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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 ..... ing." 2. The hearing of the appeal and C.O. were concluded 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 Rs. 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 Rs. 1,04,53,410/- by making the trading addition of Rs. 30,63,237/- and addition of Rs. 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 Rs. 15,34,087/- out of addition of Rs. 30,63,237/- made by the AO by applying the NP rate of 3.70% as against 2.30% declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emi-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 aforesaid facts there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - where the assessee has incurred more expenditure of Rs. 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 Rs. 36,47,343/- is taken out from the P&L A/c is NP would increase to Rs. 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 completely. The ld. CIT(A) has held that the AO should 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 A.O. this delayed the booking of receipts in the books of accounts. The objection of the 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee, the assessee is entitled to know the basis and also to an opportunity to rebut the same." In the case of Seth Nathuram Munnalal V. CIT 25 ITR 216 (Nag.) wherein the Hon'ble High court has held that "if the assessee fails to satisfy the ITO as to the correctness of the profits returned by him, it is open to the ITO to take a higher percentage consistent with the state of trade in the locality or with any special circumstances of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 647343/- (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 Rs. 30,63,237/- where the assessee has incurred more expenditure of Rs. 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 have been no case for addition. If the expenditure to the expenditure of Rs. 36,47,343/- is taken out from the P&L A/c then NP would increase to Rs. 69,40,599/- and the NP rate would work out to 6.35% which is far more than 5.11% as applied by the 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 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 res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3946000/- 5. Mohan Lal Bargoti (Self) 865627/- 5. Bank Loan 4930200/- Total 1,21,07,527/- In view of the aforesaid investment of Rs. 1,21,07,527/- treated as explained, the A.O. treated the balance amount of Rs. 43,17,473/-(16425000-12107527) as unexplained and made addition under section 69 of the Act. The ld. CIT(A) reduced this addition to Rs. 8,92,473/- considering that the report given to the banker was estimated and no addition can be made on the basis of estimation. But he has taken the value of house/investment in house at Rs. 1.3 Crore. The ld. CIT(A) did not consider the payment made after completion of the house. 13. We also observed that the A.O. did not consider the fact that the assessee was himself a contractor and was having full knowledge about of work of construction. He himself supervised the entire work of construction. No amount was paid for supervision to any engineer or an architect. This saved him around 12.5% of the cost of investment. Such deduction would have been allowed by the A.O.. It is undisputed fact that the assessee is engaged in job work and contractor work. This fact is proved by executing works of JDA Jodhpur and UIT-Ko ..... X X X X Extracts X X X X X X X X Extracts X X X X
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