Jain & Rai Construction Co v. Commissioner Of Income Tax, Gwalior

I.T.A. No. 99/2018 Jain & Rai Construction Co. Vs. Commissioner of Income Tax, Gwalior Gwalior, 18/09/2018 None for the appellant. Perused the case. This appeal under Section 260A of the IncomeTax Act, 1961 against the judgment/ order dated25/01/2018 passed by the Income Tax AppellateTribunal, Agra in I.T.A. No. 344/AGR/2015 on thefollowing proposed substantial question of law:- “(i) Whether the order passed by learnedIncome Tax Appellate Tribunal holdingthe provisions of section 145(3) of theIncome Tax Act having correctly appliedis perverse, erroneous in law as well ascontrary to the established judicialprinciples.Income Tax Appellate Tribunal holdingthe provisions of section 145(3) of theIncome Tax Act having correctly appliedis perverse, erroneous in law as well ascontrary to the established judicialprinciples. (ii) Whether in the absence of anymaterial evidence, Ld. ITAT was correctin law in reviving the order of AssessingOfficer even if provisions of Sec 145(3)were applicable. (iii) Whether the impugned Judgment/order passed by learned Income TaxAppellate Tribunal is perverse as well aserroneous in not adjudicating the issuein accordance with the propositions laiddown by Hon'ble Apex Court and Hon'bleHigh Court. (iv) Whether the learned Income TaxAppellate Tribunal can pass an order byignoring the percentage of net profitratio for previous Assessment Year ofAppellants business. (v) Whether the learned Income TaxAppellate Tribunal erred while passingthe impugned Order/ Judgment thatduring assessment, learned AssessingOfficer can not reject the whole books ofaccounts threshold without pointed outspecific defects.” 2 THE HIGH COURT OF MADHYA PRADESH I.T.A. No. 99/2018 Jain & Rai Construction Co. Vs. Commissioner of Income Tax, Gwalior The relevant facts giving rise to thecontroversy briefly are that, the appellant assesseecarries the business of Government contractor.During the year under consideration i.e. 2010-2011the appellant declared his income of Rs. 5,09,137/-.The appellant's case was selected under CASS. TheAssessing Officer noted discrepancies in the booksof account in as much that the purchase ofRs.4,81,63,098/- against total contract ofRs.5,68,85,751/- was made from unregistereddealers, which included purchase of soil, greets,bricks, muram etc, by hand-made vouchers whichcould not be verified; therefore, their genuinenesswere doubted. The vouchers pertaining to officeexpenses and general expenses were not produced.Nor the explanation qua Rs.7,91,168/- on employees& recruitment was produced. The overheadexpensesonCar(Rs.1,36,534/-),Crane(Rs.1,61,400/-), freight and carrier (Rs.10,87,138/-),fuel (Rs.4,05,895/-), JCB machine (Rs.5,71,360/-)were not verifiable. These deficiencies resulted indisallowance of books of accounts. The AssessingOfficer applied a net profit rate of 8% on the totalgross receipts and assessed the income accordingly. THE HIGH COURT OF MADHYA PRADESH I.T.A. No. 99/2018 Jain & Rai Construction Co. Vs. Commissioner of Income Tax, Gwalior Modifiying the order, the Commissioner of IncomeTax (Appeals) disallowed Rs. 1 Lac out of variousexpenses and selected the remaining addition onthe finding that the defects being minor ought notto have led to rejection of book results underSection 145(3) of the Act. THE HIGH COURT OF MADHYA PRADESH I.T.A. No. 99/2018 Jain & Rai Construction Co. Vs. Commissioner of Income Tax, Gwalior Modifiying the order, the Commissioner of IncomeTax (Appeals) disallowed Rs. 1 Lac out of variousexpenses and selected the remaining addition onthe finding that the defects being minor ought notto have led to rejection of book results underSection 145(3) of the Act. On an appeal by the Revenue, the AppellateTribunal on an issue: “Whether on the facts and in thecircumstances of the case and in law, the ld. CIT(A) has erredin by holding that provisions of Section 145(3) are notapplicable ignoring the facts that assessee has failed toproduce the complete bills & vouchers for expenses many ofthem being unverifiable”, by taking into considerationthe fact that the Assessing Officer of unverifiablevouchers and unexplained expenses allegedlyincurred by the assessee and the Commissioner ofIncome Tax (Appeal) not adverting to the respectivedeficiencies found fault with the order by theCommissioner of Income Tax (Appeal), consequentlyreversed the same and upheld the rejection ofbooks of account under Section 145(3) by theAssessing Officer. Though multiple substantial question of lawhas been proposed. However, no material is THE HIGH COURT OF MADHYA PRADESH I.T.A. No. 99/2018 Jain & Rai Construction Co. Vs. Commissioner of Income Tax, Gwalior commended at to dispel the findings arrived by theAssessing Officer as regard to the defectiveunidentified, unverified method of accountingadopted by the assessee, which led the AssessingOfficer to apply the best judgment assessment. In M/s. Kachwala Gems, Jaipur Vs. JointCommissioner of Income Tax, Jaipur (AIR 2007 SC 487), it is observed:- “9. In our opinion, whether there werebogus purchases or not, is a finding offact, and we cannot interfere with thesame in this appeal. As regards therejection of the books of accounts,cogent reasons have been given by theIncome Tax Authorities for doing so, andwe see no reason to take a differentview. bogus purchases or not, is a finding offact, and we cannot interfere with thesame in this appeal. As regards therejection of the books of accounts,cogent reasons have been given by theIncome Tax Authorities for doing so, andwe see no reason to take a differentview. 10. It is well settled that in a bestjudgment assessment there is always acertain degree of guess work. No doubtthe authorities concerned should try tomake an honest and fair estimate of theincome even in a best judgmentassessment, and should not act totallyarbitrarily, but there is necessarily someamount of guess work involved in a bestjudgment assessment, and it is theassessee himself who is to blame as hedid not submit proper accounts. In ouropinion there was no arbitrariness in thepresent case on the part of the IncomeTax Authorities. Thus, there is no force inthis appeal, and it is dismissedaccordingly. No costs.” In M. Janardhana Rao Vs. Joint Commissioner of Income Tax (AIR 2005 SC 1309), it is held:- THE HIGH COURT OF MADHYA PRADESH I.T.A. No. 99/2018 Jain & Rai Construction Co. Vs. Commissioner of Income Tax, Gwalior In M. Janardhana Rao Vs. Joint Commissioner of Income Tax (AIR 2005 SC 1309), it is held:- THE HIGH COURT OF MADHYA PRADESH I.T.A. No. 99/2018 Jain & Rai Construction Co. Vs. Commissioner of Income Tax, Gwalior “16. An appeal under Section 260A canbe only in respect of a 'substantialquestion of law'. The expression'substantial question of law' has notbeen defined anywhere in the statute.But it has acquired a definiteconnotation through various judicialpronouncements. In Sir Chunilal V.Mehta & Sons Ltd. v. Century Spinning &Mfg. Co. Ltd., (AIR 1962 SC 1314), thisCourt laid down the following tests todetermine whether a substantialquestion of law is involved. The testsare: (1) whether directly or indirectly itaffects substantial rights of the parties,or (2) the question is of general publicimportance, or (3) whether it is an openquestion in the sense that issue is notsettled by pronouncement of this Courtor Privy Council or by the Federal Court,or (4) the issue is not free fromdifficulty, and (5) it calls for a discussionfor alternative view. There is no scopefor interference by the High Court with afinding recorded when such findingcould be treated to be a finding of fact.” Presently, the entire case turn on facts. Nomaterial being commended at to establish theverifiable account method adhered at by theassessee, the conclusion drawn by the AssessingOfficer, being inevitable, no substantial question oflaw arises for consideration. Consequently, appeal fails and is dismissed. (Sanjay Yadav) Judge shubhankar* Digitally signed by SHUBHANKAR MISHRA Date: 2018.09.19 17:24:14 +05'30' (Vivek Agarwal) Judge