TaxTMI 
TaxTMI 
2014 (2) TMI 572
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....stimating the profit at 12.5% of the receipts of Rs. 3,39,20,385. The learned CIT(A) ought to have seen that the appellant correctly admitted the income from the contracts and should have directed the Assessing Officer to accept the book results. 3. The assessee filed a petition for admission of additional ground of appeal wherein the additional grounds are raised, as follows: (1) The learned CIT(A) ought to have seen that the adoption of a net profit rate of 12.5% is not justifiable. (2) The learned CIT(A) is not justified in adopting such percentage on the gross receipts of Rs. 3,39,20,385 without considering the fact that there are recoveries by the contractee on account of material and sales tax aggregating to Rs. 97,60,135 (Rs. 84,63,840 and Rs. 12,96,295). 4. The AR submitted that the appellant filed the above mentioned appeal against the order of the learned CIT(A)-III, Hyderabad in ITA No. 0554/2011-12 dated 16.7.2013. The said appeal was filed before the Hon'ble ITAT on 16.8.2013. The appellant inadvertently omitted to raise the above grounds of appeal at the time of filing the appeal. According to him, all the facts relating to these grounds of appeal are on r....
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....be estimated at 8% of the receipts of main contract works. For this purpose, we place reliance on the order of the Tribunal dated 31st January, 2011 in ITA No. 668/ Hyd/2009 & Ors. in the case of M/s. C. Eswara Reddy & Co. vs. ACIT, wherein the Tribunal held as follows: "6. We have considered the rival submissions on either side and perused the materials available on record. Admittedly the assessee produced the books of account and vouchers. On examination of the books of account with reference to the voucher produced, the Assessing Officer found that the voucher does not tally with the cashbook. When the voucher does not tally with cashbook, in our opinion, the assessee has not maintained the books of account properly. Therefore, the book result will not reflect the correct profit of the assessee. In these circumstances, in our opinion, the Assessing Officer has rightly rejected the books of account. Therefore, we do not find any infirmity in the order of the lower authority in rejecting the books of account and estimating the profit. 7. Now coming to the estimation of profit. The Assessing Officer estimated the profit at 12.5%. However, the CIT(A) restricted the same to 8% ....
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.... gross contract receipt does not exceed Rs. 40 lakhs. Wherever the gross contract receipts exceed Rs. 40 lakhs the provisions of section 44AD are not applicable. Therefore, the profit can be estimated either at lower than 8% or above 8% depending upon the factual situation. As discussed earlier, for the purpose of estimating the profit various factors such as the profit ratio of the assessee in the earlier year, profit ratio of the similarly placed traders in the same locality, demand for the product, availability of labourers, raw materials, etc., and the time gap available for executing the contract work, etc., have to be taken into consideration. Therefore, in our opinion, reference to earlier order of this Tribunal alone for the purpose of estimating the profit at 12.5% may not be justified at all. 9. In fact, in the case of Krishnamohan Constructions in ITA Nos. 116 and 117/Hyd/2007 for A.Ys. 1993-94 and 1994-95 the Tribunal estimated the profit only at 8% even though the profit was estimated at 12.5% for A.Y. 1992-92. This itself shows that for each year the profit has to be estimated depending upon the factors which prevail in the locality. 10 We have also carefully go....
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....owever, by Finance (No. 2) Act of 2009 with effect from 1.4.2011 the Legislature removed the restriction of the total contract receipts of Rs. 40 lakhs. By taking a clue from the provision of section 44AD as is applicable for the assessment year under consideration and the provisions which are applicable with effect from 1.4.2011, we find that the deduction available u/ss. 30 to 38 shall be deemed to have been already given full effect and no further deduction under those sections shall be allowed. Depreciation is allowable u/s. 32 of the Income-tax Act. Therefore, as provided in section 44AD no further/separate deduction shall be allowed. In view of the above, in our opinion, the claim of depreciation on the estimated income is not justified. Therefore, the lower authorities have rightly rejected the same. 14. Now coming to the payment of interest and salary to the partner. Proviso to section 44AD(2) clearly says that salary and interest paid to the partner shall be deducted from the income computed under sub-section (1) of section 44AD subject to limitation u/s. 40(b) of the Act. As we have already observed, though there were restrictions with regard to application of section ....
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....013 for A.Y. 2007-08. The assessee raised the following grounds of appeal: a) The order of the learned CIT(A) is erroneous both on facts and in law. b) The learned CIT(A) erred in deciding the appeal ex-parte without providing property opportunity to the appellant herein. c) The learned CIT(A) erred in confirming the action of the Assessing Officer in estimating the profit at 12.5% of the contract receipts. d) The learned CIT(A) erred in confirming the action of the Assessing Officer in making the addition of Rs. 2,18,27,000. The learned CIT(A) ought to have seen that the investment was properly explained and, therefore, no addition should have been made. e) The learned CIT(A) erred in confirming the action of the Assessing Officer in making addition of Rs. 64,70,580 u/s. 68 of the I.T. Act. 13. Facts of the case are that the assessee is an individual deriving income from civil contract works. As he has not filed his return of income for the A.Y. 2007-08, the AO issued notice u/s. 148 of the Income-tax Act, 1961 on 6.8.2010 and a notice u/s. 142(1) along with questionnaire was issued on 3.1.2011. In response, the assessee filed his return of income on 26.8.2010 de....
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.... on the ground that the said amount of investment made in purchase of land jointly by the appellant and 5 other family members is not explained by the petitioner. The Assessing officer also made addition of Rs. 1,10,77,000/- being the cost of 3.27 guntas of agricultural land purchased vide document No. 13255/2006 executed on 2.6.2006. The petitioner admitted his share of investment in the land of Rs. 25 lakhs jointly purchased and also that of the agricultural land as can be seen from the Balance Sheet. The petitioner explained the sources in the Balance Sheet. One of the source represents the credits from Sri Jaipal Reddy & others amounting to Rs. 64,70,580/-. The Assessing Officer added the entire investment in the property of Rs. 2,18,27,000/- in the assessment of the petitioner without considering the fact that the investment made by the petitioner is only Rs. 25 1akhs & Rs. 1,10,770/-. aggregating to Rs. 1,35,77,000/-. The Assessing officer also added the cash credits of Rs. 64,70,580/- without providing an opportunity. One of the Joint owner viz., V. Subramanya Sai contributed his share of cost of land of Rs. 15 lakhs by withdrawing the said amount from his bank acco....
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.... explained credit/investment properly. For this purpose, we place reliance on the order of the co-ordinate Bench in the case of Sri P.V. Sitaramaswamy Naidu vs. Addl. CIT in ITA No. 264/Hyd/2012 order dated 9.1.2013 wherein the Tribunal held as follows: "10. The next ground is with regard to sustaining the addition made u/s. 68 of the Income-tax Act, 1961 and not giving the benefit of telescoping to the same out of the estimated business income of the assessee. . 11. The learned AR submitted that once the income is estimated there cannot be any addition of whatsoever. For this purpose he relied on the judgement of Indwell Constructions (232 ITR 776) wherein it was held that where the books of account are rejected by the Revenue cannot rely on the same books for addition of exact item in the Profit and Loss A/c. 12. We have carefully gone through this judgement. This judgement is with regard to allowability of deduction while computing business income of the assessee. Now, we are concerned with the addition made u/s. 68 of the Act. In the present case, the Assessing Officer made addition with regard to credit shown in the name of Ms. Devi Indukuri at Rs. 30,07,392 and in th....
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....of cash credit and on account of unexplained payments for purchases made outside the books can be made once the net profit rate is applied on contract receipts of an assessee for estimating his income from contract work. Even when the books of account relating to the assessee's business are rejected and income from such business is determined on estimate basis, a separate addition (which may not exceed the difference between the income as estimated by the Department and the income/loss as per books) may be made under section 68 towards cash credits which are not explained or which are not properly explained. This is because the source of the former is business whereas for the latter the Department does not have to locate any particular source [Kale Khan Mohammed Hanif vs. CIT (1963) 50 ITR 1 (SC) impliedly overruling Ramcharitar Ram Harihar Prasad vs. CIT (1953) 23 ITR 301 (Pat) and impliedly approving Srinivas Ramkumar vs. CIT (1948) 16 ITR 254 (Pat) and G.M. Chenna Basappa vs. CIT (1958) 34 ITR 576 (AP) on this point]. In this case, the Supreme Court held that the ITO having assessed the income of the assessee on a percentage basis, was also justified in treating the unexplained ....
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....69) 72 ITR 194 (SC) reversing Devi Prasad Vishwanath Prasad vs. CIT (1963) 50 ITR 641 (All) and impliedly approving on this point Maddi Sudarsanam Oil Mills Co. vs. CIT (1959) 37 ITR 369 (AP) and CIT vs. Krishna Mining Co. (1972) 83 ITR 860 (AP). The Supreme Court in this case of CIT vs. Devi Prasad Vishwanath Prasad observed thus : "There is nothing in law which prevents the ITO in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained and the business income estimated by him under section 13 of the IT Act, after rejecting the books of account of the assessee as unreliable ..... Whether in a given case the ITO may tax the cash credit entered in the books of account of business, and at the same time estimate the profit must, however, depend upon the facts of each case ..... Where there is an unexplained cash credit, it is open to the ITO to hold that it is income of the assessee and no further burden lies on the ITO to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed." 15. The And....
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....ificance may point to the conclusion that the cash deficit or cash credit cannot reasonably be related to the amount covered by the intangible addition but must be regarded as pointing to the receipt of undisclosed income earned during the assessment year under consideration. It is open to the Revenue to rely on all the circumstances pointing to that conclusion." 17. Thus, as explained by the Supreme Court, income from intangible additions is available to the assessee for, inter alia, introducing amounts in his account books. If any unexplained cash credits can be reasonably related to the amount covered by the intangible additions made in the past or in that very year, necessary set off may be given by the authorities on that account. In each case, the true nature of the cash credit must be ascertained from an overall consideration of the particular facts and circumstances of the case. However, where in the earlier years, there was disallowance of expenditure on the ground that there was no evidence though the requisite amount was in fact paid, it cannot be said that the corresponding amount is available to the assessee for use later. 18. Under section 68, the burden is on t....