Income Tax Appellate Tribunal - Jaipur
Rajendra Singh Shekhawat, Jaipur vs Ito, Jaipur on 28 February, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES (SMC), JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER
vk;dj vihy la-@ITA No. 300/JP/2016
fu/kZkj.k o"kZ@Assessment Year : 2009-10
Shri Rajendra Singh Shekhawat cuke Income Tax Officer,
97-A, Goyal Farm, Sunder Vihar, Vs. Ward 3(1),
Kalwar Road, Jhotwara, Jaipur. Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AWCPS 9261K
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri S. K. Gogra (C.A.)
jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl.CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 20/12/2017
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 28/02/2018
vkns'k@ ORDER
PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 19.01.2016 of CIT(A), Jaipur for the assessment year 2009-10. The Assessee has raised various grounds in this appeal however, only effective ground is ground no. 1 of the assessee's appeal and all other grounds raised by the assessee are submissions/ contentions in support of ground 2 ITA 300/JP/16_ Shri Rajendra Singh Shekhawat vs. ITO no. 1 accordingly, for the sake of brevity only ground no. 1 is produced as under:-
"1. That ld. AO has erred in making addition in net profit by gross receipts of Rs. 24,96.557/- as per Form 26AS (TDS) Reconciliation Statement) Gross work payment as shown in TDS Certificate dt. 22.09.2009 issued by Shri Bhawani Nikean Shiksha Samiti, Sikar Road, Jaipur is of Rs. 5,19,09,588/- whereas the payment as shown in Form 26AS is of Rs. 5,44,06,145/-, thus there is a difference of Rs. 24,96,557/- which is fully added into total income of appellant without giving deduction of expenses thereof. And Further order of ld (CIT(A) as confirming the same is also erroneous which may please be deleted."
2. The assessee is a Civil Contractor and filed its return of income on 02.09.2009 declared total income of Rs. 22,91,734/-. The return was processed u/s 143(1) of the Act and thereafter, the assessment was reopened by issuing notice dated 15.05.2013. In response to the notice u/s 148 of the Act the assessee submitted that the return filed on 02.09.2009 may be treated as filed in compliance to the notice u/s 148 of the Act. During the course of reassessment proceeding the AO noted that as per the details appearing in 26AS of contract receipts the total contract receipts of the assessee are shown at Rs.5,44,06,145/- as against Rs. 5,19,09,588/- declared in the audited accounts. The difference between the contract receipts declared by the assessee and contract receipts appearing in 26AS of Rs. 24,96,557/- was proposed to be added to the 3 ITA 300/JP/16_ Shri Rajendra Singh Shekhawat vs. ITO income of the assessee. In response the assessee submitted that as per Form No. 16A issued by Shri Bhawani Niketan Shiksha Samiti, Jaipur total contract receipts are shown at Rs. 5,19,09,588/- and the same has been considered as gross contract receipts in the audited trading account. Subsequently an amount of Rs. 24,96,557/- was added by Shri Bhawani Singh Shiksha Samiti, Jaipur through a TDS return and due to this total contract receipts in 26AS are appearing at Rs. 5,44,06,145/-. The assessee though submitted that instead of adding entire amount of Rs. 24,96,557/- an amount of Rs. 4,46,909/- being net profit rate of 9.89% may be added to the return income. Thus, the assessee explained that the assessee declared the gross contract receipts as it was stated in Form 16A issued by Shri Bhawani Niketan Shiksha Samiti, Jaipur however, the said Shiksha Samiti subsequently added a sum of Rs. 24,96,557/-. Therefore, a total TDS return and due to this addition the difference of the said amount as appearing in the 26AS and the amount declared by the assessee. The assessee agreed to the addition of net profit rate 9.89% on the said difference amount of gross contract receipts. The AO also received information u/s 133(6) of the Act from detectee Shri Bhawani Niketan Shiksha Samiti, Jaipur wherein it was stated that the payment of Rs. 24,96,557/- was made to the assessee on account of contract work. These facts were brought to the notice of the assessee and in response the 4 ITA 300/JP/16_ Shri Rajendra Singh Shekhawat vs. ITO assessee submitted that the amount of Rs. 24,96,557/- was book adjustment entry made by the deductee which was not received by the assessee. It was further submitted that since this amount was not received by the assessee therefore, the assessee has also not booked the corresponding expenditure hence, only net profit rate may be added to the income of the assessee. The AO did not accept the contention of the assessee and made the addition of the entire amount of difference of contract receipts of Rs. 24,96,557/-. On appeal, the assessee reiterated its contention and submitted the additional evidence in support of the contention which was admitted by the ld. CIT(A) and forwarded to the AO for submissions of remand report. The remand proceedings the assessee took the stand that the difference of Rs. 24,96,557/- was on account of book adjustment of the expenses and deductions made by the deductee. The assessee gave the details of sales tax deducted by the deductee of Rs. 8,15,095/-, interest expenses charge of Rs. 8,37,569/- and direct purchase of material by the deductee of Rs. 8,43,893/- total of three items matching with the difference of Rs. 24,96,557/-. The assessee further contended that all these expenses are legitimate business expenses which could not be charged to profit and loss account due to book adjustment. Hence, it was explained that neither the receipt entry of the differential amount was credited nor the expenses adjusted against this received entry 5 ITA 300/JP/16_ Shri Rajendra Singh Shekhawat vs. ITO of Rs. 24,96,557/- were debited in the books of accounts. The ld. CIT(A) has examined the relevant records and found that the claim and explanation of the assessee is contrary to the stand taken before the AO as well as it is not correct as the assessee has already claimed all these expenses in the profit and loss account.
3. Before Tribunal, ld. AR of the assessee has reiterated its contention that the gross contract receipts cannot be added to the income of the assessee and at the most profit element in the gross contract receipts can be added. In support of his contention he has relied upon the following decisions:-
• Shri Hamid Khan vs. ITO 158 TTJ 0039 • CIT vs. President Industries 258 ITR 654 • Ram Kishan vs. ITO & vice Versa 2016-72(II)-ITCL-188
Placing reliance on these decisions it was contended that the receipts were found out of the books of account, the payment on account of expenses may also be out of the books of account. Therefore, only the net profit rate on the unaccounted sale can be added to the income of the assessee.
The amount of sales by itself cannot represent the income of the assessee even if the said amount is not disclosed. The sales represent only the price 6 ITA 300/JP/16_ Shri Rajendra Singh Shekhawat vs. ITO received by the assessee and the expenditure incurred for acquisition of the goods sold has to be allowed. Therefore, even if the contract receipts are not disclosed only net profit in these undisclosed receipts can be added to the income of the assessee.
4. On the other hand, ld. DR has referred to the finding of the ld. CIT(A) and submitted that the assessee claimed that the difference is due to the books adjustment made by Shri Bhawani Niketan Shiksha Samiti, Jaipur on account of direct purchase, interest deduction and sales tax deduction therefore, as per the assessee there is no income on account of this differential amount when the equal amount allowed as an expenditure against the said receipts. However, it was found that all these expenditure have been took in profit and loss account. He has relied upon the order of the authorities below.
5. Having considered the rival submissions as well as relevant material on record it is noted that the assessee has shown the contract receipts of Rs. 5,19,09,588/- whereas as per Form 26AS the contract receipts appearing at Rs.5,44,06,145/- When this discrepancy of Rs. 24,96,557/- of contract receipt was pointed out by the AO, the assessee explained that the corresponding expenses has not been claimed by the assessee and therefore, only the net profit on these differential amount of contract 7 ITA 300/JP/16_ Shri Rajendra Singh Shekhawat vs. ITO receipts can be added to the income of the assessee. Before the ld. CIT(A) the assessee explained that the difference of Rs. 24,96,557/- is due to book adjustment entry made by the deductee. The relevant part of the submissions of the assessee in para 3.1 as under:-
3.1 Submissions made by the appellant
1. That the appellant is a works contractor and has undertaken the Civil Construction work of Building of Shri Bhawani Niketan Sikhsha Samiti, Jaipur. During the said year the appellant has carried out work of 5,44,06,145/- which is shown in form 26AS whereas TDS Certificate dt. 22.09.2009 as issued by Awarder gross amount of payment was shown for Rs. 5.19,09,588/-, copy of said certificate was submitted to ld AO during assessment proceedings. Thus a difference of Rs. 24,96,557/- was arisen which is on account of book adjustment of following expenses & deductions made by awarder:-
(a) Sales Tax (WCT) deducted by Awarder 8,15,095.00
(b) Interest expenses charges by Awarder 8,37,569.00
(c) Direct purchase of material by Awarder 8,43,893.00 (on account of Contractor assessee) ----------------------
Total 24,96,557/-
The assessee also filed additional evidence in support of the contention which were forwarded to the AO for the remand report. After considering the remand report the ld. CIT(A) adjudicated the issue in paras (x) to (xv) as under:-
8 ITA 300/JP/16_ Shri Rajendra Singh Shekhawat vs. ITO "(x) I have duly considered the above contention of the appellant. Now the appellant changed its stand. During assessment proceeding, it was submitted before AO that it is booking its expenses on receipt of the payments and it offered to include 4.61 % of Rs. 24,96,557/- as its income. Whereas, now the appellate has provided the complete break-up of Rs.24,96,577/-. It is difficult to understand how the appellant can have different stands especially looking to the fact that it is maintaining its books of accounts which were audited by an auditor.
(xi) It is noted from the copy of 'Construction Expenses Direct Payment to Suppliers' ledger account filed by the appellant along with the appeal that total expenses of Rs. 92,77,652/- were debited into said account which includes amount of Rs. 4,24,000/- and Rs. 4,16,000/- debited on 01.10.2008 and 3.11.2008 respectively and this expenditure of Rs. 92,77,652/- is a part of total purchase of Rs. 2,96,16,898/- of the appellant debited to its Profit and Loss account. It is pertinent to mention here that these payments were claimed to be made by the Awarder to the supplier i.e. M/s Binani Cement. This means that the appellant has already claimed the expenditure on account of direct purchase of the material amounting to Rs. 8,40,000/- (4,24,000 + 4,16,000) in its books of accounts and was trying to mislead the appellate authority by stating that it has not claimed the expenses on account of direct purchase by the Awarder i.e. Shri Bhawani Niketan Shiksha Samiti.
(xii) It is interesting to note from the copy of ledger account of "Works Contracts Receipt' filed by the appellate with its appeal that it has shown total receipts at Rs. 5,44,06,345/-. As the appellant is following mercantile system of accounting, it should have taken the amount of Rs. 5,44,06,345/- on the basis of its books of accounts whereas it has taken the contract receipts at Rs. 5,19,09,557/- in its audited Profit and Loss account.
(xiii) it is further noted from 'Sales Tax (WCT) A/c ledger account filed by the appellant with its appeal that a sum of Rs. 8,15,095/- was debited in this account. Similarly 'Interest Exp.' Ledger account shows debit amount of Rs. 8,37,569/-. If these expenses are 9 ITA 300/JP/16_ Shri Rajendra Singh Shekhawat vs. ITO appearing in its books of accounts, it could be presumed safely that these must have been taken into account, though head wise not appearing in the Profit and Loss account, while preparing its Profit and Loss account looking to the fact that auditors have made no qualification in this regard while auditing the financial statements.
(xiv) In view of the above discussion, it is held that the version of the appellant before the appellate authority cannot be accepted especially looking to the change of stand by the appellant at the assessment and appellate proceedings and as the appellant has not come with clean hands before the appellate authority.
(xv) Hence, looking to the totality of facts and circumstances of the case, it is held that the AO was justified in making addition of Rs. 24,96,557/- as undisclosed contract receipts and thus the same is sustained. Hence, these grounds of appeal are hereby rejected." Thus, it is clear that the ld. CIT(A) has analyzed the relevant record and found that the claim of the assessee is not correct as all these expenses on account of direct purchase and sales tax deduction and interest have already been taken under consideration while preparing the profit and loss account. Therefore, once the claim of the assessee that the difference is on account of books adjustment entry is found to be wrong and contrary of the facts then the addition made by the AO of the differential amount is proper and justified. It is further noted that when the assessee has booked all the corresponding expenses in the books of accounts then, even the contention of the assessee that only net profit of these contract receipt can be added to the income of the assessee is not acceptable. Hence, in 10 ITA 300/JP/16_ Shri Rajendra Singh Shekhawat vs. ITO view of the facts and circumstances of the case and factual finding given by the ld. CIT(A) I do not find any merit or substance in the present appeal of the assessee.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 28/02/2018.
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¼ fot; iky jko ½ (VIJAY PAL RAO) U;kf;d lnL; @Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 28/02/2018 *Santosh vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Rajendra Singh Shekhawat, Jaipur.
2. izR;Fkh@ The Respondent- The ITO, Ward 3(1), Jaipur.
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, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 300/JP/16) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar