2016 (5) TMI 1178 - AT - Income Tax

Appeal partially allowed: income estimated at 8%, verification of creditors required, TDS credits to be verified.

The Tribunal partially allowed the appeal, ruling in favor of the appellant on the issues of estimating income from contract works at 8% instead of 10%, ... Income from works contract and machine hiring charges - AO estimated the net profit at 10 per cent. of gross contract receipts on the ground of unverifiable nature of account, from which, he has allowed salary and interest to partners - Held that:- It is the case of the assessee that the authorities below have estimated the income from contract works at 10 per cent. as against 8 per cent. before allowing bank interest and depreciation, which is arbitrary and excessive. We observe that the order of the learned Commissioner of Income-tax (Appeals) does not put forth any reasons and views specifically for which he has confirmed the order of the Assessing Officer on this issue and it is much more general in nature. The assessee has itself computed net profit at 6.30 per cent. of gross contract receipts. In our considered view, taking into account the net profit generally applicable in the case of works contract, the net profit at 8 per cent. will be reasonable. Therefore, we set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue and direct to estimate the net profit at 8 per cent. as against 10 per cent. adopted by the authorities below. Addition under section 68 made on account of Shaym Trading Co. and Sahoo Enterprises - Held that:- We observe that although the assessee is pleading that sundry creditors are genuine, but it is on record that the sundry creditors have denied any transactions with the assessee during the relevant year. In view of this, we set aside the order of the learned Commissioner of Income-tax (Appeals) and restore the issue to the file of the Assessing Officer to verify whether the said creditors are genuine or not and if it is found to be genuine, then relief may be allowed to the assessee Credit of TDS amount and the levy of interest under section 234B and section 234C - Held that:- Cuttack Bench in the case of Biraja Construction v. Asst. CIT [2013 (12) TMI 295 - ITAT CUTTACK ] wherein the Tribunal has held that it is necessary to direct the Assessing Officer to verify the TDS certificate by the assessee or partners in the return for the purpose of claiming credit for TDS, when the Assessing Officer has accepted the income was to be given credit to the assessee being the firm returning the income for claiming the advance tax paid but deducted at source. The Assessing Officer in that order is directed to give credit to the assessee in accordance with the provisions of the Income-tax Act, 1961. Respectfully following the same, we set aside the order of the learned Commissioner of Income-tax (Appeals) and restore the matter to the file of the Assessing Officer to verify whether the income is taken in the hands of the firm and if so, he is directed to give credit to the TDS amount to the assessee in accordance with law. The levy of interest under section 234B and section 234C is consequential Issues:1. Estimation of income from contract works2. Addition under section 68 for Shaym Trading Co. and Sahoo Enterprises3. Credit of TDS amount and levy of interest under sections 234B and 234CEstimation of income from contract works:The appellant challenged the estimation of income from contract works at 10% instead of 8% by the Commissioner of Income-tax (Appeals). The Assessing Officer estimated the net profit at 10% of gross contract receipts due to unverifiable accounts. The appellant argued that 8% would be more reasonable. The Tribunal agreed, setting aside the Commissioner's order and directing to estimate the net profit at 8%.Addition under section 68 for Shaym Trading Co. and Sahoo Enterprises:The appellant contested the addition of Rs. 9,50,100 under section 68 for Shaym Trading Co. and Sahoo Enterprises, claiming these were genuine transactions. However, the creditors denied any transactions with the appellant. The Tribunal set aside the Commissioner's order, instructing the Assessing Officer to verify the genuineness of the creditors before making a decision.Credit of TDS amount and levy of interest under sections 234B and 234C:Regarding the credit of TDS amount of Rs. 9,10,269 and the levy of interest under sections 234B and 234C, the Tribunal referred to a previous decision directing the Assessing Officer to verify the TDS certificate and give credit accordingly. The Tribunal set aside the Commissioner's order, asking the Assessing Officer to verify the income status and provide credit for TDS amount in line with the law. The levy of interest under sections 234B and 234C was deemed consequential.In conclusion, the appeal was partially allowed by the Tribunal, addressing the issues raised by the appellant in relation to the estimation of income from contract works, addition under section 68, and the credit of TDS amount along with the levy of interest under sections 234B and 234C.