TaxTMI 
TaxTMI 
2017 (5) TMI 117
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.... Rs. 4,54,49,410/- respectively. The assessments for the assessment year 2007-08 and 2008-09 have been completed u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as 'the Act') on 13.11.2009 and 4.6.2010, determining total income at Rs. 4,96,10,750/- and Rs. 4,54,49,410/- respectively. Subsequently, the assessments for the assessment years 2007-08 & 2008-09 have been re-opened u/s 147 of the Act, for the reason that the assessee has understated its closing work in progress, which results in escapement of income chargeable to tax for the assessments and accordingly, issued notice u/s 148 of the Act, calling for return of income. In response to notice u/s 148 of the Act, the assessee has filed a letter on 9.5.2015 stating that the original return filed u/s 139(1) of the Act, may be treated as return filed in response to notice issued u/s 148 of the Act. 3. Subsequently, the cases have been selected for scrutiny and accordingly, notices u/s 143(2) & 142(1) of the Act were issued. In response to notices, the authorized representative of the assessee appeared from time to time and furnished books of accounts and other details called for. During the course of assessme....
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....of notice u/s 148 of the Act and appeared before the A.O. and participated in the assessment proceedings, therefore, there is no merit in the claim of the assessee, hence, the ground raised by the assessee is dismissed. In so far as rejection of books of accounts and estimation of net profit from business, the CIT(A) observed that the assessee has failed to produce necessary bills and vouchers in support of expenditure debited in the P&L account. Therefore, the A.O. left with no option but to estimate the net profit, proceeded to estimate net profit by following the decision of ITAT, Hyderabad in the case of M/s. KNR Constructions Limited, therefore, there is no merits in the claim of the assessee that the A.O. was erred in rejection of books of accounts. As regards estimation of net profit, the CIT(A) by following the decision of ITAT, Hyderabad in the case of M/s. Srinivasa Lakshmi Constructions Vs. DCIT in ITA No.1347/H/2010 directed the A.O. to estimate net profit of 8% on main contract works and 6% on sub contract works. In so far as sub contract works given to third parties for execution, the CIT(A) upheld the estimation of net profit of 4% made by the A.O. In so far as addit....
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....d income goes below the returned income, a rider may be given so as to restrict the assessed income to the income returned by the assessee. 8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. rejected books of accounts and estimated net profit from the contract receipts. The A.O. was of the opinion that the books of accounts maintained by the assessee are not susceptible for verification. The A.O. further was of the opinion that the assessee has failed to prove expenditure with supporting bills and vouchers. Most of the expenditure debited under the head 'labour and like charges' are supported by selfmade vouchers, therefore, opined that the books of accounts maintained by the assessee does not give true and correct profit from the business. The A.O. further observed that net profit declared by the assessee is quite low when compared to the nature and size of works contract undertaken. The A.O. further observed that the jurisdictional ITAT, under similar facts and circumstances has directed the A.O. to estimate net profit of 12.5% on main contract works and 8% on sub contract works, therefore....
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....u/s 145(3) of the Act and estimation of net profit. 10. The A.O. has relied upon certain judicial precedents to estimate net profit, wherein net profit of 12.5% and 8% in respect of main contracts and sub contracts are upheld. The A.O. has given his own reasons for taking particular rate of net profit. The assessee has relied upon certain judicial precedents, wherein the net profit of 8% and 5% is upheld. The assessee also relied upon its own case for the earlier year, wherein the ITAT, Visakhapatnam bench in ITA No.523/Vizag/2014 for the assessment year 2011-12, directed the A.O. to adopt a net profit of 10% on direct works contracts and 6% on sub contract works. Though, the assessee claims that because of peculiar nature of works contract, its profit margin is very low when compared to general works contract executed by other contractors, failed to justify its stand with necessary evidences. There is no straight jacket formula for estimation of net profit. Before estimation of net profit, facts and circumstances of each case should be considered. In the present case on hand, on perusal of the facts available on record, we find that the assessee is a large contractor having a t....