Income Tax Appellate Tribunal - Ahmedabad
Aarkee Engineers,, Ahmedabad vs Assessee on 19 January, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH " D "
Before Shri BHAVNESH SAINI, JUDICIAL MEMBER and
Shri A.N. PAHUJA, ACCOUNTANT MEMBER
Date of hearing : 19/ 01 /2010 Drafted on: 19/01/2010
ITA No.1005/AHD/2006
Assessment Year : 2001-02
M/s.Arkee Engineers Vs. The ITO
5/B, Chetna Society Ward-2(5)
Hariom Nagar Road Baroda
Race Course, Baroda
PAN/GIR No. : AACFA 0034 C
(APPELLANT) .. (RESPONDENT)
Appellant by : Shri Anil R.Shah, A.R.
Respondent by: Shri C.K.Mishra, Sr. D.R.
ORDER
PER BHAVNESH SAINI, JUDICIAL MEMBER:
This appeal by the Assessee is directed against the order of the Ld.CIT(Appeals)-II, Baroda, dated 10/03/2006 passed for Assessment Year 2001-02.
2. We have heard Learned Representatives of both the parties, perused the findings of the lower authorities and considered the material available on record.
3. The ld. counsel for the assessee did not press Ground Nos.4 & 5. These grounds of appeals of the assessee are, accordingly, dismissed as not pressed.
ITA No.1005 /Ahd/2006M/s.Aarkee Engineers Vs. ITO Asst.Year - 2001-02 -2-
4. The only addition is now challenged of Rs.6,21,059/- on account of addition made for Gross Profit by rejecting the book results u/s.145 of the I.T. Act, 1961 on which assessee has raised ground Nos.1 to 3.
5. It was observed by the Assessing Officer that Gross Profit has fallen steeply from the last year figure of 27.9% to 13.47% this year. The Assessing Officer noted that the book results of the assessee cannot be accepted because the books of account of the assessee are not correct and complete. Book results were accordingly rejected u/s.145(2) of the I.T. Act, 1961. It has been noticed by the Assessing Officer that the assessee has not maintained Registers, such as, Day-to-day Consumption Register, Stock Register, Purchase Register, etc. In the absence of such records, it was not possible to verify the correctness of the purchases and consumption of the raw-material. The expenditure were also not subjected to verification and work-in-progress of the closing stock could not have been verified. In view of the above after rejection of the books of account, the Assessing Officer has estimated the Gross Profit rate at 23.39% taking the average of three preceding assessment years and, accordingly, made an addition of Rs.6,21,059/-.
6. It was submitted before the Learned CIT(Appeals) that assessee is carrying on job oriented work, unlike other civil contractors and was not maintaining any trading account showing opening and closing stock. It was, further, contended that this method is consistently followed and not disturbed by the Revenue Department. It was submitted that addition is, therefore, unjustified. The Learned CIT(Appeals) considering the submission of the assessee in the light of the objections raised by the ITA No.1005 /Ahd/2006 M/s.Aarkee Engineers Vs. ITO Asst.Year - 2001-02 -3- Assessing Officer, noted that there is a steep fall in the profit, therefore, Assessing Officer was justified in making the addition. Addition was accordingly confirmed.
7. The ld. counsel for the assessee reiterated the submissions as were made before the authorities below and submitted that assessee is a partnership-firm engaged in the business of civil construction and further maintenance work of IPCL in the form of Annual Maintenance Contract. The main work involved is civil work, carpeting, missionary/plastering, plumping, drainage work, grass-cutting, fabrication and any other work specifically required for maintenance. He has submitted that assessee did not do any other work for other parties, therefore, there was no need to maintain these stock registers. He has referred to paper-book 84 which is the contract with IPCL to show that profit margin is about 8% out of the work assigned by IPCL. He has also referred to paper-book 68 which is the chart of the Gross Profit and Net Profit rate for the preceding subsequent assessment years to show that the Net Profit of the assessee varies from 8.04% to 10.08% in six assessment years including the assessment year in question. He has submitted that the income is from the job-work, therefore, findings of the authorities below are factually incorrect and addition is liable to be deleted.
8. On the other hand, Learned Departmental Representative relied upon the orders of the authorities below.
9. On consideration of the rival submissions, we are of the view that addition is still on excessive side and requires modification. The ITA No.1005 /Ahd/2006 M/s.Aarkee Engineers Vs. ITO Asst.Year - 2001-02 -4- Assessing Officer has pointed out specific instances for the purpose of rejection of the book results. The ld. counsel for the assessee also admitted that no stock register is maintained because assessee was doing the work of IPCL. He has submitted that since only the work of IPCL is done, therefore, the material remained at this spot which would be opening stock in the next year. The above submission of the ld. counsel for the assessee clearly shows that book results of the assessee were not correctly accepted by the Assessing Officer. In the absence of stock register, it was not possible to verify the utilization of the material while completing the contract work assigned by IPCL. The other factors noted by the Assessing Officer clearly proved that the expenditure of the assessee alongwith purchases are not subjected to verification. Considering the findings of the authorities below and specific instances noted by the Assessing Officer, we are of the view that Assessing Officer was justified in rejecting the book results u/s.145(2) of the I.T. Act, 1961 because of the specific discrepancies noted by the Assessing Officer in the books of account of the assessee. However, the fact remained that the assessee was doing job-work only for one party; i.e. IPCL. It is generally seen that in the job-work, the profit margin is always lower as compared to the work done by the contractor doing the civil construction work. The assessee has shown Net Profit rate of 8.04% in the assessment year in question and in the preceding assessment years the same remained at 9.40%, 9.50% and 10.08%. In the subsequent assessment years, the Net Profit remained at 8.95% and 9.51%. Considering the history of the assessee and assessee was doing only the job-work for one party, it could be reasonable and proper to make lump-sum addition instead of taking the average Gross ITA No.1005 /Ahd/2006 M/s.Aarkee Engineers Vs. ITO Asst.Year - 2001-02 -5- Profit rate on the basis of preceding assessment years. We accordingly direct the Assessing Officer to make the addition of Rs.2,50,000/- instead of Rs.6,21,059/- in all on this issue.
10. As a result, we modify the orders of the authorities below and restrict the addition to Rs.2,50,000/- only as against Rs.6,21,059/- made by the Assessing Officer and confirmed by the Learned CIT(Appeals).
11. As a result, ground Nos.1, 2 & 3 of the appeal of the assessee are partly allowed.
12. No other point is argued or pressed.
13. In the result, appeal of the assessee is partly allowed.
Order signed, dated and pronounced in the Court on 22/ 01 /2010 Sd/- Sd/-
( A.N. PAHUJA ) ( BHAVNESH SAINI )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 22/ 01 /2010
T.C. NAIR
Copy of the Order forwarded to :
1. The Appellant. 2. The Respondent
3. The CIT Concerned. 4. The ld. CIT(Appeals)-II, Baroda
5. The DR, Ahmedabad Bench. 6. The Guard File.
BY ORDER,
स×याǒपत ूित //True Copy//
(Dy./Asstt.Registrar), ITAT, Ahmedabad