Punjab-Haryana High Court
Commissioner Of Income Tax vs Aggarwal Engg. Co. (Jal.) on 24 July, 2006
Equivalent citations: (2006)206CTR(P&H)648, [2008]302ITR246(P&H)
Bench: Adarsh Kumar Goel, Rajesh Bindal
ORDER
1. The Revenue has preferred this appeal proposing following substantial question of law:
Whether, in the facts and circumstances of the case, the Tribunal was right in law in holding that no separate addition on account introduction of unexplained cash in assessee's books of account and on account of unexplained payments for purchases made outside the books can be made once the net profit rate is applied on contract receipts of an assessee for estimating his income from contract work when the provisions of Sections 68 and 69B of the IT Act are directly hit in the instant case.
2. The assessee is a civil contractor. He filed IT return for the asst. yr. 1996-97 on 10th Jan., 1996. Assessment was made which was cancelled under Section 263 of the IT Act, 1961 (for short, 'the Act'). Fresh assessment was made on 28th Feb., 2002 under Section 144 of the Act at total income of Rs. 24,99,250 including additions of Rs. 9,25,939 on account of cash introduced in the books and Rs. 9,77,535 on account of payments made for purchases outside the books of account.
3. On appeal, the CIT(A) deleted the addition of Rs. 19,03,474 on account of cash included and payments for purchases outside the books of account. In an appeal filed by the assessee, the CIT(A) allowed relief on the said two counts. The Tribunal affirmed the order of the CIT(A). Hence this appeal.
4. Contention raised in the appeal is that separate addition on account of introduction of unexplained cash and unexplained payments for purchases outside the books of account ought not to have been deleted on the only ground that net profit rate having been applied on contract receipts of the assessee for estimating income from contract work, no further addition was called for.
5. We have perused the orders of the CIT(A) as well as the Tribunal. The CIT(A) observed:
...Having rejected the book results the separate addition was not called for on account of unexplained cash when as per facts on records cash was invariably withdrawn from bank by cheques. Similarly the addition under the head 'Purchases' does not deserve the consideration because the book results were rejected by the AO by applying net profit rate of 10 per cent. Further it is not the case that purchases were not effected because of confirmation of some of the parties on record and same are disputed because of details mentioned in order when the basis of these details were the same books of account. The sum total of these factors proves that it is a case where the profits were not supported by the complete books of account and even the books for one contract were not reliable. Therefore, the net profit rate had to be estimated in such a case as done by the AO. Herein I do not agree with the contention of the appellant as held by the Hon'ble jurisdictional Tribunal that the rate of 10 per cent will be reasonable because that was a case where the proper books were maintained by the assessee but it is not so in the case of appellant. Considering the factors that the appellant initially defaulted in not declaring all the receipts and then also failed to prove even the authenticity of the books of account which were impounded by the Department and further the business results not supported by purchase bills/vouchers, I am convinced that because of peculiar facts of the case it attracted the application of higher net profit rate than even the rate upheld by Hon'ble jurisdictional Tribunal. The learned Authorised Representative was, therefore, asked as to why the net profit rate of 13 per cent as against 12.5 per cent applied in the quoted case decided by Hon'ble jurisdictional Tribunal be not applied and the income be not enhanced to that extent as per Section 251(1)(a) of the IT Act. The learned Counsel without submitting further details chose to rely on the submissions filed earlier and mentioned that even the rate of 12.5 per cent applied in that case was brought down to 10 per cent by Hon'ble Tribunal, Amritsar Bench. But it is already mentioned that facts of the case are peculiar in itself and does not get covered by quoted case and, therefore, in view of these facts and the profit generally declared by assessees in this line it will be fair and reasonable to apply the net profit rate of 13 per cent to the gross receipts detected by the Department which result in enhancement of income to the extent of Rs. 2,14,647. The appellant gets relief of Rs. 14,04,366.
The Tribunal observed:
As is observed above, the addition on account of cash credits even if the net profit rate is applicable could be made but it depends upon the facts of each case. This is a case before us which clearly shows that the addition on account of cash credits would be unjustified. We accordingly do not find any merit in the submissions of the learned Departmental Representative with regard to the making separate addition on account of cash credit of Rs. 12,28,600. Similarly the addition of Rs. 1,75,766 was rightly deleted by the CIT(A) as it was part of the payment of purchases, which would merge with the addition made on account of addition of net profit rate. The Hon'ble Allahabad High Court in the case of CIT v. Banwarilal Banshidhar held that once net profit rate is applied, no further addition should be made in respect of purchases. Similar view is taken by the Tribunal, Allahabad Bench in the case of Gupta Construction Co. v. Asstt. CIT (2004) 84 TTJ (All) 46.
6. We have also perused the law laid down by Hon'ble the Allahabad High Court in CIT v. Banwarilal Banshidhar (supra), wherein, it was observed:
...When the gross profit rate is applied, that would take care of everything and there was no need for the AO to make scrutiny of the amount incurred on the purchases by the assessee.
7. No contrary view has been shown or relied upon in the memo of appeal. We are of the view that CIT(A) and the Tribunal was justified in holding that once net profit rate was applied, no further addition was called for in respect of purchases and introduction of cash in the facts and circumstances of the case.
No substantial question of law arises. The appeal is dismissed.