TaxTMI 
TaxTMI 
2012 (10) TMI 99
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....d the second one on merit estimating the Gross Profit @ 10.70% by the A.O. and confirmed by the CITA @ 8%. 3. The Revenue has raised ground challenging reduction of G.P. rate from 10.7%d to 8% by the CIT(A). 4. The brief facts of the case are that the assessee company is a builder and undertakes construction activities. The assessee has also sold flats of its own and the revenue is recognised as per the payment received. The assessee has worked in the capacity of contractor for Anamika Sahakari Awas Samiti for the project Mangalam Estate. The gross receipt in the capacity of contactor was Rs.5,04,79,328/- and the payment received on sold out flat Rs.4,02,006/-. The total amount of work done during he year was Rs.5,08,81,928/-. The A.O....
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.... be related to period only since the assessee followed mercantile system of accounting. The A.O. also noted that the assessee did not maintain stock register and consumption register. Some of the payments were also made in cash. The A.O. has noted some instances where cash payments more than Rs.20,000/- was paid. Transport bills were missing in most of the purchases. Purchases of raw-materials were from unorganized sector and important to note that the payment has been made in cash which is not open for verification. It has also been noted by the A.O. that the assessee has shown lesser N.P. rate before Director remuneration in comparison to earlier year i.e. 4.82% whereas this rate was shown at 8.66% in A.Y. 2005-06 and 9.6% in A.Y. 2004-05....
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....005-06 % of Cont. & Builder Activity INCOMES Work done -contractorship 3,041,906.00 24.23 22,606,650.00 71.51 50,479,328.00 99.21 Work done -Building Activity 9,511,222.00 75.77 9,007,895.00 28.49 402,600.00 0.79 Sub-total 12,553,128.00 100.00 31,614,545.00 100.00 50,881,928.00 100.00 Gross Profit 3,318,393.75 6,217,393.00 7,444,384.00 G.P. Rate 26.05 19.58 14.63 N.P. Rate before Dir. Rem. & Dep. 11.95 10.70 6.75 N.P. Rate after Dir. Rem. 9.06 8.66 4.82 &n....
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.... restricted the rate of 8% on the contract receipts subject to allowability of depreciation and remuneration paid to the partners/directors. 9. The Ld. Authorised Representative reiterated the submissions which were made before the CIT(A) and submitted that merely on account of non-maintenance of stock register, books of account cannot be rejected. Ld. Authorised Representative in support of his contention relied upon the order of I.T.A.T., Agra Bench in the case of Dass Friends Builders Pvt. Ltd. Vs. DCIT, 88 TTJ (Agra) 651. Ld. Authorised Representative has also relied upon the judgments of Hon'ble Rajasthan High Court in the case of CIT vs. Gotan Lime Khanij Udhyog, 256 ITR 243 (Raj.), judgement of Hon'ble Delhi High Court in the c....
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....onsideration, during the assessment proceedings, the A.O. had noted various mistakes in the books of account maintained by the assessee. The assessee maintained combined set of books of account for both the activities i.e. construction as well as builder. In both the activities different method of accounting has been followed. In case of construction the assessee has followed percentage completion method while in respect of builder activities the assessee has followed cash method. The A.O. noticed that the assessee has failed to furnish basis of valuation of work in progress particularly under the circumstances where the assessee followed cash method in respect of project/builder activities. Raw material in the form of gittis etc. are suppo....
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....ssessee himself in A.Y. 2005-06. The CIT(A) noticed that the A.O. has erred in applying trading result of the A.Y. 2005- 06 to trading result for A.Y. 2006-07 without considering the facts and submissions that the results were not comparable in both the years. However, the CIT(A) followed the judgement of Hon'ble Madras High Court in the case of CIT vs. A. Vajjiram & Bros. in respect of applying the profit rate of 8%. The 8% rate applied by the CIT(A) is supported by the statutory rate provided u/s.44AD of the Act. There are good reasons for estimating the profit by this 8% rate of profit even in case of big contractors having turnover more than Rs.40 lacs. The assessee as well as the Revenue both have failed to point out how this rate of 8....