IN INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH G NEW DELHI BEFORE : SHRI I.C. SUDHIR, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA No. 5711/Del./2013 Asstt. Year : 2010-11 Sohan Lal Aggarwal, vs. Income-tax Officer, A-1/148, Lawrence Road, Ward 38(3), New Delhi. New Delhi. (PAN : AACPL 1555H) (Appellant) (Respondent) Appellant by : Sh. Rajesh Mahna, Advocate Respondent by : Sh. B. Ramanjaneyula, Sr. DR Date of hearing : 16.08.2016 Date of pronouncement : 28.09.2016 ORDER Per L.P. Sahu, Accountant Member: This is appeal filed by assessee against order of ld. CIT(A)- XXVIII, New Delh dated 08.08.2013 for assessment year 2010-11 on following grounds : 1. That Learned CIT(A) has erred in upholding disallowance of expenses amounting to Rs.6,30,200/- under section 40(a)(ia) without appreciating correct facts and law of Income Tax Act, 1961. 2. That Learned CIT(A) has failed in appreciating that in spite of fact that bills, vouchers were produced before AO and CIT(A) have disallowed expenses of Rs.6,30,200/- u/s. 40(a)(ia) of IT Act keeping view facts no disallowance can be made. 2 ITA No.5711/Del./2013 3. That Learned CIT(A) has erred in law and on facts in rejecting books of account of assessee under section 145. action being arbitrary based on conjectures and surmises as there were no grounds. 4. That learned CIT(A) has wrongly computed profit at 4% of turnover while rejecting book results of assessee. This has no relevance with past history or reasons of rejection of books of accounts. 5. That learned CIT(A) has further failed to follow principles of natural justice while deciding appeal. As also failed to uphold addition as well as rejection of books of accounts. 2. brief facts of case are that assessee filed its return of income on 25.09.2010 declaring income of Rs.8,99,500/-. return was processed u/s. 143(1) and selected for scrutiny. Notice u/s. 143(2) was issued on 24.08.2011 and questionnaires were issued time to time. Assessing Officer noted that assessee is civil contractor and he has shown turnover of Rs.5.72 crores declaring net profit of Rs.11,40,215/- which gives net profit ratio at 2%. Assessing Officer issued notice and required details as per notice. case was fixed on 30.08.2012. In assessment proceedings, on 21.08.2012 assessee was asked to produce books of account and furnish bills and vouchers in respect of expenses debited to profit and loss account. assessee did not comply with requirements on given date and again opportunity was given to assessee on dated 11.10.2012. AR of assessee attended on 04.10.2012, but he did not produce required 3 ITA No.5711/Del./2013 details. ld. Assessing Officer issued show cause notice on 12.10.2012 for rejection of books of account and time was granted upto 19.10.2012. However, no compliance was made by assessee upto 19.10.2012. Therefore, Assessing Officer rejected assessee s books of account u/s. 145 of IT Act on following grounds : a) assessee has not been able to produce bills/vouchers in support of expenses debited to P & L Account and despite being directed to furnish names and addresses of concerns from whom it had made purchases exceeding Rs.1 lakh during year under consideration for verification of such expenses, no details were filed for well over period of over three months, it is held that book results of assessee remain unverifiable. b) assessee has been showing very low net profit of 2% of gross receipts and upon being put to test of verification of such expenses, there has been no reply from assessee, particularly so when complete names and addresses of persons from whom purchases were declared were specifically sought as detailed above. c) assessee is also not reported to have been maintaining day to day stock record as certified by auditor in para 9(b) of Audit Report in Form 3 CD. Since assessee has refrained from furnishing verifiable details of suppliers and has also not produced purchase bills, quantitative tally of material consumed can also not be established. d) Judicial opinion on issue of rejection of book results u/s. 145 of IT Act is consistently to effect that in absence of vouchers and quantitative tally of stock considered with other underlying circumstances, profit can legitimately be estimated by Assessing Officer, as held by Hon ble Supreme Court as well as various High Courts of land in following citations: i) S.N. Namasiwayam Chettiar v CIT (SC) 38 ITR 579 (ii) Awadesh Pratap Singh Abdul Rehman & Bros v CIT (All.) 210 ITR 406 (iii). Dhondiram Dalichand vs. CIT (Bom) 81 ITR 609 (iv). Punjab Trading Co. Ltd vs. CIT (Pun.) 53 ITR 335 4 ITA No.5711/Del./2013 (v). Bhai Sunder Das Sardar Singh (P) Ltd. vs. CIT(Del.) 84 ITR 106 In instant case, assessee has neither produced bills/vouchers, nor given addresses of its suppliers thereby preventing independent verification. It does not maintain any quantitative tally of its stock or stock records and its profit rate is also lower than that declared by similar placed contractors. In view of these defects, unsubstantiated book results of assessee cannot be accepted as declared by him. 3. Assessing Officer applied 4% net profit and accordingly calculated profit of Rs.22,88,428/-. 4. On perusal of profit and loss account, Assessing Officer noted that sum of Rs.2,12,000/- has been debited towards mixer rent and another Rs.4,18,200/- has been debited towards hot mix plant rent. On these two payments, no TDS was deducted at time of making payment to payee. Therefore, AO disallowed these payments u/s. 40(a)(ia) of Act. Aggrieved by order of AO, assessee filed appeal before ld. CIT(A) and assessee also filed some additional evidences before ld. CIT(A), but he did not file any application u/r 46A. After considering matter, ld. CIT(A) upheld order of Assessing Officer. Aggrieved by order of ld. CIT(A), assessee is in appeal before Tribunal. 5 ITA No.5711/Del./2013 5. ld. AR of assessee reiterated submissions made before ld. CIT(A) and ld. DR relied on orders of authorities below. 6. After hearing parties and perusing entire materials on record, we find that assessee did not file details as required by Assessing Officer by various notices and questionnaires to verify book version of assessee. assessing officer gave sufficient opportunities to assessee. However, assessee submitted medical certificate before ld. CIT(A). grounds of rejection of accounts also do not stand rebutted on part of assessee. Therefore, for want of requisite details, bills and vouchers, book version of assessee was not open for verification. In presence of these facts, AO had no alternative except to reject books of account of assessee. In our opinion, rejection of books of account made by AO deserves to be upheld. 7. We also find that AO has considered profit rate of 4% as appropriate keeping in view similarly placed other contractors, which in view of non-production of bills and vouchers before AO appears to be justified. It is notable that Assessee had filed bills and vouchers before ld. CIT(A) as additional evidence without filing any application u/r. 46A, but 6 ITA No.5711/Del./2013 those bills and vouchers pertained only to plants rent. medical certificate was also filed. However, no bills and vouchers with respect to other business expenses were produced even before ld. CIT(A) or AO. In such state of affairs, net profit rate applied and affirmed by ld. Authorities below at rate of 4% is quite justified. It is, however, worthwhile to note that once authorities below have applied net profit rate of 4% on gross receipts, in our opinion, this will take care of all expenditures incurred by assessee. Therefore, no separate disallowance of expenditure is required u/s. 40(a)(ia) of IT Act. We, therefore, delete addition made u/s. 40(a)(ia) of Act. 8. In result, appeal of assessee is partly allowed. Order pronounced in open court on 28.09.2016. Sd/- Sd/- (I.C. SUDHIR) (L.P. SAHU) Judicial Member Accountant Member Dated : 28.09.2016 *aks/- Copy of order forwarded to: (1) appellant (2) respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant. Registrar Income Tax Appellate Tribunal Delhi Benches, New Delhi Sohan Lal Aggarwal v. Income-tax Officer, Ward 38(3), New Delhi