Iapl/281/2017 Of Jugender Singh Yadav v. Principal Commissioner Of Income Tax Agra And Another

Court No. - 35 RESERVED Case :- INCOME TAX APPEAL No. - 281 of 2017 Appellant :- Jugender Singh Yadav Respondent :- Principal Commissioner Of Income Tax Agra And AnotherCounsel for Appellant :- Suyash AgarwalCounsel for Respondent :- S.S.C.,Krishna Agarawal Hon'ble Bharati Sapru,J.Hon'ble Piyush Agrawal,J. (Delivered by Hon'ble Piyush Agrawal, J.) We have heard Shri Suyash Agarwal, learnedcounsel for the assessee – appellant and Shri KrishnaAgarwal, learned standing counsel for the respondents –Department and perused the materials brought onrecord. The present appeal has been filed against the judgement & order dated 28.04.2017 passed by theIncome Tax Appellate Tribunal, Agra Bench, Agra forthe Assessment Year 2011-12. The said appeal was admitted on 21.09.2017 bythis Court on the following questions of law formulatedin the memo of appeal:- “(i) Whether the Appellate Tribunal was legallyjustified in applying net profit rate at 8% u/s 44ADwhen the gross turnover of the Appellant exceeded1 crore and books of accounts were maintained asper section 44AB of the IT Act? (ii) Whether the Appellate Tribunal was justified in framing assessment by applying net profit rate at8% on the basis of statement of assessee contraryto standard procedure of assessments providedunder section 143 and 144 of IT Act? (iii) Whether the Appellate Tribunal is legallyjustified in treating interest income from FDR andrental income from JCB as income other thanbusiness income for the assessment year inquestion?” The facts of the case, in brief, are that the appellant is a civil contractor engaged in execution of workscontract with Agra Development Authority, Agra. Thepresent appeal relates to the Assessment Year 2011-12.The assessee filed its returns showing net profit of Rs.42,62,972/-, which gives net profit @ 5.09% on grossreceipt of Rs. 8,37,12,896/-. The appellant has earnedinterest on FDR and JCB machines amounting to Rs. 3,46,883/-, the total income being Rs. 46,09,455/-. The appellant filed its return on 10.09.2012showing total income of Rs. 44,95,900/-. The returnwas processed under section 143 (1) of the Income TaxAct and the case was selected for scrutiny.Consequently, on 13.09.2012, notice under section143(2) of the Income Tax Act was issued, which wasproperly served upon him on 14.09.2012. A noticedated 14.06.2013 under section 142(1) of the IncomeTax Act, along with questionnaire, was issued. Inresponse to the said notice, the reply was submittedalong with required documents were also attached.Thereafter, on 17.01.2014, another notice was issueddirecting the appellant to produce complete books ofaccount. On verifying the books of account, bill,vouchers, etc., it was found that most of the expenseswere paid in cash and vouchers were self-made, whichwas not verifiable. The assessee admitted, during the course of assessment proceedings, that the maintenance of stock register and quantitative tally is not possible. TheAssessing Authority, while framing the assessmentorder dated 22.01.2014, has enhanced the net profit @8% and has observed as under:_ The assessee admitted, during the course of assessment proceedings, that the maintenance of stock register and quantitative tally is not possible. TheAssessing Authority, while framing the assessmentorder dated 22.01.2014, has enhanced the net profit @8% and has observed as under:_ “During the period assessee's contractual grossreceipt is Rs. 8,37,12,897/-. Net profit taken @8% on gross receipt comes to Rs. 66,97,032/-,assessee has also shown interest from FDRs Rs.1,93,893/- & from rent of JCB Rs. 1,52,590/-, totalnet profit comes to Rs. 70,43,515/- in whichassessee has already shown net profit in his P&LAccount of Rs. 46,09,455/-. Therefore, differenceof Rs. 24,34,060/- (Rs. 70,43,515 – 46,09,455/-)disallowed out of expenses and added back in histotal income. This disallowance also includes Rs.4,88,222/- u/s 40(a)(ia) on non deduction of taxpayment of M/s Agra Development Authority asinterest and any other possible disallowance u/s40(a)(ia) or 40A(3). Assessee is agree for thesame vide order sheet entry dated 22.01.2014.Penalty notice u/s 271(1)(c) of the IT Act is beingissued separately for concealment & furnishing ofinaccurate particulars in income.” Feeling aggrieved by the aforesaid assessmentorder, the appellant preferred an appeal before theCommissioner of Income Tax (Appeals), Agra, whovide order dated 31.07.2015, dismissed the appeal andconfirmed the assessment order. The Commissioner ofIncome Tax (Appeals), in its order, has observed asunder:- “ … Here it is a matter of legal principles thatonce an assessing officer detects any defects in thebooks of accounts, any conditional offer by theassessee for offering any income as not supportedby the bills and vouchers as also a request that heis accepting such income to avoid litigation and topurchase peace of mind has no legal validity. …... Since in this case, assessing officer while verifyingthe books of accounts of the assessee has detectedthat the assessee is not maintaining stock registerof the raw materials, making various payments oflabour wages and some small material purchasein cash and instead of maintaining proper billsand vouchers towards various expense is onlymaintaining some self-made vouchers which werenot verifiable, therefore, the rejection of books of accounts by the assessing officer is justified.” Still feeling aggrieved by the order of theCommissioner of Income Tax (Appeals), Agra, theassessee – appellant preferred an appeal before theTribunal, who by the impugned order, has dismissed theappeal of the appellant observing as follows:- “14. We find the order of the ld. CIT (A) isreasonable and justified in respect of estimation ofincome at the NP rate admitted by the assesseehimself, in the course of assessment proceedings.We also find that the ld. CIT (A) has not appliedthe provisions of section of section 44AD of theAct, rather he had justified the assessee'sadmission of 8% NP rate before the A.O. With thesupport of judicial pronouncements, wherein netprofit rate ranges from 8% to 13% in the cases ofcivil contractors. Thus, the ld. CIT (A) consideredthe facts and circumstances of the case that theassessee has admitted NP of 8% in compliance toshow cause issued by the A.O. during the course ofassessment proceedings and that subsequently,retraction in appeal is irrelevant on account ofconditional admission, because the penaltyproceedings under section 271(1)(c) of the Act, does not change the basic fact that assessee wasnot maintaining stock register and expenditurevouchers of the assessee were not verifiable.However, the assessee's admission of an estimatedincome at the NP rate of 8% which has beentreated as if detected by the A.O. in compliance toshow cause notice, during the course ofassessment proceedings has not been supportedwith corroborative documentary evidences toprove to the contrary, that it was not the offer ofthe assessee to show his bonafides that he isoffering such income to avoid litigation, or to buypeace of mind. Thus, the fact as regards to theconditional admission of NP rate of 8% by theassessee either of his own or in compliance to theshow cause notice during the course of assessmentproceedings, has not been established. 15. In view of the above, it is proved that theassessee has made an admission of 8% net profitrate before the A.O. vide order sheet entry dated22.01.2014. The ld. CIT (A) action in confirmingthe net profit rate at 8% as admitted by theassessee before the A.O. vide order sheet entrydated 22.01.2014 as above, is justified, with thesupport of judicial precedent relevant and the law applicable in the case of assessee. We also noticethat the allegation raised by the assessee, inrespect of the lower authorities, are baseless andwithout documentary evidence as regards theestimation of his income, in any arbitrary orcapricious manner.” Feeling aggrieved by the aforesaid order of the Tribunal, the assessee has preferred the present appeal. It has been argued by the counsel for the appellantthat at the time of assessment proceedings, the assesseehas given consent for acceptance of 8% of gross netprofit only with a condition that no penal action shall betaken against him and therefore, when the penaltyproceedings were initiated, he retracted with hisconsent. He further submits that the appellant hasproduced all books of account before the authoritiesbelow, but the same have wrongly been rejected. It isfurther submitted that since the nature of the business ofthe assessee is of the works contractor and in manycases, the payment has to be made in cash, for whichrelevant bills cannot be produced, therefore, it is not a case for rejection of books of account on that count. It is further submitted that the net profit has to becommensurate with the previous years, in which the netprofit of 6.7% has been accepted and therefore, in thedisputed year, the net profit of 8% is not justified. Learned counsel for the Department has supported the orders passed by the lower authorities and hasargued that all the authorities below have decided theissue against the appellant and it is concluded byfindings of fact and no substantial question of law arisesin the present appeal. From the perusal of the record, it reveals that the books of account of the assessee has been rejected andthe authorities have rightly made the assessmentenhancing the net profit @ 8%. Once, on finding offact, it has been found that substantial amount has beenspent by making payment in cash and that too, withvouchers having been self-made and not verifiable,admittedly, the appellant has not maintained the stock register and quantitative tally is not being made.Further, the assessee has also not shown the interestderived from FDR to the tune of Rs. 1,93,893/- as wellas the lease rent of Rs. 1,52,590/- so received fromleasing out of JCB machines. Once it has been found that the assessee has not voluntarily maintained its books of account, as requiredunder the Act, the books of account have rightly beenrejected and the net profit, which has been fixed at 8%,is quite reasonable. Moreover, all the authorities belowhave rejected the contention of the appellant. At thisstage, no substantial question of law arises in thepresent appeal. The appeal is, accordingly, dismissed. The register and quantitative tally is not being made.Further, the assessee has also not shown the interestderived from FDR to the tune of Rs. 1,93,893/- as wellas the lease rent of Rs. 1,52,590/- so received fromleasing out of JCB machines. Once it has been found that the assessee has not voluntarily maintained its books of account, as requiredunder the Act, the books of account have rightly beenrejected and the net profit, which has been fixed at 8%,is quite reasonable. Moreover, all the authorities belowhave rejected the contention of the appellant. At thisstage, no substantial question of law arises in thepresent appeal. The appeal is, accordingly, dismissed. The substantial questions of law are answered accordinglyagainst the Assessee and in favour of the Revenue. Order Date :-19.08.2019Amit Mishra