TaxTMI 
TaxTMI 
2013 (9) TMI 441
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....e order of the ld. CIT(A) in computing the income from contract business by applying profit rate of 2% as against 3.5% applied by the AO. On the above issue, the AO passed the assessment order u/s. 143(3) on dated 23.12.2011 determining the assessed income at Rs.27,89,490/- as against returned income of Rs.26,690/-. The assessee is a contractor engaged in supplying of grits for construction of road. The AO found that net profit declared by the assessee was very much at lower side showing only 0.036% of the turnover and during the course of examination of the books of account, he has found that entries of purchases in the books of account were not supported with proper bills and vouchers. Hence, the AO rejected the books of account as per provisions of section 145(3) of the IT Act and estimated the taxable profit of the assessee by applying the net profit rate of 3.5% on total turnover of Rs.3,35,85,884/- and computed the income at Rs.25,75,506/- from such contract work. The addition of Rs.25,48,816/- was disputed before the ld. CIT(A). Written submission of the assessee is reproduced in appellate order claiming that in the assessment year under appeal, the grit was supplied to two ....
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....the rejoinder. There is no dispute over the books of account not being maintained by the assessee(appellant) in proper manner supported with proper bills and vouchers and hence, rejection of books of account by the AO as per the provisions of section 145(3) of the Act has not been challenged before me. Therefore, income of the assessee from the contract business needs to be estimated by applying a reasonable rate of profit. The AO has applied a rate of profit of 3.5% relying on an order passed by the ld. CIT-I, Agra u/s.263 but details of nature of contract business of this case has not been given by the AO explaining the nature of contract business of the case relied upon by him and drawing similarity between the case relied upon by him and the case under appeal. In the order passed u/s 263, it is only mentioned that the assessee is in a contract business but nature of contract work has not been explained. As against the case relied upon by the AO, the ld. AR has drawn my attention to the case of M/s. A R. Enterprises which is also found to be engaged in supply of Grit for making of road. In this case, the Hon'ble ITAT, Agra has passed an appeal order for AY. 2004-05 (ITA No. 466/....
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....ssee, the provision of 44AD would not apply because the turnover exceeded Rs. 40,00,000/and hence, the assessment was restored to the AO to compute the income after making suitable estimation and then provide deduction for depreciation out of the estimated profit. However, apart from relying on the decision of Patna High Court in case of Shyam Bihari vs. CIT(supra), the Ld. AR has also relied on the case of M/s. A.R. Enterprises (supra). In the case of M/s. A. R. Enterprises, the rate of profit applied by the Hon'ble ITAT, Agra is taken to be very low at 2% only and therefore, in their wisdom, the Hon'ble members decided not to allow any deduction in form of salary and interest to partners and also deduction for any depreciation. After considering the submission of the Id. AR and taking into account the entire facts of the case in totality, I have to decide whether the above mentioned three case laws are to be applied in case of the appellant as cited by the ld. AR to claim deduction u/s. 40(b) and deduction for depreciation or to apply the decision of Hon'ble ITAT, Agra in case of M/s. A. R. Enterprises as relied upon by the ld. AR in justification for a suitable profit rate to be....
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.... and sales. The ld. CIT(A) also gave similar finding in the appellate order and also noted that rejection of books of account have not been challenged before him. The ld. counsel for the assessee has relied upon the order of ITAT, Agra Bench in the case of M/s. A.R. Enterprises (supra) before the ld. CIT(A), who was also engaged in the supply of grits for making roads. Operative portion of the order of Tribunal in the case of M/s. A.R. Enterprises is reproduced in the findings of ld. CIT(A) above. Counsel for the assessee has also agreed with the ld. CIT(A) to apply the order of the Tribunal in the case of M/s. A.R. Enterprises (supra) in the case of assessee for the purpose of determining income of the assessee. Since the assessee pleaded before the ld. CIT(A) that the facts in the case of assessee are identical to that of M/s. A.R. Enterprises and assessee's counsel agreed before the ld. CIT(A) to apply the decision in that cas3e in the case of assessee for the purpose of determination of income of the assessee, therefore, the ld. CIT(A) was justified in following the said decision of the Tribunal being bound to follow the decision of jurisdictional Tribunal, i.e., ITAT, Agra Ben....
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....gs of the ld. CIT(A) in maintaining part addition on agreed basis. Similarly, when the ld. CIT(A) followed the decision of the Tribunal in identical case and applied reasonable profit rate to compute the income of assessee, no grievance left with the Revenue to challenge the order of the ld. CIT(A). Further considering the history of the assessee and the profit rate declared in the earlier assessment year, we find it reasonable to apply the profit rate of 2% as against 3.5% applied by the AO. Considering the above discussion, we do not find any infirmity in the order of the Ld. CIT(A). The appeal of the assessee as such is dismissed. Ground No. 1 of the departmental appeal is also dismissed. 7. On ground No. 2 in the departmental appeal, the Revenue challenged the deletion of addition of Rs.1,84,730/- made by the AO as bogus liability. The AO on perusal of the balance sheet of the year ending 31.03.2009 found that there are 21 sundry creditors showing the outstanding liabilities of Rs.2,29,45,170/-. Out of these sundry creditors, maximum balances are the old balances which are being reflected in the past balance sheets. The assessee was directed to file copy of ledger account an....