1 RESERVED Court No. - 35 Case :- INCOME TAX APPEAL No. - 281 of 2017 Appellant :- Jugender Singh Yadav Respondent :- Principal Commissioner Of Income Tax Agra And Another Counsel for Appellant :- Suyash Agarwal Counsel for Respondent :- S.S.C.,Krishna Agarawal Hon'ble Bharati Sapru,J. Hon'ble Piyush Agrawal,J. (Delivered by Hon'ble Piyush Agrawal, J.) We have heard Shri Suyash Agarwal, learned counsel for assessee appellant and Shri Krishna Agarwal, learned standing counsel for respondents Department and perused materials brought on record. present appeal has been filed against judgement & order dated 28.04.2017 passed by Income Tax Appellate Tribunal, Agra Bench, Agra for Assessment Year 2011-12. said appeal was admitted on 21.09.2017 by this Court on following questions of law formulated in memo of appeal:- 2 (i) Whether Appellate Tribunal was legally justified in applying net profit rate at 8% u/s 44AD when gross turnover of Appellant exceeded 1 crore and books of accounts were maintained as per section 44AB of IT Act? (ii) Whether Appellate Tribunal was justified in framing assessment by applying net profit rate at 8% on basis of statement of assessee contrary to standard procedure of assessments provided under section 143 and 144 of IT Act? (iii) Whether Appellate Tribunal is legally justified in treating interest income from FDR and rental income from JCB as income other than business income for assessment year in question? facts of case, in brief, are that appellant is civil contractor engaged in execution of works contract with Agra Development Authority, Agra. present appeal relates to Assessment Year 2011-12. assessee filed its returns showing net profit of Rs. 42,62,972/-, which gives net profit @ 5.09% on gross receipt of Rs. 8,37,12,896/-. appellant has earned interest on FDR and JCB machines amounting to Rs. 3 3,46,883/-, total income being Rs. 46,09,455/-. appellant filed its return on 10.09.2012 showing total income of Rs. 44,95,900/-. return was processed under section 143 (1) of Income Tax Act and case was selected for scrutiny. Consequently, on 13.09.2012, notice under section 143(2) of Income Tax Act was issued, which was properly served upon him on 14.09.2012. notice dated 14.06.2013 under section 142(1) of Income Tax Act, along with questionnaire, was issued. In response to said notice, reply was submitted along with required documents were also attached. Thereafter, on 17.01.2014, another notice was issued directing appellant to produce complete books of account. On verifying books of account, bill, vouchers, etc., it was found that most of expenses were paid in cash and vouchers were self-made, which was not verifiable. assessee admitted, during course of 4 assessment proceedings, that maintenance of stock register and quantitative tally is not possible. Assessing Authority, while framing assessment order dated 22.01.2014, has enhanced net profit @ 8% and has observed as under:_ During period assessee's contractual gross receipt is Rs. 8,37,12,897/-. Net profit taken @ 8% on gross receipt comes to Rs. 66,97,032/-, assessee has also shown interest from FDRs Rs. 1,93,893/- & from rent of JCB Rs. 1,52,590/-, total net profit comes to Rs. 70,43,515/- in which assessee has already shown net profit in his P&L Account of Rs. 46,09,455/-. Therefore, difference of Rs. 24,34,060/- (Rs. 70,43,515 46,09,455/-) disallowed out of expenses and added back in his total income. This disallowance also includes Rs. 4,88,222/- u/s 40(a)(ia) on non deduction of tax payment of M/s Agra Development Authority as interest and any other possible disallowance u/s 40(a)(ia) or 40A(3). Assessee is agree for same vide order sheet entry dated 22.01.2014. Penalty notice u/s 271(1)(c) of IT Act is being issued separately for concealment & furnishing of inaccurate particulars in income. 5 Feeling aggrieved by aforesaid assessment order, appellant preferred appeal before Commissioner of Income Tax (Appeals), Agra, who vide order dated 31.07.2015, dismissed appeal and confirmed assessment order. Commissioner of Income Tax (Appeals), in its order, has observed as under:- Here it is matter of legal principles that once assessing officer detects any defects in books of accounts, any conditional offer by assessee for offering any income as not supported by bills and vouchers as also request that he is accepting such income to avoid litigation and to purchase peace of mind has no legal validity. ... Since in this case, assessing officer while verifying books of accounts of assessee has detected that assessee is not maintaining stock register of raw materials, making various payments of labour wages and some small material purchase in cash and instead of maintaining proper bills and vouchers towards various expense is only maintaining some self-made vouchers which were not verifiable, therefore, rejection of books of 6 accounts by assessing officer is justified. Still feeling aggrieved by order of Commissioner of Income Tax (Appeals), Agra, assessee appellant preferred appeal before Tribunal, who by impugned order, has dismissed appeal of appellant observing as follows:- 14. We find order of ld. CIT (A) is reasonable and justified in respect of estimation of income at NP rate admitted by assessee himself, in course of assessment proceedings. We also find that ld. CIT (A) has not applied provisions of section of section 44AD of Act, rather he had justified assessee's admission of 8% NP rate before A.O. With support of judicial pronouncements, wherein net profit rate ranges from 8% to 13% in cases of civil contractors. Thus, ld. CIT (A) considered facts and circumstances of case that assessee has admitted NP of 8% in compliance to show cause issued by A.O. during course of assessment proceedings and that subsequently, retraction in appeal is irrelevant on account of conditional admission, because penalty proceedings under section 271(1)(c) of Act, 7 does not change basic fact that assessee was not maintaining stock register and expenditure vouchers of assessee were not verifiable. However, assessee's admission of estimated income at NP rate of 8% which has been treated as if detected by A.O. in compliance to show cause notice, during course of assessment proceedings has not been supported with corroborative documentary evidences to prove to contrary, that it was not offer of assessee to show his bonafides that he is offering such income to avoid litigation, or to buy peace of mind. Thus, fact as regards to conditional admission of NP rate of 8% by assessee either of his own or in compliance to show cause notice during course of assessment proceedings, has not been established. 15. In view of above, it is proved that assessee has made admission of 8% net profit rate before A.O. vide order sheet entry dated 22.01.2014. ld. CIT (A) action in confirming net profit rate at 8% as admitted by assessee before A.O. vide order sheet entry dated 22.01.2014 as above, is justified, with support of judicial precedent relevant and law 8 applicable in case of assessee. We also notice that allegation raised by assessee, in respect of lower authorities, are baseless and without documentary evidence as regards estimation of his income, in any arbitrary or capricious manner. Feeling aggrieved by aforesaid order of Tribunal, assessee has preferred present appeal. It has been argued by counsel for appellant that at time of assessment proceedings, assessee has given consent for acceptance of 8% of gross net profit only with condition that no penal action shall be taken against him and therefore, when penalty proceedings were initiated, he retracted with his consent. He further submits that appellant has produced all books of account before authorities below, but same have wrongly been rejected. It is further submitted that since nature of business of assessee is of works contractor and in many cases, payment has to be made in cash, for which relevant bills cannot be produced, therefore, it is not 9 case for rejection of books of account on that count. It is further submitted that net profit has to be commensurate with previous years, in which net profit of 6.7% has been accepted and therefore, in disputed year, net profit of 8% is not justified. Learned counsel for Department has supported orders passed by lower authorities and has argued that all authorities below have decided issue against appellant and it is concluded by findings of fact and no substantial question of law arises in present appeal. From perusal of record, it reveals that books of account of assessee has been rejected and authorities have rightly made assessment enhancing net profit @ 8%. Once, on finding of fact, it has been found that substantial amount has been spent by making payment in cash and that too, with vouchers having been self-made and not verifiable, admittedly, appellant has not maintained stock 10 register and quantitative tally is not being made. Further, assessee has also not shown interest derived from FDR to tune of Rs. 1,93,893/- as well as lease rent of Rs. 1,52,590/- so received from leasing out of JCB machines. Once it has been found that assessee has not voluntarily maintained its books of account, as required under Act, books of account have rightly been rejected and net profit, which has been fixed at 8%, is quite reasonable. Moreover, all authorities below have rejected contention of appellant. At this stage, no substantial question of law arises in present appeal. appeal is, accordingly, dismissed. substantial questions of law are answered accordingly against Assessee and in favour of Revenue. Order Date :-19.08.2019 Amit Mishra Jugender Singh Yadav v. Principal Commissioner of Income-tax Agra and Another