The Commissioner Of Income Tax-Ii, Jalandhar v. Sh. Anil Kumar

Income Tax Appeal No.206 of 2014 IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH (1) Income Tax Appeal No.206 of 2014 Date of Order: 18.12.2014 The Commissioner of Income Tax-II, Jalandhar ..Appellant Versus Sh. Anil Kumar Prop. M/s Siddarth Enterprises,Adampur, Jalandhar. ..Respondent (2) Income Tax Appeal No.230 of 2014 The Commissioner of Income Tax-II, Jalandhar ..Appellant Versus Sh. Anil Kumar Prop. M/s Siddarth Enterprises,Adampur, Jalandhar. ..Respondent CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE B.S.WALIA Present: Mr. Vivek Sethi, Advocate, for the appellant. Mr. S.K.Mukhi, Advocate, for the respondent. RAJIVE BHALLA, J (Oral) By way of this order, we shall dispose of ITA No.206 of 2014 and ITA No.230 of 2014, filed by the revenue raising thefollowing questions of law, namely:- Income Tax Appeal No.206 of 2014 “i. Whether on the facts and circumstances of thecase and in law the Hon'ble ITAT was justified inapplying the N.P. Rate of 5% instead of confirming Income Tax Appeal No.206 of 2014 the specific additions of bogus purchases,amounting to Rs.1,05,619/-, wages amounting toRs.27,36,902/- and hire charges amounting toRs.1,50,619/- made by the A.O. ignoring the factthat the A.O. has rejected the books of account asthe expenses claimed by the assessee were notverifiable and purchases were also found to bebogus.”? ii. Whether on the facts and circumstances of thecase and in law the Hon'ble ITAT was justified inpartly allowing the appeal of the Revenue bydirecting the A.O. to apply N.P. rate of 5% on totalcontract receipts without any reasonable basis andignoring that the facts of the cases relied upon areentirely different from the assessee's case”? Income Tax Appeal No.230 of 2014 “i. Whether on the facts and circumstances of thecase and in law the Hon'ble ITAT was justified inapplying the N.P. Rate of 5% instead of confirmingthe specific additions of bogus purchases,amounting to Rs.9,40,483/-, wages amounting toRs.44,08,113/- and hire charges amounting toRs.1,50,591/- made by the A.O. ignoring the factthat the A.O. has rejected the books of account asthe expenses claimed by the assessee were notverifiable and purchases were also found to be bogus.”? ii. Whether on the facts and circumstances of thecase and in law the Hon'ble ITAT was justified inpartly allowing the appeal of the Revenue bydirecting the A.O. to apply N.P. rate of 5% on totalcontract receipts without any reasonable basis andignoring that the facts of the cases relied upon areentirely different from the assessee's case”? We have heard counsel for the parties. The questions oflaw are in two distinct parts, the first challenging deletion of additionsand the second the net profit rate of 5% determined by the Tribunal. Counsel for the parties agree that part of the questionsrelating to additions made after rejection of accounts has beenanswered against the revenue in ITA No.122 of 1999 (TheCommissioner of Income Tax, Patialav. Dulla Ram, LabourContractor, Kotkapura),decided on 22.10.2103, by holding that ifaccounts books are rejected, the Assessing Officer has nojurisdiction to make additions under other heads. The questions are,therefore, partly answered against the revenue, in terms of theaforesaid judgment. A significant part of these questions of law relate to thelegality of the net profit rate of 5% determined by the Income TaxAppellate Tribunal. Counsel for the parties agree that the question with respect to determination of net profit rate has to be answered interms of a judgment of this court in ITA No.269 of 2014(Telelinksv Income Tax Appeal No.206 of 2014 A significant part of these questions of law relate to thelegality of the net profit rate of 5% determined by the Income TaxAppellate Tribunal. Counsel for the parties agree that the question with respect to determination of net profit rate has to be answered interms of a judgment of this court in ITA No.269 of 2014(Telelinksv Income Tax Appeal No.206 of 2014 Commissioner of Income Tax, Bathinda), decided on 20.11.2014,holding that determination of net profit rate must be based upon anidentifiable criteria by reference to relevant facts and factors.Counsel for the parties also agree that as neither the CIT(A) nor theTribunal have applied any identifiable criteria while determining thenet profit rate, the assessment may be restored to the Assessingofficer for determining the net profit rate afresh, for assessment years2007-08 and 2008-09. Consequently, while answering the questions of law inrespect to additions against the revenue, it is held that order passedby the CIT(A) and the Income Tax Appellate Tribunal, determiningnet profit rates being perverse and arbitrary are set aside and thematter is restored to the Assessing Officer for a fresh determinationof the net profit rate after taking into consideration principles set out in Telelinksv. Commissioner of Income Tax, Bathinda(supra). Parties are directed to appear before the AssessingOfficer, on 29.01.2015. (RAJIVE BHALLA) JUDGE December 18, 2014nt (B.S.WALIA) JUDGE