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TMI Blog2024 (10) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... ection and part acceptably of book results, and there cannot be any head wise bifurcation of any claims under direct or indirect expenses, separately, because once books are rejected, it is rejected for the assessee and for the revenue, both, and in the instant case the statement of the Ld AR before the AO, on 05/08/2011 proves beyond doubt, that books of account never ever existed at all. AO under the factual circumstances stated above, and in absence of any regular books of accounts, was fully justified in estimating the business profits at a flat percentage of gross contract receipts. Now in cases of absence of any books of accounts, when the question of estimation of profits arises, it is a fair rate of percentage that is to be applied on actual receipts of the assessee, and in such cases there are plethora of judgments which prescribes that percentage declared by the assessee in earlier years in the assessees own case are the best guide, even though the principles of res judicata does not apply in income tax proceedings. In the instant case, based on earlier years records, in the case of the assessee himself, and after considering the profit percentage declared in Asst years 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... None For the Respondent : Sh. A. K. Singh, Sr. DR ORDER PER: UDAYAN DAS GUPTA, JM These two appeals are filed by the assessee against the orders of the Ld. CIT (A), dated 13/02/2015 for the Asst year 2009-10 and order dated 16/10/2014, for the Asst year 2010-11, both passed u/s 250 of the Act 61, which in turn has emanated out of the orders passed by the ACIT- Range III, Mirjapur, dated 20/12/2011, and order dated 20/03/2013, for the Asst years 2009-10 and 2010-11, respectively, both passed u/s 143(3) of the Act 61. 2. The grounds of appeal preferred by the assessee are as follows: Assessment Year 2009-10 1. The Learned CIT (Appeals) went wrong to disbelieve, merely on the basis of not lodging a FIR, the event of fight which caused dispossession of book of accounts from the appellant. The observation of the Id. CIT (Appeals) regarding books of account is perverse. 2. The Ld. CIT (Appeals) as well as ld. AO failed to appreciate entire material on the record inter alia the demurrage charges 8, 19,124/- in form of time extension, Royalty of 9,30,225/- Shram Upkar 3,36,916/- deducted from the bills by the contractee and depreciation 8,52,665/-, Bank interest of 36, 783/- and interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate that this is applicable to amount payable and not already paid. 7. The Learned CIT (Appeal) failed to appreciate the bonafide belief of the appellant that he was not aware of the law regarding TDS on interest paid to a loan account as the expenses had been claimed year after year and no disallowance was made in scrutiny assessment. 8. The Learned CIT (Appeal) failed to appreciate that there was no any payable amount under the loan account of Tata Motor Finance as on 31.03.2010 at the closing of financial year. 9. The Learned CIT (Appeal) erred in the law and on the facts in upholding the interest charged u/s 234 B 234C of the Act. 10. The appellant craves to leave, add or delete all are or any of the above grounds which are independent to each other. Asst Year : 2009-10: 3. The brief facts of the case are that the assessee is an individual and during the year under appeal, was engaged in the business of execution of contract under MPRRDA ( Madhya Pradesh Rural Road Development Authority ) being one of the major parties, under whom work has been executed and payments received there on. Regular return has been filed in normal course u/s 139(1) of the Act 61, supported by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @ 7.25% of Gross receipts, without considering the extra item of expenditure incurred by the assessee in these two years under appeal, on account of royalty payment and demur-rage (due to non-completion of the project within time), upkar, depreciation and in which were absent in earlier years, and these additional expenditure will have an effect of reducing the profits, while compared to earlier years. 8. The Hon ble Tribunal, while disposing off the miscellaneous application, observed that when it is apparent from record that there are extra items of expenditure during the year, then estimation of income should be based on a criteria taken after due consideration of such extra-ordinary item, and the order of the ITAT dated 07/02/2017, was recalled for fresh adjudication, vide order dated 27th January, 2021, in MA Nos 05 and 06 / Alld/ 2017. 9. During the second round of hearing before the tribunal, the assessee has filed a paper book dated 21/01/2022, containing 41 pages, consisting copies of audited accounts and copies of appellate orders of first appellate authorities for subsequent years AY 2011-12 and 2012-13, ( as evidence that deduction u/s 37(1) of the Act 61, has been allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials consumed, labour wages, royalty, compound tax, statutory Upkar, transportation, interest on bank and finance charges, and depreciation on fixed assets, and all other indirect expenses as reflected in the audited accounts, before arriving at the net profit of Rs. 25,55,430/- (percentage working out to 5.75% ). 10.4 Thereafter, in the return of income filed, the assessee further claimed a deduction of Rs. 8,19,124/- as demurage charges ( for non completion of work in time), and arrived at the returned figure of Rs. 17,36,307/- ( percentage working out to 3.91% of gross). 10.5 The summary for both the years are reproduced for easy reference : Asst Year: Gross Receipts: Net Profit as per NP Rate % Additional Disclosed Percentage audited accounts Percentage deductions Profit in demurrage Return: Claimed in return 2009-10 4,44,16,951.00 25,55,430.00 5.75 8,19,124.00 17,36,306.00 3.9% 2010-11 4,37,59,063.00 25,08,842.00 5.73 9,05,558.00 16,03,284.00 3.6% 10.5 It is seen that the assessee has filed copies of accounts details signed by the GM, MPRRDA, in annexure- 2 of his paper book filed on 14/03/2016, which certifies that the total amount deducted from gross bills for non comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks, in the month of September 2011. 13. On the face of such contradictory statements, it is very difficult to accept the authenticity of the audited accounts, totally un-vouched and unsupported by documentary evidences and the figures appearing in the audited accounts, cannot be accepted at face value, specially without supporting invoices, of materials consumed and labour expenses, the two huge expenses claimed, among others. 14. In the instant case we further observe, that in the instant case, the assessee without producing any documentary evidences relating to claims of direct expenses made in trading account specially on account of materials and labour, wants to claim deductions on estimate based on past records and further wants to claim, head-wise deductions, on account of upkar, royalty, demurrage, compound tax, etc. as per statement certified by the contractee, which is legally and technically unacceptable arguments, because when book results are rejected, it is rejected as a whole and there cannot be any part rejection and part acceptably of book results, and there cannot be any head wise bifurcation of any claims under direct or indirect expenses, separately, because once ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides a reliable and reasonable basis for estimating gross profit in the hands of the assessee. The average gross profit for the past two assessment years as available on record was 25.18 per cent. as against 24.80 per cent. declared by the assessee. Therefore, the addition to the extent of differential of 0.38 per cent. was to be sustained and the remaining addition sustained by the Commissioner (Appeals) was to be deleted. Followed ACIT v. Allied Gems Corporation (I.T.A. Nos. 794 and 795/JP/2011 and 716/JP/2012, dated December 15, 2017). (AY. 2012 -13 ) 19. In the instant case, based on earlier years records, in the case of the assessee himself, and after considering the profit percentage declared in Asst years 2007-08 and 2008-09, at 6.6% and 6.32%, respectively, the Hon ble Bench vide order dated 07/02/2017, took a view to estimate the contract business profits @ 6.30%, on Gross Receipts, after considering all claims referred to in sections 29 of the Act, in accordance with provisions contained in sections 30 to 43D of the Act 61, and we also are of the same opinion and there are no reasons to take a different view in the matter. 20. However, regarding the qualms of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 40(a)(ia),amounting to Rs. 3,40,272/- the law is very well settled that when books of accounts are rejected, it is rejected both for the assessee and the revenue, and the revenue cannot proceed to make any additions or disallowances, based on the same rejected books. 24. At this stage we would also like to refer to some judicial pronouncement, where it has been held that, when books of accounts are already rejected and recourse has been taken to section 145(3) of the Act 61, and gross profit has been estimated at fair percentage on sales, it is not open to the AO to rely upon the same rejected books of accounts, to make additions and or disallowance on other heads of expenditure. 25. Hon ble Karnataka High Court in the case of CIT vs Bahubali Neminath Muttin 388 ITR 608 ( Karnataka HC ) has observed as follows : relevant portion reproduced: Alternatively, and without prejudice to the preliminary objections raised above, he would submit that, on merits it should be noted that admittedly the books of accounts of the respondent have been rejected by the assessing authority. The profit of the respondent is estimated as provided under Section 145 (3) of the I.T. Act. When the gross ..... X X X X Extracts X X X X X X X X Extracts X X X X
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