TaxTMI 
TaxTMI 
2017 (4) TMI 656
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....ter called as 'the Act') were issued. In response to notices, the authorized representative of the assessee appeared from time to tome and furnished books of accounts and other details as called for. The A.O. after considering the books of accounts and other details furnished by the assessee, rejected books of accounts u/s 145(3) of the Act and estimated net profit from the business by adopting net profit of 10% on main contract receipts, 6% on sub-contract receipts and 4% on subcontract works given to third parties net of all deductions, including depreciation and interest on capital and remuneration to partners. Apart from estimation of net profit, made separate additions towards interest received from fixed deposit. 3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee contended that the A.O. was erred in rejecting books of accounts, as the assessee has furnished complete books of accounts along with bills and vouchers for expenditure debited to the profit & loss account. The assessee further contended that the A.O. was not correct in estimating net profit of 10% on main contract receipts, 6% on sub c....
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.... "9. We have heard both the parties and perused the materials available on record. In this case, the assessing officer rejected the books of accounts and estimated the net profit from contract receipts @ 10% on main contracts, 8% on sub contracts and 4% on sub contracts executed through third parties. The assessee contended that it is consistently declaring a net profit of 5% to 6% for the past several years which was accepted by the department. The assessee further submitted that the element of profit in works contracts is less, because there is a huge competition in the market. Therefore, the profit declared by the assessee should be accepted. The CIT (A) after considering the assessee's submissions scaled down the net profit estimated by the assessing officer to 8% on main contracts, 5% on sub contracts and 1% on sub contract works executed through third parties. While doing so, the CIT (A) relied upon the ITAT special bench decision in the case of Arihant Builders Pvt. Ltd. Vs. ACIT 291 ITR 49 and also Hyderabad bench decision in the case of C. Eashwar Reddy and company in ITA No.668 & 670/Hyd/2009. We have gone through the CIT (A)'s order and also case laws relied upon by the....
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....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, ii our opinion, reference to earlier order of this Tribunal alone for the purpose of estimating the profit at 12.5910 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 gone through the orders of the lower authorities. The CIT(A) after referring to the decision of this Tribunal 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 contrac....
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....dingly, the AO is directed to compute the income of the assessee afresh." 11. In the present case on hand, the assessee declared a net profit of 5.28% on gross contract receipts. The assessing officer has estimated net profit of 10% on main contract works, 8% on sub contracts and 4% on sub contracts executed through third parties. The CIT (A) scaled down the net profit to 8%, 5% and 1% respectively. The CIT (A) after considering the facts and circumstances of the case, rightly estimated the net profit, therefore, his order does not require any interference. Therefore, we are of the opinion that there is no error or infirmity in the order passed by the CIT (A), hence, we are inclined to upheld the order of the CIT (A)." 5. Considering the facts and circumstances of this case and also respectfully following the decision of coordinate bench in assessee's own case for the assessment year 2009-10, we direct the A.O. to estimate net profit of 8% on main contract works, 5% on sub contract works and 1% on sub contract works given to third parties. 6. The next issue that came up for our consideration from both the appeals is deductions towards depreciation, remuneration to pa....
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....d no error or infirmity in the order of the CIT (A), hence, we inclined to upheld the order of the CIT (A)." 8. In this view of the matter and also respectfully following the coordinate bench decision in assessee's own case for the assessment year 2009-10, we are of the view that depreciation, interest on capital and remuneration to partners is deductible even after estimation of net profit from the contract receipts. Therefore, we direct the A.O. to allow depreciation, interest on partner's capital account and remuneration to partners against income estimated from contract receipts. 9. The next issue that came up for our consideration is additions towards income from other sources being interest earned on fixed deposits. The Ld. A.R. for the assessee submitted that the issue is covered against the assessee in assessee's own case for the assessment year 2009-10, in ITA No.370/Vizag/2012 dated 30.11.2015. We find that the coordinate bench, in assessee's own case for the assessment year 2009-10, has considered similar issue and decided the issue against the assessee. The relevant portion of the order is extracted below: "12. Coming to the next issue, i.e. additions tow....