Commissioner Of Income Tax, Jaipur-Ii ,Jaipur v. M/S Sohan Lal Mathur B-3, Durga Path Amba Bari, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 172 / 2011 Commissioner of Income Tax, JAIPUR-II ,JAIPUR ----Appellant Versus M/s Sohan Lal Mathur B-3, Durga Path Amba Bari, Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. K. D. Mathur on behalf of Mr. R. B. Mathur For Respondent(s) : Mr. Sanjay Jhanwar with Ms. Archana _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 18/09/2017 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal haspartly allowed the cross-objection of the assessee and dismissedthe appeal of the department. 2.This court while admitting the appeal on 15.05.2013 framedthe following question of law:- “ I. Whether in the facts and circumstances of the casethe ITAT was justified in law in deleting the additions onaccount of sundry creditors for which genuineness couldnot be proved by the assessee? ii. Whether in the facts and circumstances of the casethe ITAT was justified in allowing the amount of sundrycreditors which was disallowed by the Assessing Officerand added to the income of the assessee as thegenuineness of transaction and creditors could not beproved.” 3.Counsel for the appellant has contended that the CIT(A) andTribunal have wrongly allowed the appeal of the assesseeinasmuch as the addition of Rs.61,04,372/- of sundry creditorswas wrongly deleted holding as under:- “In view of the above facts, sundry creditors above Rs.1.00/- lacs is hereby disallowed and added to the income ofthe assessee which is as follows:- Sundry Creditors1. Ambalal Material 131587Supp. 2.Chagan Lal Brothers1515343. Diwan Singh & Sons1286504. Gautam Traders1514405. Goshi Ston Crushing 131860Co.6. Jagdish Prasad Stones 129370Supp.7. Kalilash PC3655198. Kalu Ram & Co1647309. Khandelwal Building 167400Material Supp 10.Kumawat Enterprises12000011.Labour Payment 1430550Payable 12. Mangal Transport & 170480Earth Movers13. Mangilal Stone Supp16974014. Mittal Stone Co 20000015. Mittal Stone Co 132234(Material)16. Mohit Brothers5503017.Narian Das & Co.11670018. Navneet Building 138156Material Supp 19.Prahald Ram & Sons15047020. Rameshwaw Stone 122440Supp21.Ranjeet Building 151496Material Supp22. Sapan Building 121130Material Supp.23.Shri Abhimanyu Stone159844Supp24.Shri Balaji Enterprises14492025. Shri Ganesh Trading 156330Co.26. Shyam Enterprises13142027. S. S. Building Material 141310Supp. 28. S. S. Enterprises12234529. Sudhir Brothers11182730. Surendra Singh 110000Painter31. Triveni Material Supp15733032. Udai Lal Brick Supp168530Total6104372 4. However, CIT(A) while considering the same in Paragraph 1.2 and 1.3 observed as under:- “1.2 Challenging the said view of assessing officer Sh. Y.K. Sharma and Sh. Ashish Sharma CA & AR of appellantin their submissions has argued that the nature of thebusiness since inception is same and when books ofaccounts are rejected its profit should be determined onthe basis of net profit % as settled in the appellant’s owncase and ITAT Jaipur Bench in the case of appellant whiledisposing the appeal for A. Y. 200-2002 has heldaccordingly which has been followed by CIT(A) in the A.Y. 2003-04. After giving the past history of net profitbefore claim of depreciation, interest and remunerationto partners in this year such net profit has been shownat 9.82 % which was much highter as compared to allearlier years right from A. Y. 2001-02 to 2004-05. and 1.3 observed as under:- “1.2 Challenging the said view of assessing officer Sh. Y.K. Sharma and Sh. Ashish Sharma CA & AR of appellantin their submissions has argued that the nature of thebusiness since inception is same and when books ofaccounts are rejected its profit should be determined onthe basis of net profit % as settled in the appellant’s owncase and ITAT Jaipur Bench in the case of appellant whiledisposing the appeal for A. Y. 200-2002 has heldaccordingly which has been followed by CIT(A) in the A.Y. 2003-04. After giving the past history of net profitbefore claim of depreciation, interest and remunerationto partners in this year such net profit has been shownat 9.82 % which was much highter as compared to allearlier years right from A. Y. 2001-02 to 2004-05. Thereafter, relying upon Rajasthan High Court judgmentin the case of Bhawan Nirman path (Bohra) it wasargued that when revenue consistently for 5 years priorto A. Y. under consideration was following a particularmethod to estimate net profit then the trading resultopted by applying such net profit rate needed furtherappropriation towards allowable depreciation andinterest on borrowings and accordingly it was requestedto delete various aforesaid disallowance out of variousexpenses claim. 1.3I have considered facts of the case andarguments taken by Sh. Sharma quite carefully. It isseen that the assessing officer has discussed in detailthe various patent defect in the books of accountsproduced while rejecting books of accounts by invokingprovisions of S. 145(3) of I. T. Act. During the course ofappellate proceedings Sh. Sharma could not contradictthe finding on such defect and therefore, in myconsidered view the assessing officer was fully justifiedin rejecting the books of accounts by invoking provisionsof S. 145(3) of I. T. Act. Now the question comes thatwhether under facts and circumstances of the case afterrejecting the books of accounts it requireds any furthertrading addition or disallowance of certain expenses dueto non verifiability. It is held in the appellant case as wellas in number of other cases by Hon’ble ITAT JaipurBench and even by Hon’ble Rajasthan High Court that inthe cases of contractor after estimating the net profitwhen the books of accounts are rejected total businessincome shall be subject to allowable depreciation,interest to third parties, interest and remuneration topartners. Keeping in view such judicial finding whentrading result shown by appellant it is seen that the netprofit shown at Rs. 10,59,784/- was after debiting Rs.1,50,000/- as remuneration to partners, Rs. 5,14,313/-as interest to partners, Rs. 22,005/- as interest to thirdparties and depreciation claim of Rs. 10,76,927/-. Afterconsidering this the appellant has shown net profitbefore claim of aforesaid deductions at Rs. 28,23,029/-which comes 9.72% of contract receipt shonw at Rs.2,90,33,914/-. Since, such net profit is better thanearlier years and more than 8 % which is held asreasonable by Hon’ble ITAT Jaipur Bench in number ofcontractor cases who are engaged in Civil Constructionactivity therefore, in my considered view there is nojustification for making disallowance of aforesaidexpenditure claim in trading and P. & L A.c which isallowed by A. O. at Rs. 71,66,591/- which is herebydeleted.” 5. The Tribunal while considering the same has rightly considered in Para 2 as under:- 5. The Tribunal while considering the same has rightly considered in Para 2 as under:- “The AO has given further finding that no basiscould be given that why sundry creditors areoutstanding and no confirmation from sundrycreditors could be furnished and therefore, afterrejecting the books of accounts by invokingprovisions of S. 145(3) of Income Tax Act the AO haddisallowed Rs. 9,26,256/- out of labour charges claimof Rs. 92,62,561/- sundry creditors to the extent ofRs. 61,04,372/- were not considered genuine and anaddition was made, a disallowance of Rs. 20% of thetelephone expenses claim, 10% of transportationexpenses claim and 10 % of petrol expenses claimwas made along with 20 % disallowance ofdepreciation claim on car. Accordingly, a total suchaddition on the aforesaid account was made of Rs.71,66,591/-” 6. In view of the concurrent finding and when this position wasprevailing for last 5 years, we see no reason to interfere thematter. Both the issues are answered in favour of assessee andagainst the department. 7. The appeal stands dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. B. M. G/Gourav-106