J.K. Ranka, J. - (1.) THE instant appeal under section 260A of the Income -tax Act, 1961 (for short "the Act"), is directed against the order of the Income -tax Appellate Tribunal, Jaipur Bench, Jaipur (for short "the ITAT"), dated January 30, 2014, passed in I.T.A. No. 583/JP/2012 relating to the assessment year 2009 -10. Brief fats which have been noticed from the impugned order and other material on record are that the respondent -assessee being a partnership firm is engaged in the business of civil contractor and has furnished his income -tax return for the above assessment year under appeal along with the audit report and other information. The respondent -assessee declared a total contract work at Rs. 12,32,57,523 declaring a net profit rate of 5.38 per cent subject to interest and remuneration to the partners. On a perusal of the order, it is noticed that the net profit rate in the immediate preceding assessment year, i.e., the assessment year 2008 -09 was 5.02 per cent.
(2.) DURING the course of the assessment proceedings, the respondent -assessee was directed to provide material to justify the expenses claimed in the profit and loss account vis -a -vis receipts and a number of queries were raised. The assessee appears to have replied to the various queries raised by the Assessing Officer and it was admitted that the nature of work of the assessee is fully unorganised and that the work is carried out at various sites, where he could not maintain a proper system of accounting. It was also admitted by the assessee that the accounting work was conducted by the labour supervisor, who was also promoted from amongst labourers and did not have a knowledge of accounting and was unable to maintain coordination between assessee and suppliers and those sites. It was further submitted that the turnover and the net profit rate is better vis -a -vis the last five preceding years and, therefore, the book results should be accepted. However, the Assessing Officer was dissatisfied with the explanation offered by the assessee and not only invoked the provisions of section 145 of the Act and rejected the book results but he further disallowed the expenses to the tune of Rs. 1,17,75,202 out of the major heads of the expenses, namely, out of purchases of Rs. 7,50,39,180 disallowed at 20 per cent, out of labour charges of Rs. 3,72,48,425 disallowed 10 per cent, out of salary to the tune of Rs. 9,48,000 disallowed 20 per cent, out of vehicle expenses of Rs. 69,850 disallowed 20 per cent, out of vehicle charges of Rs. 69,850 disallowed 20 per cent, out of water charges of Rs. 49,252 disallowed 20 per cent, out of welfare expenses of Rs. 16,245 disallowed 20 per cent, out of vehicle insurance of Rs. 17,190 disallowed 20 per cent, and out of other deduction of Rs. 12,90,245 disallowed Rs. 2,68,219. Thus, the Assessing Officer in effect by disallowing Rs. 1,17,75,202 determined the net profit at 13.7 per cent.
(3.) DISSATISFIED with the addition of Rs. 1,17,75,202 an appeal was preferred before the Commissioner of Income -tax (Appeals) (for short "the CIT(A)), before whom detailed explanation was offered and the Commissioner of Income -tax (Appeals), after considering the facts on record, was of the view that the provisions of section 145(3) have rightly been invoked as various defects have been noticed by the Assessing Officer and the assessee has not been able to give satisfactory explanation with regard to the deficiencies noticed by the Assessing Officer. The Commissioner of Income -tax (Appeals) was also of the view that the results of the assessee are to be compared alone and in view of the past history, where the Tribunal in the case of the assessee itself applied the rate of 5 per cent, therefore, the Commissioner of Income -tax (Appeals), under such circumstances, sustained and ad hoc addition of Rs. 10 lakhs on account of possible leakage of income of profit and the appellant and deleted the balance addition.;