Income Tax Appellate Tribunal - Pune
Pradip Sidheshwar Wahvol, Ahmednagar vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench "B" , Pune
Before Shri G.S. Pannu Accountant Member
and Shri R.S. Padvekar, Judicial Member
ITA No. 351/PN/2011
(Asstt. Year : 2006-07)
Pradip Sidheshwar Wahvol, ... Appellant
Prop. of M/s. Prabhanjan Electricals,
Bagadpatti,
Ahmednagar 414001
PAN : AAIPW3622L
v.
Income Tax Officer, Ward 2, ... Respondent
Ahmednagar
Appellant by : Shri. Bharat H. Shah
Respondent by : Shri Alok Mishra
Date of Hearing : 22/6/12
Date of Pronouncement : -7-12
ORDER
Per R.S. Padvekar, JM
In this appeal, the assessee has challenged the impugned order of the Ld CIT(A) - I, Pune dated 30.4.2010 for the A.Y. 2006-07. The assessee has filed the revised grounds in place of the original grounds which are as under :
1) The authorities below erred in facts and circumstances of the case in sustaining additions by way of disallowance under various heads of expenses such as Wages Rs. 331353, Hamali Mathadi works Rs. 128345 and Office Expenses Rs.13392 when the accounts are properly audited and audit report u/s. 44 AB of the Income Tax Act was the only material on record. The various additions made on estimation basis be deleted and just and proper relief be granted to the assessee.
2) The authorities below erred in facts and circumstances of the case and also legally by making addition of Rs. 75000 on account of unsecured loans when the loan confirmations were submitted before the Honourable CIT Appeals Pune.
Also the authorities below erred in law by making separate addition on account of unsecured loan when the books of 2 ITA . No.351//PN/2011 Pradip Sidheshwar Wahvol, A.Y. 2006-07 Page of 6 accounts are rejected u/s 145 of the Income Tax Act. Just and proper relief be granted to the assessee.
3) The appellant craves permission to add, alter, modify, revise, amend or delete the grounds of appeal before or during the course of hearing of the appeal.
2. Ground No. 1 is in respect of disallowances under the various heads of expenses as under :
1. Wages ... Rs. 3,31,353/-
2. Hamali Mathadi works ... Rs. 1,28,345/-
3. Office Expenses ... Rs. 13,392/-
3. The assessee is an Electrical Contractor, who mainly undertakes work for MSEB and PWD. The A.O has observed that the assessee undertakes contract with material and executes work at site. In the A.Y. 2006-07, the assessee declared the gross receipt of Rs. 71,85,401/-. The A.O passed the assessment order u/s. 144 on the reason that assessee was not responding to the notices issued by the A.O. by filing the required information and the assessment was getting time barred. The A.O compared the turnover of the assessee in the preceding year vis-à- vis the expenditure like wages, hamali mathadi works & others, office expenses, travelling and conveyance, telephone, diesel expenses etc., from the point of view of increase or decrease in the said expenditure. So far as the disallowance of wages is concerned, the A.O has observed that assessee has debited an amount of Rs. 29,07,523/- and there is an increase to the said expenditure to the extent of 46% as compared to last year. The A.O., therefore, disallowed Rs. 3,31,353/- which was 25% of the increase. In the same way, the A.O. compared the preceding year's expenditure on Hamali Mathadi works as well as office expenses and made the disallowance of Rs.1,28,345/- and 20% out of office travelling, 3 ITA . No.351//PN/2011 Pradip Sidheshwar Wahvol, A.Y. 2006-07 Page of 6 telephone and diesel expenditure which is to the extent of Rs. 26,785/-. The Assessee carried the issue before the Ld CIT(A). The Ld CIT(A) supported the action of A.O for rejecting the books of account by evoking the Sec. 145(3) as well as completing assessment Ex-parte, based of his best of judgment u/s. 144 of the Act. Before the Ld CIT(A), the assessee pleaded that the assessee attended before the A.O on 19.11.2009 along with his Accountant. The Accountant did not produce the books of account. Subsequently, the Accountant left the employment of the assessee without handing over the books of account, and hence, it was pleaded for admitting additional evidence, that was in respect of the second addition. Before Ld CIT(A) also, the assessee did not produce the books of account. The Assessee pleaded before Ld CIT(A) that net profit ratio for the A.Y. 2005-06 and 2006-07 is 6.6% and which is a reasonable once considering the nature of business of the assessee. The Ld CIT(A) was not impressed with the contention of the assessee as in his opinion, there is an abnormal increase in respect of expenditure claimed under the head wages and hamali charges as compared to the last year, which are totally disproportionate compared with the increase in the contract receipt. The Ld CIT(A) also considered the G.P rate and Net Profit rate. The Ld CIT(A) examined the disallowances made by the A.O. in respect of the wages, hamali and mathadi expenditure and office expenditure. So far as wages expenditure is concerned, he confirmed the action of the A.O as in the opinion of the Ld CIT(A), there was abnormally increased expenditure to the extent of 83%, but, so far was contract receipts are concerned, the increase was only 30%. The Ld CIT(A) confirmed the disallowance made by the A.O.
4. In respect of the Hamali Mathadi Works expenditure, the Ld CIT(A) again confirmed the disallowance, as in his opinion, the increase in the 4 ITA . No.351//PN/2011 Pradip Sidheshwar Wahvol, A.Y. 2006-07 Page of 6 said expenditure was 205%. He accordingly confirmed the disallowance made in respect of the expenditure claimed on the Hamali Mathadi Works. So far as office expenses, travelling expenses, telephone expenses, diesel expenses are concerned, the Ld CIT(A) was of the opinion that the disallowance made by the A.O at 20% was at higher side and with the observation to meet the ends of justice, he restricted the disallowance to 10%. The assessee is in appeal before us.
5. We have heard the parties and also perused the records. Admittedly, the assessee did not produce the books of account even before the Ld CIT(A). We find that while making disallowances, the A.O. compared the expenditure in the A.Y. 2006-07 with the expenditure claimed by the assessee in the immediately preceding year i.e. A.Y. 2005-
06. The A.O has observed that the assessee has declared the gross contract receipt of Rs.71,85,405/- in A.Y. 2006-07 as against Rs. 55,03,803/- in the preceding year and there was increase of 30% in the gross receipts. The A.O. made the following disallowances and made addition to the total income of the assessee :
Wages ... Rs.3,31,353/-
Hamali Mathadi works ... Rs. 1,28,345/-
Out of office expenses, ... Rs. 26,785/-
Travelling, telephone &
Diesel etc.,
If we add this amount to the net profit shown by the assessee at Rs.4,74,250/-, the total Net Profit works out at Rs. 9,60,733/-. If the said Net Profit is compared against the gross contract receipts of Rs. 71,85,405/-, the Net Profit works out at Rs. 13.37%, which, in our opinion is much more on higher side. At this stage, we are not considering the addition made by the A.O under the head 'unsecured 5 ITA . No.351//PN/2011 Pradip Sidheshwar Wahvol, A.Y. 2006-07 Page of 6 loan'. Considering the fact that assessee is an Electrical Contractor and if the Net Profit is taken at 10% of the gross receipts, as assessee could not produce books of account this year, that will be the reasonable basis for determining the total income of the assessee. We, therefore, direct the A.O to work out 10% of Rs. 71,85,405/- as a Net Profit (oher than the additions made under the head 'unsecured loan' which we are separately dealing with). We, accordingly, delete the disallowance made by the A.O and sustained by the CIT(A) under the head 'Wages, Mathadi Hamali works and office expenses'. It is to be mentioned here that so far as the disallowance of the office expenditure is concerned, the Ld CIT(A) has given 10% relief. The A.O. is accordingly directed to determine the Net Profit as above and separate addition made by the A.O by disallowing the expenses like wages, mathadi hamali works, and office expenses are not to be added. In result, Ground No. 1 is partly allowed.
6. The next issue is the addition of Rs. 75,000/- sustained by the Ld CIT(A) out of Rs. 1,20,000/- made by the A.O. Once the income is estimated, no addition can be made separately by evoking the Section 68 of the Act. We find that the Ld CIT(A) has given the relief of Rs.45,000/- after considering the evidences filed by the assessee. In our opinion, no such addition can be made as income is estimated. Moreover, decision of Hon'ble High Court of Rajasthan in CIT Vs. G.K. Contractor (2009) 19 DTR (Raj) 305 supports the assessee's contention. We, accordingly, delete the addition of Rs. 75,000/- sustained by the Ld CIT(A).
7. In the result, assessee's appeal is partly allowed. 6 ITA . No.351//PN/2011
Pradip Sidheshwar Wahvol, A.Y. 2006-07 Page of 6 The order is pronounced in the open Court on 11th July 2012.
Sd/- Sd/-
(G.S. PANNU) (R.S.PADVEKAR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 11th July, 2012
US
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
3. The CIT - I, Pune
4. The CIT(A)-I,Pune
4. The D.R. "B" Bench, Pune
5. Guard File
/- true copy-/
By order
Senior Private Secretary
Income Tax Appellate Tribunal
Pune