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2017 (3) TMI 1029
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....(Appeals) has further erred in confirming the addition of Rs. 10 lacs that resulted into net profit rate of 10.64% (subject to salary, interest and depreciation)." "3. That under the facts and circumstances of the case, the learned Assessing Officer has erred in disallowing of 10% of depreciation of jeep and car i.e. Rs. 20,472/- considering that the same were incurred on personal use particularly under the circumstances that appellant firm has also paid Fringe Benefit Tax on the expenses incurred on depreciation of vehicle and also for the reason that the learned Assessing Officer has rejected the books of accounts and has applied a N.P. rate on gross contract receipts. The Hon'ble Commissioner of Income Tax (Appeals) also erred in dismissing the ground taken by the appellant." 2. Brief facts of the case are that the assessee is a civil contractor and engaged in the business of contract work from the Ex. Engineer, Water Resources Baran, Pali, Kota, Tonk etc. The return of income was filed on 30.10.2006 at total income of Rs. 1,20,07,390/-. During the year under consideration the assessee has shown gross contract receipts of Rs. 17,35,96,602/- and N.P. at Rs. 1,74,62,94....
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.... section 145(3) are clearly applicable in the case of assessee. As regards application of the profit rate, it may be mentioned that the assessee is carrying out such business with heavy utilization of capital assets and that is the reason that the depreciation claim of the assessee is for Rs. 34,31,532/-. Due to such capital investment, the assessee is deriving more economies of scale and profit rate should also be higher. The Hon'ble Rajasthan High Court in the case of M/s Jain Construction & Co. has upheld the NP rate of 12.5% in the business of civil construction. Similarly the Hon'ble Orissa High Court in the case of CIT V/s Builders Union 211 ITR 993 has also considered reasonable NP rate of 12.5% in the case of contractor. The following assesses of this Range carrying out the business of civil construction have also disclosed better profit rate subject to depreciation interest etc. as under:- Sl. No. Name of the Assessee A.Y. Total contract receipts Net Profit Net Profit @ 1. M/s Jain Enterprises 2006-07 Rs.9,60,64,093/- Rs.1,00,68,196/ - 10.48% 2. Sh. Harbans Lal Sethi Prop M/s Goodwill Advance construction Co....
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....of bill. Normally this procedure takes 3 to 15 days. Therefore normally the work related to payment has to be completed 3 to 15 days before the release of payment. The following observations are worth mentioning:- i) The bills of Rs. 10,33,834/- [Bundi Site] was related to escalation charges and not any new work done by assessee. ii) The bills of Tonk were dated 29/03/2006 and not 30.03.2006, out of these Sr. No. 5 & 6 were escalation bills and not related to any new work done by assessee. iii) Sr. No.3 [Sirohi Site] was also a price escalation bill [no work done]. iv) The Assessee purchased cement of Rs. 466900/- from Jodhpur on 31.03.2006 on the bill it was written that the same was delivered on 30.03.2006. We all know that such a huge quantity cannot be consumed in a day. Moreover ever if it was consumed, cement takes at least 7 days for quarrying etc. and no bill can be prepared and passed on the same day. v) Cement of Rs. 3,22,000/- was purchased on 31.03.2006, claimed to be delivered on 11/03/2006, no evidence of delivery was produced. vi) Cement of Rs. 2,37,000/- was purchased on 31.03.2006, claimed to be deliver....
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.... time to time. The AO has not at all judiciously considered submissions made before the AO. Minor irregularities, even assuming were there, cannot be made basis of the rejection of the books of accounts or of trading addition. Kindly refer Padampath Ramgopal 76 ITR 719 (SC). What is pertinent to note is that the AO has very categorically admitted in the assessment order as regards the fact of maintenance of complete books of account; that the same are audited; were duly produced before him and the contract receipts duly reconciled with the TDS certificates. The fact of claiming labour payments based on the labour registers, must roll registers and the fact of maintenance of site wise details of labour payment, were also duly admitted by the AO. Thus, the only objection/basis of rejection of the accounts raised by the AO are that: i. the assessee has shown purchases of the material in the last days of the financial year, which is suspected not to have been consumed by the assessee and therefore, should remain as a part of the closing stock. Resultantly the profit to that extent should have gone up. ii. Payments were made in cash and the name & address of the ....
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....d a consistent practice of not disclosing the work-in-progress while working its P&L-AO made an addition of Rs. 5,47,000/- being the value of the work-in- progress- If the value of the work-in-progress is taken in the closing stock, the opening stock shall have to be adjusted in this assessment-Rate of profits shown by assessee reasonable- Tribunal was justified in upholding the deletion of value of goods used in work-in-progress." Hence, for the above reason and also for the reasons that because of the practical difficulties of the business and unavoidable compulsion on the part of the contractor to raise bills showing complete work done without being any work in progress/closing stock in hand, there is no justification for invoking of Section 145, also when this is not one of the reasons provided u/s 145. As regards the allegations of cash payment, it is a matter of common knowledge that labourers demand cash payment and cannot wait for receiving cheque and realization thereof. Further, once admittedly detailed wages sheets and muster rolls etc. have been maintained, they contain all the necessary details. The payments are made through the labour contractors/supervisors the....
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....umar Gupta (2013) 142 ITD 0303 (JP) wherein it was held that "When assessee's income was assessed by estimating profit after rejection of books of accounts, no disallowance can be made separately u/s 40A(3)." Also Kindly refer CIT Vs Banwari Lal Banshidhar (1998) 229 ITR 229, 232 (All.), CIT vs. G.K. Contractor (2009) (PB 17-18) 19 DTR 305 (Raj.), Indwell Constructions v CIT (1998) (PB 14-16) 232 ITR 776 (AP), Maddi Sudarsanam Oil Mills Co. v/s CIT (1959) 37 ITR 369 (AP), ECI Engineering & Construction Co. Ltd. in ITA No.2048/Hyd/2011, Samurai Techno Trading Co. (P) Ltd. v/s CIT (2010) 37 DTR 386 (Ker.), ITO v/s Kenaram Saha & Subhash Saha (2008) 116 TTJ 289 (Kol.) (SB). In this case the ld. CIT(A) made the estimation of NP @ 10.64% based on the adhoc addition on account of the alleged inflated consumption of material and thus again considered the same accounts already rejected, hence was not a good basis. The only course left after the rejection is a fair estimation taking relevant material into consideration and past history being the most relevant and binding material, could not have been ignored. In the past also similar situation had arisen however, estimatio....
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....in Kailash Chand Gupta v/s DCIT 35 Tax World 36 (JP). 6. The ld DR is heard who has vehemently argued the matter and relied upon the order of ld CIT(A). 7. We have heard the rival contentions and pursued the material on record. Firstly, regarding the rejection of books of accounts, u/s 143 of the Act, the Assessing Officer has treated two broad reasons for rejection of books of accounts. Firstly, the assessee has shown purchase of material in the last week of March, 2006 which have been claimed to have been consumed and as a result no closing stock has been shown. However, necessary explanation regarding consumption of the material so purchased has been given by the assessee and the only explanation which has been furnished is that it will not significantly affect the profits as per the Assessing Officer as the assessee failed to provide necessary explanation regarding the purchase and consumption of material in the last week of March, 2006. It cannot be said that the said material was fully consumed. Therefore, this has resulted in excess claim of expenditure whereby the profits shown by the assessee was neither correct nor reliable. Further, the ld. CIT(A) has examined the ....