M S Padam Construction Company/ Bhatinda v. The Assistant Commissioner Of-Income Tax, Bhatinda And Another

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ----- -Income tax Appeal No. 13 of 2001Date of decision: 20.7.2010 M s Padam Construction Company/ Bhatinda --- Appellant Versus The Assistant Commissioner of-Income tax, Bhatinda and another --- Respondents --- CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- PRESENT:Mr. Akshay Bhan, Advocatefor the appellant. . Ms. Savita Saxenafor the respondent. , Advocate. --- AJAY KUMAR MITTAL , .J TheassesseehasapproachedthisCourtunder-Section 260- A of the Income tax Act, 1961 ( in short “the Act’) andprayedthatthefollowingsubstantialquestions oflaw arise in this appeal for the consideration of this Court,-from the order of the Income tax Appellate Tribunal, Amritsar-Bench, Amritsar, passed on 14.9.1999, in Income tax AppealNo. 1245(ASR)-1991 for the assessment year 1989-90: 1-Whetherinthefactsandcircumstancesof thecase, theIncome Tax-AppellateTribunal, AmritsarBench, Amritsar was justified in applying a net G P . .rate of 9.25%?case, theIncome Tax-AppellateTribunal, AmritsarBench, Amritsar was justified in applying a net G P . .rate of 9.25%? 2-Whetherthelowerauthoritieswerejustifiedinapplying provisoto Section 145(1) of the IncomeTax Act, in the case of the assessee?applying provisoto Section 145(1) of the IncomeTax Act, in the case of the assessee? 3-Whether the impugned annexure A -1 to A -3 can? be sustained in the eyes of law -The assessee appellant furnished its return - -declaring income of Rs. 6,00,540/- by applying gross profit rate of 8%. The return was processed under Section 143(1)of the Act and was subsequently selected for scrutiny. Theassessment was completed under Section 143(3) of the Act, vide order dated 25.1.1991 at an income of Rs. 8,52,052/-wherebytheassessingofficermadeanadditionofRs.2,47,127/- byapplyingnetprofitrateat 9.25%. The-Commissioner of Income tax (Appeal) [(forshort “CIT ( )]A ”concurred with the view of the assessing officer in the matter-of application of gross profit rate of 9.25%, though it gave arelief to the assessee in the sum of Rs. 20,596/- observingthatsincesalestaxformedpartoftradingreceipt and as-such the sales tax paid by the assessee was required to bereduced from the gross receipts. It was found that the grossreceipts would go down by Rs. 2,22,666/-, and the profit-worked on that amount at gross profit rate of 9.25% wouldcome to Rs. 20,596/-. -The Income tax AppellateTribunal, AmritsarBench, Amritsar (for short “the Tribunal”) affirmed the findingsof the authorities below, vide order dated 14.9.1999. We have heard learned counsel for the parties andhave perused the record. Learnedcounselfortheassesseesubmitted that-learned Tribunal had erred in upholding the gross profit rateof 9.25% appliedbytheauthoritiesbelow. Thecounselsubmitted that the CIT ( ) Awhile recording its concurrence tothe view of the assessing officer had relied upon its decisionrelating to the previous years, and the Tribunal has ignoredits own decision dated 23.11.1995 in the case of the presentassesseerelatingtopreviousthreeassessmentyears,-whereby the gross profit rate of 8% had been held to be fairand reasonable. The Tribunal, while adjudicating the controversyraisedbytheassesseeintheappealandrejecting thecontention of the learned counsel for the assessee, recordedas under: “9.Ongoingthroughtheordersofthe lowerauthorities, the observation of which also could notbechallengedbythecounseloftheassessee,duringthecourseofarguments, wefind that in The Tribunal, while adjudicating the controversyraisedbytheassesseeintheappealandrejecting thecontention of the learned counsel for the assessee, recordedas under: “9.Ongoingthroughtheordersofthe lowerauthorities, the observation of which also could notbechallengedbythecounseloftheassessee,duringthecourseofarguments, wefind that in thiscase, theassesseeisnotmaintaining stockregister of materials and no day to day record ofwork in progress- -waskeptbytheassessee. Ithas also been observed by the CIT ( ) Athat the-voucherswereself preparedinrespectoflabourexpensesandthesamewasnotsubject to anyverification. Hence, we are of the opinion that intheabsenceofrecordofdaytoday work in- -progressandstockregistersofmaterials, theexpensesincurredbytheassesseecouldnot be-co related to the work done and hence the lowerauthoritieswerefullyjustifiedinapplyingtheproviso to Section 145(1) of the Income Tax Act,1961 inthecaseoftheassessee. Accordingly,the first point is decided in favour of the Revenue.10.In the year under consideration, the assesseefirm has disclosed G P. . rate of about 8% whereasontheotherhand, thelearned . . A Oafter takingintoconsiderationthemagnitudeofthework, scatteredworkoftheassessee, andalsoconsidering the plea of the assessee that due todisturbed conditions in Punjab, he has to suspendhis work off and also after giving consideration tothe nature of business of the assessee, the A O . .applied the G P . . rate of 9.25% and worked out theincome of the assessee. 12.Inappeal, thelearnedCIT ( ) Ahas upheld-theG P. . rateof 9.25% butreduced the grossreceipts on account of sales tax to the tune of Rs.2,22,666/- by treating as a trading receipt and inthis manner, granted a relief of Rs. 20,596/- tothe assessee. 13.Duringthecourseofarguments, this Benchhas asked the assessee to work out the net profitrateconsidering 9.25% G P. . rateapplied by thelower authorities. To this, the learned counsel forthe assessee, after working out the net profit rate,replied that net profit in the case of the assessee for the year under consideration would work out to4.2% if we take into consideration the G P. . rate of9.25% as applied by the lower authorities, in ouropiniontheapplicationofG P. . of 9.25% by thelower authorities is already on a very low side andso, we are of the opinion that this application ofnet profit rate of 4.2% or application of G P. . rate9.25% by the lower authorities in working out thenetincomeoftheassessee, ismostreasonableandfairanddoesnotcallforanyinterference.Hence, we are of the opinion that in these factsandthecircumstances, thelowerauthorities havealreadygivensufficientrelieftotheassessee byapplyingtheG P. . rateof 9.25% and hence nointerference is called for from our side. Accordingly,this issue is disposed of by holding that the CIT( ) AwasjustifiedinapplyingtheG P. . rateof9.25% in the case of the assessee ”. LearnedcounselfortheappellantmadestrenuousefforttopersuadethisCourttotakeaviewdifferent than the one taken by the Tribunal, by urging thatrejectionofthebooksofaccountsoftheassessee andapplication ofgrossprofitrate of 9.25%, was arbitrary andwithout any basis. Learned counsel sought to urge that this-Court on re appreciation of evidence may record a finding infavour of the assessee. He, however, could not point out anyerroroflaworperversityinthefindingsrecorded by theauthorities below. In view of the above, we are of the opinion thatnosubstantialquestionoflawarisesinthisappeal foradjudicationbythisCourt. Theappealisconsequentlydismissed. MITTAL) (AJAY KUMAR JUDGE GOEL ) ADARSH KUMAR ( July 20, 2010 *rkmalik * JUDGE