Income Tax Appellate Tribunal - Amritsar
Income Tax Officer, Ward 3(3), Srinagar vs M/S S.L Road Construction Co., Kashmir on 22 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE SH. R.S.SYAL, VICE PRESIDENT AND
SH. N.K.CHOUDHRY, JUDICIAL MEMBER
ITA No.425(Asr)/2017
Assessment Year:2012-13
Income Tax Officer Vs. M/s S.L Road Construction Co.,
Ward-3(3), Srinagar Kashmir
Shalina Sumerbugh Chadoora
Kashmir
PAN:ABOFS4352G
(Appellant) (Respondent)
Appellant by: Sh. S.S. Negi (DR)
Respondent by: None
Date of hearing: 20.02.2018
Date of pronouncement: 22.02.2018
ORDER
PER N.K.CHOUDHRY, JM:
The instant appeal has been preferred by the Revenue Department, on feeling aggrieved against the order dated 02.02.2017 passed by the Ld. CIT(A), J&K, Jammu, in appeal No.131/15-16, by raising the following grounds of appeal.
"1. The Ld. CIT(A) accepted that estimation of income was correct and this being the case these were no reason for disturbing the rate of profit estimated by the AO and in doing so the CIT(A) order is enormous.
2. The Ld. CIT(A) has error in deleting addition of Rs.53,22,625/- made by the AO on account of suppression of receipts by the assessee despite the assessee being unable to 2 ITA No.425 /Asr/2017 (A.Y.2012-13) ITO vs. M/s. S.L. Road Constructions, Kashmir provide any explanation despite being given opportunity to do so.
3. The Ld. CIT(A) is in error in failing to appreciate that suppression of receipts is an infraction of the law that can be penalized and as such cannot be clubbed with any other issue as done by him.
2. The brief facts of the case are that the assessee is a contractor and has declared gross contract receipts at Rs.8,37,13,833/- which is equal 3.81% of the total turnover after accounting for appropriation of salary and interest to partners. The net profit rate over the last three assessment years has hovered between 1.93% for 2010-11, to 4.91% for the assessment year 2011-12 and 3.81% for the relevant year, thus showing significant deviation but could not be examined in the absence of books of account, however, on verification of TDS certificate issued by the Exen, PMGSY (JKRRDA) Division, Pulwama, it was found that the gross contract receipts paid to the assessee are to the tune of Rs.5,13,99,460/- against the declared receipts of Rs.4,56,13,998/- thus suppressing the receipts by an amount of Rs.57,85,462/- which were not explained by the assessee on the ground that the books of account have been destroyed in the floods of September, 2014. However, the assessee insisted that the rejection of books version may be looked into from the CBDT's instruction F.No.225/303/2014/ITA-II dated 30.12.2014 issued in this regard. However, the Assessing Officer while relied upon judicial precedent comes from Shivam Constructions Co. Vs. ACIT reported in ITA Nos.383 & 384/2004, 622/2005, 385 & 3 ITA No.425 /Asr/2017 (A.Y.2012-13) ITO vs. M/s. S.L. Road Constructions, Kashmir 386/2004 and 728/2005 of the Hon'ble ITAT Chandigarh Bench A, at Chandigarh in which the net rate of 10% on gross receipts was found to be a fair estimate of income from contractor in the eventuality of failure to produce the books of account and finally the Assessing Officer worked out 8% as against contract receipt.
3. On appeal by the assessee, the Ld. CIT(A) applied the net profit rate @ 7% subject to no further allowances including that of depreciation and further hold that no separate addition is called for on account of unexplained investment u/s 69 of the I.T. Act in the contract receipts of 57,85,462/- which was not disclosed by the assessee, however, detected by the AO. Further deleting the addition of interest income to the tune of Rs.1,75,704/-.
4. Feeling aggrieved against the order passed by the Ld. CIT(A), the Revenue Authority preferred the instant appeal and in support of its case, the Ld. DR submitted that there was no reason before the Ld. CIT(A) for accepting the estimation of income and disturbing the rate of profit of estimated by the AO. Further, the Ld. CIT(A) committed error in deleting the addition of Rs.53,22,625/- made by the AO on account of suppression of receipts by the assessee because the assessee was unable to provide any explanation despite being given opportunity to do so. Further the Ld. CIT(A) has erred in failing to appreciate that suppression of receipts is a infraction of law that can be 4 ITA No.425 /Asr/2017 (A.Y.2012-13) ITO vs. M/s. S.L. Road Constructions, Kashmir penalized and as such cannot be clubbed with any other issue as done by him.
5. We have gone through with the facts and circumstances of the case and specifically the order impugned herein as it is not in doubt that the assessee had failed to produce the books of account or other supporting evidence on record. The same was destroyed in the floods of September,2014 in Srinagar and FIR to this effect was also produced by the assessee before the Assessing Officer, however, the AO finding no alternative, invoked the provisions of Sec.145(3) of the Act for rejection of books of account and proceeded for best judgment assessment or non satisfying about the completeness and correctness of accounts. The Assessing Officer followed the case of Shivam Constructions decided by the Hon'ble ITAT, Chandigarh (supra) and applied a net rate of 8% subject no deduction of salary and interest. By considering the fact that the assessee is also engaged in civil construction business, however the Assessing Officer has not considered that the assessee is operating in remote areas of Srinagar where the profit margins are very low due to hard weather conditions and intermittent stoppage of work due to one or other reasons, leading to the higher cost of input and labour. The Assessing Officer was under obligation to apply the comparative cases of the similar other asessees in similar business on the similar location, therefore, the ld. CIT(A) has considered the case of M/s Shivam Constructions Engineers, 5 ITA No.425 /Asr/2017 (A.Y.2012-13) ITO vs. M/s. S.L. Road Constructions, Kashmir Srinagar (ITA No.493(Asr)/2010 dated 01.05.2012) decided by Jurisdictional Hon'ble ITAT Bench at Amritsar, in which, the net profit rate was directed to be applied @7% subjected to no further allowances. Therefore, in our considered opinion, the Ld. CIT(A) is right in granting relief to the assessee, hence, ground No.1 of the Revenue Department is liable to be dismissed.
Now coming to the ground No.2 & 3 with regard to the deletion of addition of Rs.53,22,625/- made by the AO on account of suppression of receipts by the assessee. The Ld. CIT(A) rightly held that no separate addition is called for as the net profit rate @ 7% has already been taken into consideration undisclosed receipt for the purpose of computing the total income, hence, for ground Nos.2 & 3 also stand dismissed.
On the aforesaid consideration and analyzation, we are of the considered view that the order passed by the Ld. CIT(A) is based on the logical reasoning and does not suffer from any illegality, perversity and impropriety, therefore, does not require to be any interference.
6. In the result, the appeal filed by the Revenue Department stands dismissed.
Order pronounced in the open Court on 22.02.2018.
Sd/- Sd/-
(R.S.SYAL) (N.K.CHOUDHRY)
VICE PRESIDENT JUDICIAL MEMBER
Dated:22.02.2018
/PK/ Ps.
6 ITA No.425 /Asr/2017 (A.Y.2012-13)
ITO vs. M/s. S.L. Road Constructions, Kashmir Copy of the order forwarded to:
(1) M/s. S.L. Road Construction Co., Kashmir (2) The ITO, Ward,3(3), Srinagar (3) The CIT(A) J&K, Jammu (4) The CIT concerned (5) The SR DR, I.T.A.T., Amritsar True copy By order