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IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH :
JODHPUR
BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND
SHRI N.K. SAINI, ACCOUNTANT MEMBER.
ITA NO. 530/Jodh/2010
(Assessment Year 2005-06)
M/s. Deep Jyoti Co. (Unit-2) Vs. JCIT,
4-E-34, Jawahar Nagar, Sriganganagar.
Sriganganagar (Raj.)-335001.
PAN No. AADFD 0294 B
(Appellant) (Respondent)
Assessee by : Sh. Suresh Ojha, Advocate.
Department by : Sh. G.R. Kokani, (DR).
Date of hearing : 19/02/2013.
Date of pronouncement : 04/03/2013.
PER HARI OM MARATHA, J.M. :
This appeal of the assessee for A.Y. 2005-06 is directed against
the order of ld. CIT(A) dated 25.08.2010. Following grounds have been
raised in this appeal :-
“1. That ld. Lower Authorities below have grossly erred
in sustaining protective addition of Rs. 11,00,000.00 regarding
capital introduced by partner Shri Vishnu Kumar Agarwal,
without appreciating the facts, evidence and Judicial
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Decisions, which is not justified, not proper and against
cannon of law.
2. That ld. Lower Authorities below have grossly erred in
estimating income from contractorship business by
application of Profit rate of 9% against the returned profit
rate of 8.02%, which is not justified, not proper and excessive
also.”
2. Briefly stated the facts of the case are that the assessee firm is
doing the work of a Civil Contractor. For A.Y. 2005-06 it filed its return
of income (ROI) on 27.10.2005 declaring total income of Rs. 3,04,870/.
The assessment was framed on 27.12.2007 u/s 143(3) at a total income
of Rs. 17,65,025/- by making various addition. In first appeal also all
additions have been upheld. The assessee is further aggrieved.
3. We have heard rival submissions and carefully circumspected the
entire record. The facts apropos ground No. (1) are that Shri Vishnu
Kumar Agarwal who is the partner in this firm had deposited a sum of
Rs. 11,00,000/- in cash towards his capital in the capital account of
partners. This partner had withdrawn some amount from the firm in
the F.Y. 2003-04 and introduced the above amount out of the
withdrawals in F.Y. 2006-07 in his capital account of the firm. The A.O.
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has doubted the source of this deposit and by rejecting this claim has
added the entire amount of Rs. 11 lakhs in the hands of the firm. As
per A.O. the amounts of Rs. 7 lakhs and 4 lakhs were withdrawn by Shri
Agarwal on 06.06.2003 and 13.06.2003, and redeposited them on
05.04.2004 and 18.04.2004, respectively, may not be the same
amounts. The case of the assessee is that the capital introduced by the
partner of the firm cannot be added in the hands of the firm. In our
considered opinion both authorities below have proceeded on the
wrong premise by treading these amounts as cash credits. In fact the
partner has introduced this capital of Rs. 11 lakhs in his capital
account and even if he could not or would not explain the source
thereof, this amount cannot be considered in the hands of the firm. In
any case this amount can be considered and discussed in the hands of
the partner as individual. Accordingly, we order to delete this addition
of Rs. 11 lakhs from the hands of the assessee-firm and allow ground
No. (1) of this appeal.
4. The facts apropos ground No. (2) of this appeal are that the
assessee-firm has disclosed gross-profit 08.02% on total turn over of Rs.
1,28,31,382/-. The A.O. has rejected the books of accounts and by
adopting G.P. rate of 09% has made impugned addition. This has been
confirmed by ld. CIT(A) also.
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5. Both parties have reiterated their earlier stand. The assessee ahs
declared Net Profit rate of 6.93% as against 5.93% declared in the
immediately preceding year. In our considered opinion non-
maintenance of the stock register, labour register for work in
progress, etc. are not the specific defect sin the books of the assessee.
Moreover, keeping in view totality of facts and the circumstances of
this issue we are no approving the action of ld. CIT(A). The assessee
has declared 08.02% of G.P. rate and adoption of 09% rate of G.P. by
the A.O. is not supported by any logic. This is simply ad hoc and such
ad hoc baseless additions cannot be sustained in the eyes of the law.
Accordingly, we order to delete this addition so made and allow ground
No. (2) of assessee’s appeal.
6. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 4th
March, 2013.
Sd/- Sd/-
[N.K. Saini] [Hari Om Maratha]
Accountant Member Judicial Member
Dated : 4th
March, 2013
VL/
Copy to :
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1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR
ASSISTANT REGISTRAR