Income Tax Appellate Tribunal - Jaipur
Acit, Kota vs Goodwill Adance Construction Company ... on 7 July, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No.618/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2012-13
The Asst. Commissioner of cuke M/s Goodwill Advance
Income-tax, Circle-1, Kota. Vs. Construction Company Pvt. Ltd.,
41-42, 1st Floor, CAD Circle,
Kota.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AADCG4121G
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@Revenue by : Shri Neena Jeph
fu/kZkfjrhdh vksj ls@Assessee by : Shri Mahendra Gargieya,
Shri Divang Gargieya &
Shri Akash Jain
lquokbZ dh rkjh[k@Date of Hearing : 22.06.2017
?kks"k.kk dh rkjh[k@Date of Pronouncement: 07/07/2017.
vkns'k@ORDER
PER SHRI VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the Revenue against the order of Ld. CIT(A), Kota dated 08.03.2016 for A.Y. 2012-13. The ground of appeal taken by the Revenue is as under:-
"On the facts and in the circumstances of the case, the ld. CIT(A) has erred in restricting the addition of Rs. 2,28,24,615/- made towards the business income of the assessee by applying net profit rate of 8% after allowing depreciation and interest to Rs. 10,00,000/- by not adopting harmonious interpretation on AO's above said decision."ITA No. 618/JP/16
ACIT Vs. M/s Goodwill Advance Construction Co. Pvt. Ltd.,Kota
2. Brief facts of the case are that the assessee is engaged in the business of civil construction work. During the year under consideration, the assessee had shown gross contract receipts at Rs. 62,88,21,658/- and N.P. at Rs. 3,26,31,301/-, giving NP rate of 5.19%. The AO rejected the books of account under section 145(3) of the Act and enhanced the NP rate @ 8% and thus, made trading addition of Rs. 1,76,74,431/-. In appeal before the ld. CIT(A), he upheld the application of section 145(3) but the trading addition was sustained at Rs 10,00,000/- against which the Revenue is in appeal before us.
3. The relevant finding of the ld. CIT(A) which are under challenge before us is reproduced as under:-
"Since the facts and the nature of business remain the same in this year as well except that the proprietorship has been replaced by the present private limited company, I am inclined to follow the same line of decision in this case for the year under consideration.
Considering the past history and findings given by the AO while discussing the issue related to defects pointed out in books of accounts, and the inability of the assessee to counter explain the defects pointed out in his books of accounts shows that assessee's books were not properly maintained and as such these incomplete & improperly maintained books of accounts could not reflect true and fair picture of profit of the assessee company. Hence, the rejection of books of accounts resorted to by the A.O. is upheld.
The AO in the assessment has assessed the interest income, sales tax refund, discounts etc. Rs. 1,65,18,473/- as income from other sources. Therefore, the income from business after re-computation (excluding interest income0 comes to Rs. 2,74,81117/- (Rs. 4,39,99,590-Rs. 1,65,18,473).
In the assessment order the AO has given the following finding:-2 ITA No. 618/JP/16
ACIT Vs. M/s Goodwill Advance Construction Co. Pvt. Ltd.,Kota "Considering the totality of the facts available on record and previous history of the case, net profit rate @ 8% is applied on the gross contract receipts of Rs. 62,88,21,656/-. Since net profit rate has been applied, all expenses including depreciation and interest deemed to have been allowed."
However, in the computation, the AO did not reduce depreciation and interest from the net profit computed @ 8%. As per the correct calculation (giving effect to the AO's finding), the income from business should be as under:-
Turnover Rs. 62,88,21,658/-
Net profit @ 8% Rs. 5,03,05,732/-
Less: i) Interest Rs. 1,82,33,376/-
ii) Depreciation Rs. 2,25,51,633/- Rs. 4,07,85,009/-
Income from Business Rs. 95,20,723/-
Therefore, as per AO's finding itself, the correct income of assessee from business comes to Rs. 95,20,723/- as against this, the correct business income declared by assessee (after excluding interest income0 comes to Rs. 2,74,81,117/-. This shows that if we apply AO's finding, the income of assessee would actually go down.
The declared income before interest and depreciation comes to Rs. 8,47,84,599/- which gives a net profit rate of 13.48%.
Considering the above, I Am of the opinion that an addition of Rs. 10,00,000/- would meet the end of justice. The income of assessee would be Rs. 6,92,66,126/- before depreciation & interest, this gives net profit rate of 11.01% before interest and depreciation. Assessee's net income after interest & depreciation would be Rs. 2,84,81,117/-. The AO is directed to take assessee's net business income at Rs. 2,84,81,117/-."
4. The ld AR submitted that the results declared are better than last year and where the books of accounts are rejected, a fair estimate is required to be made. It was submitted that the Hon'ble Rajasthan High Court these days 3 ITA No. 618/JP/16 ACIT Vs. M/s Goodwill Advance Construction Co. Pvt. Ltd.,Kota has been adoptingthe principle of five years average in the cases of fair estimation. Applying the same, in the instant case, it will be observed that the average NP rate (after all deductions) declared from assessment year 2008-09 to 2012-13stood at 5.36%, as against whichthe NP rate(after all deductions) declared this year by the assessee stood at 5.19%. However, the ld. CIT(A) partly sustained the addition of Rs. 10,00,000/- and therefore such NP rate stood increased to 5.35% which is nothing but the average of five years.
5. Having heard both the parties, the principle of averages taking into consideration last five years (past history) is clearly a robust and fair estimation of determining the net profits for the year under consideration. The principle of average has been determined by the Hon'ble Rajasthan High Court and is thus clearly binding and applicable in the instant case. The AO is directed to verify the average NP rate for last five years as contended by the ld AR and where the same is consistent with what has been determined by the ld CIT(A), allow the necessary relief to the assessee.
6. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 07/07/2017.
Sd/- Sd/-
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(Kul Bharat) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Santosh*
Jaipur
Dated:- 07/07/2017
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The ACIT, Circle-1, Kota.4 ITA No. 618/JP/16
ACIT Vs. M/s Goodwill Advance Construction Co. Pvt. Ltd.,Kota
2. izR;FkhZ@The Respondent- M/s Goodwill Advance Construction Company Pvt. Ltd., 41-42, 1st Floor, CAD Circle, Kota.
3. vk;dj vk;qDr@CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT,
6. xkMZ QkbZy@Guard File (ITA No.618/JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar.
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