Income Tax Appellate Tribunal - Jaipur
K.B.S. Enterprises, Jaipur vs Department Of Income Tax on 29 February, 2016
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM
vk;dj vihy la-@ITA No. 794/JP/2014
fu/kZkj.k o"kZ@Assessment Year : 2010-11
Deputy Commissioner of cuke M/s K.B.S. Enterprises,
Income Tax, Vs. 5A, Dayal Nagar, Gopalpura
Circle-6, Jaipur. Byepass, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAIFK 5727 G
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri O.P. Bhateja (Addl.CIT)
fu/kZkfjrh dh vksj ls@ Assessee by : None (Notice returned unserved)
lquokbZ dh rkjh[k@ Date of Hearing : 18/02/2016
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 29/02/2016
vkns'k@ ORDER
PER: T.R. MEENA, A.M. This is an appeal filed by the revenue against the order dated 12/09/2014 passed by the learned CIT (A)-II, Jaipur for A.Y. 2010-11. The effective grounds of appeal are as under:-
"(i) Whether on the facts and in the circumstances of the case and in law the ld CIT(A) erred in estimating the NP rate @ 8% of total contracts receipts whereas in the case of M/s Choudhary & Brothers being similar
2 ITA 794/JP/2014_ DCIT Vs. M/s KBS Enterprises case the Hon'ble ITAT (ITA No. 1177/JP/2010) has upheld N.P. rate of 11.5% of total contract receipts as appropriate.
(ii) Whether on the facts and in the circumstances of the case and in law the ld CIT(A) has erred in deleting the addition made on account of delayed payment in ESI and PF account inspite of the fact that the assessee failed to deposit the same before the prescribed due dates of relevant Acts/Rules in terms of section 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act, 1961."
2. The first ground of revenue's appeal is against deleting the addition made by the Assessing Officer by applying the NP rate @ 11% by applying the comparable case of M/s Choudhary & Brothers. The ld Assessing Officer observed that the assessee is a civil contractor. The firm has filed return on 25/9/2010 declaring total income of Rs. 43,33,460/-. The case was scrutinized U/s 143(3) of the Income Tax Act, 1961 (in short the Act). The ld Assessing Officer gave reasonable opportunity of being heard on the basis of GP disclosed by the assessee as well as comparable case of M/s Choudhary & Brothers Vs. Addl.CIT in ITA No. 1177/JP/2010. The Assessing Officer also rejected the books U/s 145(3) of the Act on the basis that no proper bill vouchers have been maintained. Some of the payments were made in cash, which are not verifiable. No books of account for each of the contract had been maintained. Day to day stock register and quantity register has not 3 ITA 794/JP/2014_ DCIT Vs. M/s KBS Enterprises been maintained by the assessee. The assessee also replied before the Assessing Officer. After considering the assessee's reply, he held that the assessee's income cannot be deducted on the basis of bill vouchers/books of account maintained by it, therefore, he applied provisions of Section 145(3) of the Act by relying on the decision in the case of S.N. Namasivayam Chettiar Vs. CIT 38 ITR 579 and Ved Prakash Vs. CIT 191 CTR 168/210 ITR 486. He also relied on the decision of Hon'ble Supreme Court in the case of CIT Vs. British India Paints Ltd. 188 ITR 44. After considering the M/s Choudhary & Brothers case comparable, the ld Assessing Officer applied 10% net profit rate on total contract receipts subject to deduction on account of financial charges, depreciation, interest and remuneration to the partner but the interest income on FDR of Rs. 2,43,774/- was assessed separately.
3. Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had allowed the assessee's appeal by observing as under:-
"2.3.2 With respect to estimation of net profit, the Assessing Officer has applied a net profit rate of 10% of gross contract receipts before deduction of financial charges, depreciation and interest and remuneration to partners by relying upon the judgement in the case of Choudhary
4 ITA 794/JP/2014_ DCIT Vs. M/s KBS Enterprises & Brothers vs. Addl. CIT, wherein the ITAT, Jaipur (ITA No. 1177/JP/2010) has applied N.P. rate of 11.5% in the case of the above civil contractor.
2.3.3. The appellant has distinguished the facts of its case with the facts of the case of Choudhary & Brothers primarily on the basis of nature of business, volume of business and other parameters. In this case, the books of accounts have been correctly rejected by the Assessing Officer and the net profit rate of the appellant is less than the preceding two years. Also, in A.Y. 2009-10, the counsel of the appellant has himself accepted a net profit rate of 8% of the gross receipts prior to deduction of financial charges, depreciation and interest and remuneration to partners. The reasons given by the appellant for decrease in the net profit rate as compared to the preceding year are general in nature viz due to increase in turnover, execution of work allotted in preceding year etc. Such conditions of increase in turnover and completion of work of preceding years was also existent in A.Y. 2009-10. Keeping in view, the above discussion, the defects in the books of accounts and the past history of the appellant, the net profit is estimated at 8% of the gross receipts prior to deduction of financial charges, depreciation and interest and remuneration to partners, as in A.Y. 2009-10. This will result in sustaining an addition of Rs. 12,38,043/-. The balance addition is 5 ITA 794/JP/2014_ DCIT Vs. M/s KBS Enterprises deleted. Ground Nos. 2, 3 and 6 are partly allowed and Ground Nos. 4 & 5 are allowed."
4. Now the revenue is in appeal before us. The Ld. DR supported the order of the ld. Assessing Officer and argued that the ld CIT(A) has confirmed the rejection of books U/s 145(3) of the Act but comparable case cited by the Assessing Officer has not been considered in confirming the partly addition in case of assessee. Therefore, he requested to confirm the order of the Assessing Officer.
5. No one appeared on behalf of the assessee, therefore, whatever evidence and argument submitted before the ld CIT(A) has been considered to decide the appeal.
6. We have heard the rival contentions of both the parties and perused the material available on the record. The rejection of books of account had been confirmed by the ld CIT(A) is justified and the NP rate applied is reasonable @ 8% against the application of the NP rate @ 10% by the ld Assessing Officer. The past history also considered by the ld CIT(A) i.e. in A.Y. 2008-09, the assessee had shown NP rate @ 6.87% and in A.Y. 2009-10, it has been shown net profit @ 7.24% where also the Assessing Officer applied NP rate @ 8%. The assessee 6 ITA 794/JP/2014_ DCIT Vs. M/s KBS Enterprises has shown NP rate @ 6.73% during the year under consideration. He has justified the reasons for decline of net profit rate compared to preceding year but it is undisputed fact that part payments were made in cash and the raw material purchase for complete the construction work either taken from the local area and labourers also paid in cash which required some disallowances as whatever expenses claimed by the assessee are not subject to verification. Therefore, we uphold the order of the ld CIT(A) and 8% net profit rate applied by him is reasonable. Thus, we dismiss the revenue's appeal on this ground.
7. The second ground of the revenue's appeal is against allowing the delayed payment on account of ESI and PF. The ld Assessing Officer had tabulated the payments made towards employees contribution account on page NO. 8 of the assessment order. He disallowed these payments in terms of provisions of Section 36(1)(va) read with Section 2(24)(x) of the Act. Accordingly, he disallowed Rs. 19,080/- on account of alleged payments made. The ld CIT(A) has allowed the appeal on the ground that the assessee had made payments for all the outstanding of ESI and PF on due date of filing of the return U/s 139(1) of the Act. Various rulings are in favour of the assessee that if the assessee is paid these payments before due date of return, is allowable deduction. We 7 ITA 794/JP/2014_ DCIT Vs. M/s KBS Enterprises also concur with the findings of the ld CIT(A) that Hon'ble Jurisdictional High Court in the case of CIT Vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (2014) 366 ITR 163 (Raj) has held that if the payments made before date of filing of return are allowable. By respectfully following the Hon'ble Jurisdictional High Court decision in various cases, we also uphold the order of the ld CIT(A). Accordingly, this ground of the revenue's appeal is also dismissed.
8. In the result, the revenue's appeal is dismissed. Order pronounced in the open court on 29/02/2016.
Sd/- Sd/-
¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½
(R.P.Tolani) (T.R. Meena)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 29th February, 2016
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The DCIT, Circle-6, Jaipur
2. izR;FkhZ@ The Respondent- M/s K.B.S. Enterprises, 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. 794/JP/2014) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar