The Commissioner Of Income Tax-Ii, Amritsar v. M/S Amarjit Singh Bajwa

IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH I.T.A. No.10 of 2013 (O&M) Date of Decision:14.03.2013 The Commissioner of Income Tax-II, Amritsar ...Appellant Vs. M/s Amarjit Singh Bajwa ...Respondent CORAM:- HON'BLE MR. JUSTICE HEMANT GUPTAHON'BLE MS. JUSTICE RITU BAHRI Present:-Mr. Denesh Goyal, Advocate for the appellant. HEMANT GUPTA, J.(Oral) The present appeal under Section 260-A of the Income Tax Act,1961 (for short, `the Act') arises out of an order dated 26.7.2012 passed bythe Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for short,`the Tribunal') pertaining to assessment year 2006-2007. The revenue hasclaimed the following substantial questions of law:- “1.Whether the Hon'ble ITAT is correct in law in upholding theorder of the Ld. CIT (A) despite the fact that sufficientopportunities were given to the assessee by the AssessingOfficer during the assessment proceedings. 2.Whether the Hon'ble ITAT was correct in law in confirmingthe order of the Ld. CIT(A) in deleting the additions ofRs.1,43,33,248/- on account of wages payable and Rs.68,000/-on account of salary payable, made by the A.O even when theidentity, creditworthiness and the genuineness of the samecould not be proved by the assessee? 3.Whether the Hon'ble ITAT was correct in law in confirmingthe order of the Ld. CIT(A) deleting the addition of 4. Rs.68,98,994/- made by the A.O on account of purchase ofmaterial even when the genuineness of the same could not beproved by the assessee which were duly proved by the A.O tobe bogus and unverifiable. Whether the Hon'ble ITAT was correct in law in confirmingthe order of the Ld CIT (A) even when the A.O was notallowed by the Ld. CIT(A) to represent the case on behalf ofrevenue?” The said questions of law arise out of the fact that the assesseefiled its return on 31.10.2006 declaring total income of Rs.27,07,570/-. Theassessee is a civil contractor. Subsequently, the assessment case was takenup in scrutiny and the assessment was framed by the Assessing Officermaking additions of Rs.1,43,33,248/- including a sum of Rs.68,98,494/- asbogus and unverified purchases. The Commissioner of Income Tax(Appeals), in an appeal filed by the assessee, vide an order dated 12.3.2009,accepted the appeal partly and applied 11% net profit rate on the contractreceipts of Rs.4,49,17,526/-. The revenue and the assessee being aggrievedagainst the order, filed separate appeals before the Tribunal. The Tribunalaccepted both the appeals on 5.6.2009 holding that the Assessing Officerhas not rejected the books of account of the assessee and made the additiononly on the basis of non-production of evidence supporting the claim of theassessee. The Tribunal found that the impugned order passed by theCommissioner of Income Tax (Appeals) is non-speaking order.Consequently, the appeals were accepted and the matter was remanded backto the Commissioner of Income Tax (Appeals) for fresh decision. After remand, the Commissioner of Income Tax (Appeals) inits order dated 15.6.2010, considered the letter dated 1.4.2008 issued by I.T.A. No.10 of 2013 (O&M) the Assessing Officer during the course of assessment proposed to reject thebooks of account and compute profit from contract business under Section144 of the Act by applying net profit @ 8% of contract receipts. On thebasis of the said letter, the Commissioner of Income Tax (Appeals) foundthat income is required to be estimated @ 8% of the contract receipts andthe additions on any other issues cannot be made. It is the said order passedby the Commissioner of Income Tax (Appeals), which has been affirmed inappeal by the Tribunal. After remand, the Commissioner of Income Tax (Appeals) inits order dated 15.6.2010, considered the letter dated 1.4.2008 issued by I.T.A. No.10 of 2013 (O&M) the Assessing Officer during the course of assessment proposed to reject thebooks of account and compute profit from contract business under Section144 of the Act by applying net profit @ 8% of contract receipts. On thebasis of the said letter, the Commissioner of Income Tax (Appeals) foundthat income is required to be estimated @ 8% of the contract receipts andthe additions on any other issues cannot be made. It is the said order passedby the Commissioner of Income Tax (Appeals), which has been affirmed inappeal by the Tribunal. Learned counsel for the appellant has vehemently argued thatearlier Commissioner of Income Tax (Appeals) has applied 11% as netprofit rate of the contract receipts but after remand, the Commissioner ofIncome Tax has applied 8% of the contract receipts as a net profit rate. It ispointed out that the communication of the Assessing Officer dated 1.4.2008is only a proposal during the course of assessment proceedings and cannotbe used against the revenue at the time of finalization of the assessmentproceedings. It is contended that each assessment year is independentproceedings, therefore, the net profit rate applied in earlier years cannot bemade basis to finalize assessment of year in question. Reliance is placedupon a judgment of this Court in Bandi Co-operative Labour andConstruction Society v. Commissioner of Income Tax, [2008] 300 I.T.R.107 (P&H)and a judgment of Rajasthan High Court inCommissioner ofIncome Tax v. Foss Electronic, [2003] 263 I.T.R. 125 (Raj.). We have heard learned counsel for the appellant at length andfind no merit in the present appeal. The Tribunal in the earlier appeal foundthat the books of account were not rejected by the Assessing Officer, I.T.A. No.10 of 2013 (O&M) therefore, the best judgment assessment could not be framed by theCommissioner of Income Tax (Appeals). However, after remand, it has beenfound that in fact the Assessing Officer has proposed to reject the books ofaccount and to compute income by applying net profit @ 8% of the contractreceipts. Since the assessee has not maintained proper books reflecting thepurchase of the material and the wages payable or paid, the revenue has nooption but to frame best judgments assessment. It is not the case of therevenue that the assessee has not executed the work at all. In fact the orderpassed by the Assessing Officer shows the details of the work executed bythe assessee. Learned Tribunal has recorded a finding that the AssessingOfficer in the following assessment year applied 8% net profit rate oncontract receipt. There is no dispute to the argument that each of theassessment year is independent proceedings and the Assessing Officer iswithin its jurisdiction to frame assessment by applying net rate of profitwhich he found prudent. But if in the earlier assessment years as well as inthe subsequent assessment year, a particular net profit rate has been applied,it is a prudent rate of income, which has been applied by the Commissionerof Income Tax (Appeals). Such finding cannot be said to give rise to anysubstantial question of law in the present appeal. Dismissed. ( HEMANT GUPTA ) JUDGE March 14, 2013renu/Vimal ( RITU BAHRI ) JUDGE