ITAT accepts contractor's gross receipts from Form 26AS, directs 5% profit estimation on total contract receipts

ITAT Hyderabad allowed the assessee's appeal regarding profit estimation on gross contract receipts. The AO had estimated 8% profit, while CIT(A) accepted 5% but directed verification through Form 26AS. ITAT found the assessee's Form 26AS entries genuine, showing the main contractor had filed revised TDS statements correcting misreported turnover. The tribunal held that absent contrary evidence, the assessee's claim of gross contract receipts per Form 26AS should be accepted, directing AO to estimate net profit at 5% on total contract receipts as per Form 26AS for AY 2016-17.

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Issues:
- Discrepancy in assessment of income for A.Y. 2016-17
- Validity of assessment completed under section 144 r.w.s. 147 of the IT Act, 1961
- Consideration of Form 26AS and other relevant documents for estimating profit on gross contract receipts
- Applicability of principles of natural justice in assessment proceedings

Analysis:

1. Discrepancy in assessment of income for A.Y. 2016-17:
The appeal was filed against the order of the CIT (A) relating to the assessment year 2016-17. The case involved a partnership firm engaged in civil contract works that did not file its return of income. The Assessing Officer reopened the assessment under section 147, estimating the total income at Rs. 4,64,07,030 based on gross contract receipts of Rs. 58,00,87,847. The appellant contested this estimation, claiming the actual gross receipts were Rs. 22,31,24,260 as per updated Form 26AS.

2. Validity of assessment completed under section 144 r.w.s. 147 of the IT Act, 1961:
The Assessing Officer completed the assessment under section 144 r.w.s. 147 due to non-filing of the return by the assessee. The appellant argued that the assessment was completed without providing sufficient opportunity and against the principles of natural justice. The Tribunal noted discrepancies in the reported gross contract receipts and directed the Assessing Officer to estimate profit at 5% on the actual turnover of Rs. 22,31,24,260 as per Form 26AS.

3. Consideration of Form 26AS and other relevant documents for estimating profit on gross contract receipts:
The CIT (A) directed the Assessing Officer to estimate profit at 5% on gross contract receipts based on Form 26AS and other relevant documents. The appellant contended that the updated Form 26AS reflected gross receipts of Rs. 22,31,24,260, while the Assessing Officer considered Rs. 58,00,87,847. The Tribunal found the appellant's evidence credible, reversing the CIT (A)'s decision and directing the assessment based on the actual turnover reported in Form 26AS.

4. Applicability of principles of natural justice in assessment proceedings:
The appellant raised concerns regarding the lack of sufficient opportunity provided during the assessment proceedings and the failure to consider relevant documents. The Tribunal emphasized the importance of verifying actual turnover through Form 26AS and other supporting documents to ensure a fair assessment process. The decision to estimate profit at 5% on the accurate turnover upheld the principles of natural justice and fair assessment practices.

In conclusion, the Tribunal allowed the appeal, reversing the CIT (A)'s decision and directing the Assessing Officer to estimate the net profit at 5% on the actual contract receipt reported in Form 26AS for the assessment year 2016-17.

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