TaxTMI 
TaxTMI 
2014 (6) TMI 174
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....ed CIT(A) erred both in law and on facts. 2. The learned CIT(A) ought to have appreciated the fact that the assessee failed to produce tangible evidence in support of the expenditure claimed. 3. The learned CIT(A) ought to have appreciated the fact that the AO has not compared the present case with that of M/s KMC Constructions but adopted the stand of ITAT only in estimating the income." 3. Briefly the facts are that during the course of scrutiny proceedings, the assessee produced few bills I vouchers, a substantial part of which were cash vouchers. When asked to produce complete bills to verify the genuineness of the expenses claimed in the P&L Account, it was submitted by the assessee that all the bills and vouchers were maintained and as required some of the bills maintained at Hyderabad and Tirupati offices were produced on random basis. After considering the reply of the assessee, the Assessing Officer opined that the assessee is not maintaining proper bills and vouchers, little information submitted by the assessee in piece meal manner was not sufficient to verify the business affairs of the assessee and rejected the book results. While rejecting the books of account, fol....
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....alaries and wages are self-made vouchers, non-submission of these vouchers maintained at site offices cannot be a ground for rejection of books of accounts. It was further contended that without pointing out any defects or deficiencies in the books of account, ledger extracts of the total expenses claimed and without referring to any lacuna in the bills / vouchers produced, the Assessing Officer rejected the books of account and resorted to estimation of income. 6. After considering the submissions of the assessee, the CIT(A) observed that there is no force in the action of the Assessing Officer in rejecting books of account and estimation of income. As per the assessment order, hearings in this case have commenced on 16.11.2009 i.e., hardly one and half a month before the time barring date for finalizing the assessment. As para 03(a) of the assessment order, a show cause dated 23.12.2009 was issued proposing rejection of books of account. On this count, the claim made by the assessee that no sufficient time was left for them to produce all the details as was called by the Assessing Officer within the time allowed is reasonable. Even otherwise, what the assessee failed to produce ....
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....ncompleteness has been pointed out from the books of account and other material produced by the assessee except making a general observation that all vouchers are not produced for verification. 10. In view of the above observations, the CIT(A) held that there is no justification for rejection of books of account of the assessee and accordingly he directed the Assessing Officer to accept the admitted book results of the assessee. 11. Aggrieved by the order of the CIT(A), the revenue is in appeal before us. 12. We have heard the arguments of both the parties, perused the record and have gone through the orders of the Revenue authorities. In this case, it is observed that the books of account of the assessee were not reliable as the assessee has not produced all the bills and vouchers, which are required to support the expenditure claimed by the assessee. Since the assessee did not maintain proper bills and vouchers, the Assessing Officer rejected the books of account and estimated income of the assessee at 12.5% of gross contract receipts and thereafter allowed depreciation. When the books of account are not verifiable, the Assessing Officer has no option, but, to reject the books....
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....ethod 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 main contract and 5% on sub contract is justified or not. 8. We have carefully gone through the order of this Tribunal in the case of Krishnamohan Constructions (supra), K.C. Reddy Associates (supra), Sri Srinivasa Constructions (supra) and M. Bhaskar Redd....
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....unal in the case of Krishnamohan Constructions (supra) and the Special Bench decision in Arihant Builders (supra) estimated the profit at 8% for main contract and for sub contract at 5%. It may not be out of place to mention that this Tribunal uniformly estimating the profit from main contract at 8% to 12.5% depending upon the factual situation and 5% to 7% on the sub contract depending upon the factual situation. Therefore, in our opinion, estimation of profit at 8% by the CIT(A) on main contract and at 5% on sub contract is justified. We do not find any infirmity in the order of the lower authority. Accordingly the same is confirmed." 11. Now coming to the claim of the assessee towards seigniorage charges. No doubt the seigniorage charges are in relation to the material supplied by the Government for executing the work. The Apex Court in the case of Brij Bhushanlal (supra) considered this issue and found that the material supplied by the Government/contractor will not have any element of profit. Therefore, the same shall be reduced from the contract receipts. In view of the judgement of the Apex Court the seigniorage charges shall be reduced from the total contract receipts for ....
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....s removed by the Legislature. Moreover, the co-ordinate Bench this Tribunal in M. Bhaskar Reddy (supra) after taking aclue from section 44AD estimated the profit at 8% of the contract receipt. Therefore, by taking a clue from the provision of section 44AD as is applicable for the assessment year under consideration and the provisions which would come into operation with effect from 1.4.2011, in our opinion, the payment of interest and salary to the partner shall be allowed subject to limitation specified in section 40(b) of the Act from the estimated income. 15. We have carefully gone through the judgement of the jurisdictional High Court in the case of Indwell Construction (supra). The assessment year under consideration before the jurisdictional High Court was assessment year 1981-82. Section 44AD was introduced in the statute book with effect from 1.4.1994. Therefore, the jurisdictional High Court had no occasion to consider the provisions of section 44AD as it is applicable for the assessment year under consideration and as it would be applicable with effect from 1.4.2011. In view of the provision of section 44AD as it is applicable for the assessment year under consideration ....
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....,61,781 was outstanding at the end of the year as payable to M/s. VSS which is to be sustained. Further, the AO observed that there was a proof of payment of Rs. 3.3 crores out of Rs. 4.32 crores actually paid by the and she recommended for giving relief only to the extent of Rs. 3.3 crores. 19. The CIT(A) after going through the record like purchase bills, delivery challans, confirmation letter from the assessee, as most payments are by cheques, and also direct payment to HPCL and the payments are verifiable, he was of the opinion that the claimed of the assessee is genuine. Further he observed that it is not clear as to what happened to the proceedings u/s. 133A in the case of B. Krishna Murthy, Hyderabad. The AO though called for information from the ITO, Kothagudem, he has not made any whisper about it either in the assessment order or in the Remand Report. According to the CIT(A) it is not proper to draw a conclusion in the backdrop of so many facts that the affairs of M/s. VSS are not being managed by its proprietor, Sri B. Krishna Murthy, but by someone else probably the assessee firm. He was of the opinion that the observation of the AO in his Remand Report is not proper. ....