2016 (5) TMI 1266

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....ideration, the books of accounts of the assessee were rejected by the Assessing Officer; and the profit was estimated at 12.5% of the gross receipts. In appeal, the Commissioner of Income Tax (Appeals), following the judgment of the Special Bench of the Tribunal, Indore in Arihant Builders, Developers and Investors P. Ltd. vs. ACIT 291 ITR 41 (SB) , held that estimation of net profit at 8% was reasonable; and such a rate is in tandem with the spirit of the provisions of Section 44AD of the Act, which could be considered as a guideline for the purpose of applying a particular net profit rate in the case of civil contractors. With regards the works entrusted to the sub-contractor, the Commissioner of Income Tax (Appeals) followed the decision....

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...., passed in the case of Krishnamohan Constructions, K.C.Reddy Associates, Sri Srinivasa Constructions and M.Bhaskar Reddy, the Tribunal had estimated the profit between 12.5% to 8% depending upon the factual situation; a bare reading of the earlier order of the Tribunal, in M.Bhaskar Reddy, showed that the Tribunal, after considering the judgment of the Supreme Court in State of Kerala vs. C.Velukutty 60 ITR 239 and the decision of the Special Bench of the Tribunal in Arihant Builders, Developers and Investors P. Ltd. 291 ITR 41 (SB), and by taking a clue from Section 44AD of the Act, had estimated profits at 8%; Section 44AD of the Act would be applicable in respect of cases where the gross contract receipts do not exceed Rs. 40 lakhs; whe....

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....ofits and gains of such business chargeable to tax under the head "Profits and gains of business or profession". Under the proviso thereto, the requirement of Clause (1) of Section 44AD would not apply in cases where the gross receipts exceed Rs. 40 lakhs. In the present case, the gross receipts, no doubt, are far in excess of Rs. 40 lakhs and, as such, Section 44AD of the Act is not attracted. The Tribunal, however, held that Section 44AD of the Act serves as a guidance in estimating net profit even in cases where the gross receipts exceed Rs. 40 lakhs also. The Tribunal has referred to the earlier orders passed in several other cases where profits were estimated at 8% of the gross receipts for the main contract, and at between 5% to 7%....