of depreciation during the year under consideration is of ₹ 6,25,059/- as against ₹ 3,68,739/- in Assessment Year 2012-13. Thus there was increase in depreciation of ₹ 2,56,320/-. Thus, the expenditure in the P L A/c in Assessment Year 2013-14 was more by ₹ 3647343/- (3391023+256320). It because of this expenditure that NP rate has gone down. The ld AR has submitted that assessee did not charge any such taxes from the govt agencies on job work executed. The A.O. made addition of ₹ 30,63,237/- where the assessee has incurred more expenditure of ₹ 36,47,343/-. Thus, the fall in NP rate is fully explained. If the A.O. had taken into consideration this factor of more expenditure there would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 69,13,200/-. The last installment paid by the bank was on 06.06.2012 of ₹ 20,00,000/-. The A.O. has not taken this amount of bank loan in consideration on the ground that the same was not used for construction purchases but was used for purposes of business. In the view of this, the A.O. out of the total amount of loan received from the bank of ₹ 69,13,200/- only ₹ 49,13,200/- was utilized for construction purposes. Further the A.O. has also considered other investment made by the family members of the assessee. The total investment treated as explained by the A.O. is of ₹ 1,21,07,527/- which is detailed as under: - 1. Himanshu Bargoti (Son) 37000/- 2. Subham Bargoti (Son) 3 25700/- 3. Rakesh Bargoti (Brother) 2020000/- 4. Indian Commercial Services (Self) 3946000/- 5. Mohan Lal Bargoti (Self) 865627/- 5. Bank Loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the construction work, therefore would have no occasion for making the addition. The addition made may kindly be deleted. 14. From perusal of the impugned order qua this issue, we observed that the ld. CIT(A) has himself held that addition u/s 69 cannot be made on the basis estimate. The AO did not bring any evidence on record to substantiate his claim that the assessee has made more investment in house construction then what was explained him. The submission of the assessee was only on estimated basis. The ld. CIT(A) has confirmed the addition of ₹ 8,92,473/- on the basis of source of investment not explained by the assessee for construction. Before the AO the assessee has also submitted that the cash withdrawal of family members during the financial year 2010-11 to 2013-14 when the construction was started and completed. During the financial year 2013-14 then the house was on the finishing stage and payments of many vendors were made after completion of construction was not considered by the AO and CIT(A) which are more than ₹ 16,15,000/-. The assessee claimed before the AO that the following family members have contributed for house construction during the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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