Income Tax Appellate Tribunal - Delhi
Sameer Buildtaid P.Ltd, New Delhiq vs Dcit, Circle-22(1), New Delhi on 31 May, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'B', NEW DELHI
Before Sh. Amit Shukla, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
ITA No. 6123/Del/2017 : Asstt. Year : 2013-14
Sameer Builtaid Pvt. Ltd., Vs DCIT,
B-49, 2nd Floor, Joshi Colony, I.P. Extn. Circle-22(1),
New Delhi-110092 New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AAICS6389P
Assessee by : None
Revenue by : Sh. Avikal Manu, Sr. DR
Date of Hearing: 15.03.2022 Date of Pronouncement: 31.05.2022
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of the ld. CIT(A)-30, New Delhi dated 21.06.2017.
2. The only ground taken up by the assessee is as under:
"2. That the ld. CIT(A) erred while rejecting books of account and estimation of profit @ 2.5% of total turnover to Rs.43,36,084/- while books of accounts were duly audited and produced before the CIT(A)."
3. Brief facts of the case relevant for adjudication are as under:
(i) In this case, the original return of income was filed on 29.9.2013, declaring total income of Rs. 49,44,110/-.2 ITA No. 6123/Del/2017
Sameer Builtaid Pvt. Ltd.
(ii) Subsequently, the assessment u/s 143(3) of the Act, was completed vide order dated 29.02.2016, determining the total income of Rs. 1,90,05,307/-, as against the returned income of Rs. 49,44,110/-, after making the following additions on account of:
( a) Es t i m at ed In c om e f r om Bu si n e s s an d P r o f es si on : R s .6 9 ,3 7 , 7 3 5/ -
(b) Ex c e s s R e c ei p t s ap p e a ri n g i n f o rm 2 6 A S : R s . 7 1 ,2 3 , 4 6 2/ -
T ot al : R s. 1 , 4 0 ,6 1 ,1 9 7 / -
4. After the rejection of books of accounts, the AO estimated profit of Rs. 69,37,735/- @ 4% of the turnover. The A.O. has made the addition in assessment order u/s 143(3) of the Act, dated 29.02.2016 and the relevant portion is reproduced as under:
"The Assessee company e-file d re turn of income for A . Y.2013- 14 on 29.09.2013 declaring income of Rs.49,44,110/-.I n accordance with guidelines o f sele ction of cases scrutiny during the F.Y . 2014-15 issued by the CBDT the case was selected for scrutiny. Notice u/s 143(2) was first issued on 02.09.2014. Detailed questionnaire s were issued to the assessee company on 13.01.2015, 04.09.2015 & 12.01.2016. In re sponse to vario us notice issue d, Sh. Vivek Kumar, CA appeared and filed details which have been placed on record. The case was discusse d with him. The assessee company is engaged in the business o f work contract services involving material and labour supply in co nstruction re lated services.
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III. As is appare nt from the above , the assessee opted not comply with most of the notice issued by this office. After the se rvice o f notice issued on 12.1.2016, Sh. V ivek Kumar, CA appeared and file d part details which have been place d on reco rd.3 ITA No. 6123/Del/2017
Sameer Builtaid Pvt. Ltd.
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11. Please no te that you were specifically require d vide notice u/s 143 (2) issued in the case More than a year ago to produce or cause there to be produced at the said time, any documents, acco unts and any o ther e vidence on which you may re ly in support of the return filed by you ho we ver, till this date the assessee company has failed to produce any do cuments, vo uche rs, bills or ledger in respect of any expenditure claimed under the he ad expenses and other credits claimed to have been rece ive d as per the information filed in the return o f income the refo re the re sults declared by the assessee company are no t verifiable and deserve to be rej ected. In the circumstances, please explain why provisio ns of section 145 o f the act, should not be invoke d and the results declared by yo u should not be rejected.
12. You are here by given FINAL OPPORT UNITY to make it convenient to appear thro ugh duly authorized person as pe r section 288 o f the act on 02.02.2016 at 11.10am with your complete se t of books of accounts for the acco unting pe rio d 01.04.2012 to 31.03.2013 along with above de tails in room no.226 C.R building I.P estate Ne w De lhi 110002. The submissions file d sho uld be duly page numbered along with the summary index shee t at the top. In case of failure the case will be decide d ex- parte u/s 144 of the Act on the basis of information available on record. Notice u/s 142( 1) is enclosed for necessary compliance simultaneo usly penalty proceedings u/s 271 (1) (b) shall also be initiated for non - compliance with statutory no tices.
(IV) In respo nse the reto , Sh. Vivek Kumar, CA appeare d on 03.02.2016, 08.02.2016, 16.02.2016 and 17.02.2016, howeve r faile d to furnish the requisite details. The books of accounts as required could no t be pro duced for examinatio n.4 ITA No. 6123/Del/2017
Sameer Builtaid Pvt. Ltd.
(V).1. T he order sheet e ntry dated 03.02.2016 is repro duced be low:
"Sh. V ivek Kumar, CA appeared file d letter dated 03/02/2016 seeking adjournment. Give n last opportunity. Case fixed for 08.02.2016."
(IV).2 The o rde r sheet e ntry dated 08.02.2016 is repro duced be low:
"Sh. Vivek Kumar, CA and S h. Sanjay Kumar, Asstt. Manager. F ile d lette r dated 08.02.2016 case fixe d for 16.02.2016 (IV).3 The o rde r sheet e ntry dated 16/02/2016 is reproduced be low:
"Pre sent S h. Vive k Kumar C.A . To explain as to why the receipts as per 26AS of Rs. 14.83 lacs, Rs. 2.80lacs, Rs. 51.95 lacs and Rs. 1.65 lacs fo r samiah international & Amarpali hospitality ultra homes and Pan re alto rs respe ctively sho uld no t be adde d to inco me. To explain in the absence of expenses details as required why the business results declared should no t be re jected u/s 145 and N .P. @ 8% should not be asse ssed.
It is seen that increase in the turno ver o f the assessee company is 70% where as expenses claimed by the assessee co mpany in the following heads have increased substantially as co mpared to last year:
S. No. Head of expense F.Y. 2011-12 F.Y. 2012-13 Percentage increase 1 Computer Repairing & Maintenance - 283359 N.A. 2 Cartage Expense 633,810.00 1398345 120.63 3 Contract Charge 12,438,643.00 29368555 136.11 4 Conveyance A/c 601,855.00 2848929 373.36 5 Office Expense Account 556,666.00 5338851 3456.08 6 Printing & Stationery account 67,538.00 969806 1335.94 7 Telephone Expense 82,225.00 357181 334.39 8 Tour & Travels Expense 59,096.00 226190 282.75 9 Vehicle repair & maintenance 3,683.00 60122 1532.42 Total 14,443,516.00 3,80,51338 5 ITA No. 6123/Del/2017 Sameer Builtaid Pvt. Ltd.
VI.3. I t was required vide o rde r sheet entry date d 16.02.2016 to show cause as to why the business results declared by the assessee company should not be rejecte d u/s 145 and NP @ 8% should not be assessed. The assessee company has faile d to furnish any explanation in this regard. No do cumentary evide nce has been furnished in suppo rt o f the claims made in the income.
VI.4 This o ffice also relies on the fo llowing judicial decisions:
The Hon'ble S upre me Court in the case of CIT vs. A. Krishanswami Mudaliar (1964) 53 ITR 122 (SC) has held that sectio n 145 does not compel the A.O. to accept a balance sheet of cash receipts and outgo ing prepared from the boo ks o f account.
The Hon'ble Supreme Court in the case of CIT Vs. McMilan & Co . (1958) 33 TTR 182 (SC) has he ld that the A. O. even when he accepts the assessee's method of accounting , is not bound by the figure of profits shown in the accounts.
In the case of Seth Nathuram Munalal vs. CIT (1954) 25 ITR 216 (Nag.) that it was held that if the assessee fails to satisfy the 1TO as to the co rrectness of the pro fits returne d by him. It is open to the 1TO to take a higher percentage consistent with the state of trade in the locality o r with any special circumstance o f the assessee which warrant higher rate of profits. However, the ITO must disclose the basic and manne r of computation and make his order a spe aking order.
VI. 5. The assesse e company has failed to pro duce evidence / de tails / documents to substantiate that the trading result declare d by it are complete and correct. In the absence of any ve rifiable documents, this o ffice is co nstraint to reject the books of account of the assessee company u/s 145 o f the Act and the ne t profit of the assessee company is estimated at 4% of to tal turnove r of Rs.
6 ITA No. 6123/Del/2017Sameer Builtaid Pvt. Ltd.
17,34,43,379/- which comes to Rs. 69,37,735/- to its income under the head income from business and profession.
Further, I am satisfie d that the assessee has filed inaccurate particulars of its income, there fore , penalty proceedings u/s 271(1)(c) o f the I T Act, is being imitate d se parately."
5. Before the ld. CIT(A), the ld. AR has filed written submissions/objections vide letter dated 16.6.2017 and the relevant portion is reproduced as under:
"1. While AO has completed the Assessment he has taken income on presumptive basis @ 4% on Total Turno ver of Rs. 17,34,43,379/- to Rs. 69,37,735/- and it is adde d back to returne d inco me. That means Income already declared by the assessee company of Rs. 31,21,362/- sho uld be deducted from the Presumptive income. So double taxation on same income is not pe rmissible in the act.
In respo nse to the notice issued by the A.O. counsel o f the Assessee Vivek Kumar, CA appe ared and furnished information and documents before the Ld. A .O. o n date d 16.10.2016. Later o n AO aske d to submit tax audit report then the A ssessee Company submitte d the same on date d 26th February, 2016. Late r on AO asked for to furnish books of accounts and othe r requisite details fo r which AR of the assessee company appeared be fore the AO o n dated 01st March, 2016, then AO refused to acce pt the documents and books of accounts and said that he has alre ady passe d the order u/s 143 (3) of Income T ax Act, 1961 o n date d 29th February, 2016.
Apart from this, books of acco unts is rejected on the ground that differe nt nature o f expe nses is increased in comparison to previous year, but Ld. A .O. has not co nsidered the fact that turno ver of the company has also incre ased by more than Rs.7.00 crore as compared to previous ye ar, which is depicte d as below:7 ITA No. 6123/Del/2017
Sameer Builtaid Pvt. Ltd.
" ASSESSMENT YEAR EXPENS ES INCURRED TURNOVER (in Rs.)
(As per Assessment
Orde r) ( in Rs.)
2012- 13 1.44,43,516 10,30,72,268
2013- 14 3,80,51,388 17,34,43,379
Increase in Expe nses & 2,36,07,872 7,03,71,111
Turnove r
Reason for decline in the Net Profit Ratio
There was a slum started in the real estate business from the financial year 2008- 09 onwards and consequently net pro fit has declined in the year unde r consideration howeve r Gross Pro fit is maintaine d by the company. In nutshell indirect expe nses canno t be avoided and reduced due to inflation facto r (for ex- salary and wages canno t be re duce d). Due to e ffo rt of directo rs turnove r has increased year after ye ar but net profit has de cline d due to incre ase in salaries and wages which had increased from 1,71,78,906 to 3,81,51,644 which is almost double in the year unde r consideratio n and re duced the NP by 12% otherwise the company had the contro l on othe r expenses in te rms of percentage of turnover. T he comparative ratio of GP and N P is shown below:-
A SNAP OF COMPARATIVE RATIO ASSESSMENT 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 YEAR Sales 64,278,111.00 62,903,540.00 103,072,268 173443379.00 175,281,556.00 95,006,535.00 Gross Profit 7,643,139.10 8,758,685.61 14,444,368.28 27758688.78 26,987,033.00 23,321,447.00 Net Profit 3,245,211.00 3,022,319.00 3,717,548.00 3121362 2,825,704.00 (472,400.00) G.P. Rate 11.89 13.92 14.01 16.00 15.40 4.55 N.P. Rate 5.05 4.80 3.61 1.80 1.61 -0.50 Hence from the above table it is cle arly evide nt that Net pro fit ratio is go ing to decrease from the Assessment ye ar 2013-14 onwards.
And all expenses is claimed as pe r invoice/ bills and vouchers which is authenticate d by Tax Audit Repo rt and Audite d Balance Sheet, but 8 ITA No. 6123/Del/2017 Sameer Builtaid Pvt. Ltd.
Ld. A.O. did no t give sufficient time to produce all such things in spite o f the fact that there was sufficient time to complete the assessment. On the facts and circumstances it is clear that the actio n o f the A O was unlawful, unj ustifie d and against the principal of natural justice .
We hereby produce the books o f account, bills and vo uchers for your kind pe rusal.
The A.O. has reje cted the books of accounts and assessed income @4% on to tal rece ipts o f Rs.17,34,43,379/- to Rs. 69,37,735/- and it is adde d back to income , while I ncome already disclosed by the Assessee company of Rs. 31,21,362/- should be de ducted from the Assessed Income, because double taxation is not allowe d as per principle of natural justice .
Hence, we pray to delete the addition made on the basis of presumptive basis AND de lete the additio n of Rs. 31,21,362.00 which is alre ady co nsidered in income tax return."
6. The ld. CIT(A) after considering the assessment order, written submission/objections, case laws relied upon and oral arguments of ld. AR held as under:
"(i) In the assessme nt proceedings, several o pportunities were allo wed by the A .O. to furnish the requisite details. However, as pe r the A.O., the same were not furnished by the assessee and also books o f account alongwith bills/ vouchers, we re not pro duced.
(ii) In the assessment orde r the A .O. has stated that inspite of various o ppo rtunities allowe d to the assessee company, as mentione d abo ve , the correctness of books o f acco unt and result could not be ve rified. The A.O. has furthe r state d that in the year unde r consideratio n, ne t profit (N .P.), has been shown @ 1.8%, as 9 ITA No. 6123/Del/2017 Sameer Builtaid Pvt. Ltd.
against N .P. @ 3.7% in A.Y. 2012- 13. It is furthe r stated by the A.O. that the re is a increase in turno ver by 70%, whe reas the expenses have been incre ased substantially as compare d to last year.
(iii) In vie w of the above, the A.O. pro posed by show caused vide order sheet entry dated 16.02.2016, for rejecting the books o f account u/s 145 of the Act and to apply N .P. @ 8%. Howe ver, in response to this show cause, assessee did not file any reply no r any documentary evidence, in suppo rt o f the claim made in the return o f income.
In view o f the above, the A.O. rejected the books of account u/s 145 of the Act and estimated the income of Rs. 69,37,735/ -, by applying N.P. @ 4%, o n to tal turno ver of Rs. 17,34,43,379/- and made the addition under the head income from business.
(iv) In the appellate proceedings, the appellant has state d that the adequate o ppo rtunity was no t allo wed by the A.O., during assessment procee dings. It is further submitted by the appe llant that unde r the different heads, e xpe nses have bee n increased, as compared to last year, but the A.O. has not co nsidere d the incre ase in turnove r by more than Rs. 7cro res. Howe ver, it is submitte d by the AR that these expenses have been incurred, fo r which pro per invo ice/vo uchers were maintaine d with the appellant. I t is further submitted by the AR that the books of account of the appe llant are audite d and no discrepancy have bee n po inted out by the auditor.
(v) In the appe llate proceedings, the appellant has further state d that the A .O. has not taken into account, the income of Rs. 31,21,362/-, already disclosed in the books and o ffered fo r tax from the business and accordingly, it is submitted by the A R that the re is a double addition on account of igno ring this pro fit, while estimating the income o f Rs. 69,37,735/-.
10 ITA No. 6123/Del/2017Sameer Builtaid Pvt. Ltd.
(vi) In the appellate proceedings, AR has further submitted that in the prece ding A .Y. 2012-13, the N .P. be fore tax has been wro ngly taken by the A.O. @ 3.7%, as against correct N .P. @ 3.61% and in A.Y. 2013-14, the same was @1.8%, since there was a slum in the market and the e xpenses have increased. It is furthe r submitted by the AR that the re was a slum in re al estate from F .Y. 2008-09 and there fore , in the case of the appellant also the net pro fit rate is decreasing from year to year.
In vie w of the above, AR has subm itte d that the A.O. has wrongly rejected the books of acco unt, as same were audited and applied a N.P. @ 4%, witho ut co nsidering the net pro fit o f Rs. 31,21,362/-, alre ady disclosed in the ITR.
From the abo ve, it is clear that all the books of account alongwith bills and vouchers were not produced during assessment proceedings, without any re asonable cause and therefo re, the provisio n o f sectio n 145 o f the Act, are co rrectly applied by the A .O. Accordingly, the above argument of appe llant is not acceptable and same is rejected. It is also a fact that the re was a slum in the real estate market and the N .P. rate of the appellant is go ing down from year to year and the refo re, N.P. rate ado pted by the A.O. @ 4%, appe ars to be high, in the facts and circumstances o f the case .
In view o f the abo ve, I am of the co nside red opinion that the books of account o f the appe llant, has bee n correctly rejecte d by the A.O. u/s 145 of the A ct, as in the assessment proceedings, same were partly pro duce d alongwith bills and vouche rs. Ho weve r, the N.P. rate @ 4% applied by the A.O. is high. In these facts and circumstances, I am of the considered o pinion that the N.P. @ 2.5%„will meet the end of justice and acco rdingly, the net pro fit will come to Rs.43,36,084/-, as against Rs. 69,37,735/- , determ ined by the A.O. Accordingly, addition to the extent of Rs. 12.14.722/ .- (Rs.
11 ITA No. 6123/Del/2017Sameer Builtaid Pvt. Ltd.
43,36,084 - Rs. 31,21,362) , is co nfirmed and additio n to the extent of Rs. 57,23,013/- (Rs. 69,37,735 - Rs. 12,14,722), is dele ted, since the income to the exte nt o f Rs. 31,21,362/-, has already been offe red to tax."
7. We have perused the material available on record. We find that the ld. CIT(A) has given due credit to the income offered by the assessee of Rs.31,21,362/- after determining the NP @2.5% on the turnover. The net profit thus determined is Rs.43,36,084/- against Rs.69,37,734/- determined by the AO. Thus, the ld. CIT(A) after determining NP @ 2.5% confirmed the addition to the extent of Rs.12,14,722/- which we find "more than reasonable" which is moderate, tolerable, intelligent, practical. Hence, we hereby affirm the action of the ld. CIT(A).
8. In the result, the appeal of the assessee is dismissed. Order Pronounced in the Open Court on 31/05/2022.
Sd/- Sd/-
(Amit Shukla) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 31/05/2022
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR