TaxTMI 
TaxTMI 
2014 (1) TMI 1266
X X X X Extracts X X X X
X X X X Extracts X X X X
....Referring to the expenditure claimed for materials, diesels and oil, labour payment, repair and maintenance and mess expenses, etc., she noted that, for some of the expenses out of the same, the assessee could not produce bills and vouchers. She further noted that in a large number of instances, the assessee has maintained only self-made vouchers. Under these circumstances, she noted that the expenses claimed by the assessee are not fully verifiable. She further noted, that the assessee could not furnish the address in respect of certain trade creditors. 4. Referring to the contracts received from MRKR Constructions Pvt. Ltd., HES Infra Pvt. Ltd. and Hindustan Engineers Syndicate, she noted that the same were in the nature of earthwork contracts and the profit margin from such contracts is very high. Further referring to the subcontracts received from Raghu BKMJV, Ramky Infrastructure Ltd. and Satyamurthy JV, she noted that the profit margin from such subcontract work, is usually high. Referring to the subcontract work received from the last two parties, she noted that, those parties have retained only a small percentage of the gross amount and have passed on the balance profit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....method available to the Assessing Officer is to estimate the profit. The profit ratio cannot be a constant factor for each and every year. In other words, profit ratio would fluctuate depending upon various factors such as the place of execution of contract, availability of raw material, labour and assessee's own funds, etc. Therefore, for the purpose of estimating the profit, the lower authorities may take into consideration the profit ratio of the similarly placed traders in the same locality and other factors such as availability of labour, demand in the market, etc., as discussed above. Therefore, the profit ratio of the other assessees in that locality may be one of the factors to be taken into consideration. However, that cannot be the sole criteria for fixing the profit ratio from the contract business. By keeping this factual situation in mind, let us now examine whether the estimation of profit by the CIT(A) at 8% on contract receipt is justified or not. 7. We have carefully gone through the earlier order of this Tribunal in the case of Krishnamohan Constructions (ITA No. 380/H/94 dated 10.3.1999), K.C. Reddy Associates (ITA Nos. 804 & 805/Hyd/93 dated 24.4.96), Sri Sri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome in the present case is taken clue from the provisions of section 44AD of the Act. Earlier this provision is applicable to cases where the contract receipts not exceeded Rs. 40 lakhs. However, by Finance (No. 2) Act, 2009 w.e.f. 1.4.2011 the Legislature removed the restriction of the total contract receipts of Rs. 40 lakhs. By taking clue from this provision u/s. 44AD as is applicable for the assessment year under consideration and the provisions which are applicable w.e.f. 1.4.2011, we find that the deduction available u/ss. 30 to 38 shall be deemed to have been given full effect and no further deduction under these provisions shall be allowed. Depreciation is allowable u/s. 32 of the Act. Therefore, as provided in section 44AD no other/separate deduction shall be allowed. But when we come across the order of the Special Bench of Ahmedabad in the case of Arihant Builders Pvt. Ltd. vs. ACIT (291 ITR (AT) 41) (SB) (Ahd) wherein income is estimated at 8% of the main contract receipts and at 5% on subcontract receipts. Being so, in our opinion, considering the facts of the assessee's case income of the assessee has to be estimated at 8% on main contract and 5% on subcontract receip....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edits are referable to the income from disclosed sources viz., business, whose income has been estimated by the Revenue authorities. In order to delete this addition, the assessee is bound to explain the source of credit, genuineness of the transaction and the capacity of the lender to advance the same. As the assessee failed to explained these criteria, we have no hesitation in confirming the action of the CIT(A). For this purpose, we place reliance on the judgement of jurisdictional High Court in the case of CIT v. Maduri Rajaiahgari Kistaiah (120 ITR 294). Further, we place reliance on the judgement of Hon'ble Supreme Court in the case of CIT v. Devi Prasad Viswanath Prasad (72 ITR 194) wherein held that on rejection of books of account, business income estimated, addition towards unexplained cash credit separately valued. 13. Further, the approach of the various High Courts' is not uniform on the above aspect as would be seen from the following cases. In CIT v. Aggarwal Engg. Co. (Jai.) (2006) 206 CTR (P&H) 648, the Punjab & Haryana High Court held, relying on decision in CIT vs. Banwarilal Banshidhar (1998) 148 CTR (All) 533; (1998) 229 ITR 229 (All), that no separate addit....
X X X X Extracts X X X X
X X X X Extracts X X X X
...... the question whether income represented by an entry in the books of a business is income of that business or of another business would have to be decided on the facts which showed the business to which it belonged. But quite clearly, the answer to that question would not depend on whether the income from the first mentioned business had been computed on the basis of a return filed or of an estimate of the income made by the taxing authorities Therefore, it cannot be said that the taxing authorities were precluded from treating the amounts of the credit entries as income from undisclosed sources simply because the entries appear in the books of a business whose income they had previously computed on a percentage basis." 14. There is no presumption that any cash credit entry found in the business accounts of the assessee is related to his concealed income from the same business [CIT vs. Maduri Rajaiahgari Kistaiah (1979) 120 ITR 294 (AP) where the assessee pleads that the impugned cash credits came out of suppressed profits which are already included in the income estimated from business on rejection of the books, it is for him to prove that it is so [CIT vs. Devi Prasad Vishwa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e or introducing amounts in his account books. But it is quite another thing to say that any part of that fund must necessarily be regarded as the source of unexplained expenditure incurred or of cash credits recorded during a subsequent assessment year. The mere availability of such a fund cannot, in all cases, imply that the assessee has not earned further secret profits during the relevant assessment year. Neither law nor human experience guarantees that an assessee who has been dishonest in one assessment year is bound to be honest in a subsequent assessment year. It is a matter for consideration by the taxing authority in each case whether the unexplained cash deficits and the cash credits can be reasonably attributed to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year. In each case, the true nature of the cash deficit and the cash credit must be ascertained from an overall consideration of the particular facts and circumstances of the case. Evidence may exist to show that reliance cannot be placed completely on the availability of a previously earned undisclosed income. A number of circumstance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is undoubtedly open to him to put forward such a plea while furnishing explanation regarding such cash credits. While the fact of making of intangible additions in the earlier years is undoubtedly a matter to be considered by the Assessing Officer in judging whether the cash credits are satisfactorily explained by the assessee, the burden of proof rests squarely on the shoulders of the assessee to establish the truth and tenability of the explanation furnished by him. In other words, the assessee's explanation must satisfy the Income-tax authorities that the cash credits represent intangible additions made in the earlier years. For weighing the assessee's explanation, the assessee's conduct, his explanation at the initial stage and the shift, if any, in later stages and also the material, if any, linking up the cash credit entries would be relevant factors. The assessee, instead of merely raising an argument, must support his claim by proper explanation, affidavit and material. Thus, there is no general or absolute rule to the effect that whenever additions to profits are made, they must be regarded as funds represented in the books of account as cash credits. The question depend....