TaxTMI 
TaxTMI 
2014 (11) TMI 766
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....ly common issue in these six appeals of revenue is against the order of CIT(A) in estimating the net profit @ 4% of the gross contractual receipt as against estimated by the AO at 8%. 3. Briefly stated facts are that a search and seizure operation u/s. 132 of the Act was conducted on the business and residential premises of Tantia Construction Ltd. and GPT Infraprojects Limited on 17.03.2010. During the course of search some documents belonging to the assessee company were seized and also a consequential survey operation u/s. 133A of the Act was carried out in the business premises of the assessee at 59, Raja Naba Krishna Street, Kolkata-700005. Consequent to search a notice u/s. 153C of the Act was issued on the assessee company and in response to such notice assessee filed its return of income on 20.04.2011 at a taxable income of Rs. 6,67,778/-. The assessee company is engaged in the business of executing work contracts of civil construction, supply of labour and trading in sarees. During the course of assessment proceedings the assessee filed audited Balance Sheet, P&L Account and its annexure. The assessee company also produced books of account, vouchers, invoices, bank statem....
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....s stated above, the AO compared the net profit of Tantia Constructions Ltd, GPT Infraprojects Ltd and Allied Infrastructure & Projects Pvt. Ltd. for various assessment years with the net profit of the appellant company. It is observed by the AO that the profit shown by the appellant company was much less than the profit declared by these companies. In the case of Tantia Constructions Ltd. the average profit margin was 5.93%, in the case of GPT Infraprojects Ltd, it was 6.l5% and in the case of Allied Infrastructure & Projects Pvt. Ltd. the profit margin was 5.19% whereas the appellant company had shown profit margins of 1.94%, 0.67%, 0.20% and 0.09% for A.Ys. 2007-08, 2008-09, 2009-10 and 2010-11 respectively. Thereafter, the AO considered the provisions of section 44AD of the Act, according to which, in the case of business of civil construction, where the gross receipt is not exceeding Rs. 40 lakhs, the net profit is to be taken at 8%. As per the AO, to assess an income of the assessee, it is important to consider the nature of business carried on by the assessee, past history of the assessee and conduct of the assessee. According to him, considering the facts and circumstances o....
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....ion of some details and documents. Only for these counts he has rejected the books of account of the appellant company, the action which has not been challenged by the appellant in the course of appellate proceedings. It is worthwhile to see that the AO prior to estimation of profìt at 8%, has stated that to assess the income of the appellant its nature of business activities, conduct and : past history is to be considered. However, while estimating the income he has not considered these things otherwise there is no reason that in a case of sub-contractor the profit could be estimated at 8%. The comparable case discussed by the AO cannot be compared with the case of appellant for the reasons already stated above and the provisions of section 44AD could also not be applied in its case because the turnover of the appellant company is more than Rs. 40 lakhs. In view of above, it is held that the AO was not justified in estimating the profìt @ 8% of the gross receipt. However, I am also not inclined to agree with the submission of the appellant that the profit should be estimated @ 2% of the gross contractual receipt. Considering the totality of the facts, I direct the AO....
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.... as sub-contractor to execute the civil construction works awarded by the principals, which is a small part of the projects executed by the principals. On the contract receipts, the principals had also deducted the tax u/s.194C of the Act. Besides, the assessee company is also engaged in the business of trading of sarees. It is also a fact that the assessee filed duly audited profit and loss account and balance sheet along with its annexure. It also produced the audited books of account, bills/vouchers and bank statements before the AO as admitted by him ín the assessment order. Besides, it further produced all the details and explanations called for by the AO from time to time. It also produced labour registers before the AO. However, he was of the opinion that the said registers have not been maintained in a conventional manner and according to him, there were no signatures or thumb impressions of all the recipients. Because of the aforesaid observations, the AO rejected the audited books of account of the assessee and estimated the net profit. The AO gave the examples of net profit earned by three companies viz. Tantia Constructions Ltd, GPT Infraprojects Ltd and Allied I....