TaxTMI 
TaxTMI 
2016 (7) TMI 1283
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....e assessment year 2011-12 on 23.9.2011 declaring total income of Rs. 7,70,76,240/-. The case was selected for scrutiny and accordingly, notices u/s 143(2) & 142(1) of the Income Tax Act, 1961 (hereinafter called as '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 relevant details called for. During the course of assessment proceedings, the A.O. noticed that the books of accounts maintained by the assessee are not susceptible for verification and also the assessee has not produced supporting bills & vouchers in respect of various expenditures. The A.O. further observed that there are number of inconsistencies in the books....
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....assessee and 5% net profit on sub contracts given to others. While doing so, relied upon the decision of jurisdictional ITAT, in the case of M/s. KNR Constructions Ltd., M/s. Suguna Constructions and M/s. Teja Constructions Vs. ACIT. Besides, the A.O. made separate additions towards income from other sources being interest on fixed deposits and other income, however, allowed deductions towards interest on capital and remuneration to partners under the provisions of section 40(b) of the Act. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has made elaborate written submissions and contended that the assessing officer is erred in rejecting the books of accounts by invo....
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....racts. Therefore, the A.O. was not correct in relied upon judgement of M/s. KNR Constructions to estimate the net profit of 12.5%, 8% & 5% respectively on main contracts, sub contracts and sub contracts given to third parties without appreciating the fact that its case stands in different footing. The assessee further submitted that while estimating the net profit, the A.O. should have consider the comparable cases which are performing similar functions and also having same risk factors. The assessee further submitted that the jurisdictional ITAT, Hyderabad in the case of Shri Easwar Reddy and Company Vs. ACIT has upheld the estimation of net profit of 8% for main contract and 5% for sub contracts, therefore, the A.O. was erred in estimatin....
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....ooks of accounts maintained by the assessee are inconsistent with the financial statement furnished along with the return of income. Under these circumstances, the A.O. rightly estimated net profit of 12.5% & 8% in respect of direct works contracts & sub contracts. The D.R. further submitted that the CIT(A) failed to appreciate the fact that the assessee itself admitted income from the contract it awarded to its sub contractors @ 9.71%. The D.R. further argued that the assessee has admitted an income of Rs. 7,70,76,240/-, whereas the income determined by the CIT(A) is at Rs. 6,81,79,734/- which is below the admitted income. Under any circumstances, the income assessed shall not go beyond income admitted by the assessee. Therefore, the CIT(A....
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....es, it is very difficult to compute the income based on the books of accounts furnished by the assessee. The A.O. further observed that the net profit declared by the assessee is quite less when compared to the nature and size of works contract undertaken by the assessee. The A.O. further observed that the assessee is a big contractor having large turnover is expected to maintain books of accounts, however, the assessee's books of accounts are not susceptible for verification, therefore, opined that the net profit from the business can be computed on estimation basis. The A.O. estimated net profit of 12.5% on direct works contracts and 8% on sub contract works. The A.O. has taken a clue from the decision of jurisdictional ITAT, in the case ....
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....the facts and circumstances of each case. In the case of estimation, it is difficult to take any one of these cases as precedent, because of peculiar facts of each case. Admittedly, the assessee is a large contractor having turnover of more than Rs. 100 crores. As pointed out by the A.O., the books of accounts of the assessee are not susceptible for verification. The expenditures claimed by the assessee are not supported by proper bills & vouchers. The assessee has failed to explain the reasons for not maintaining the books of accounts and bills & vouchers in support of expenditure debited to P&L account. Under these circumstances, the A.O. was justified in estimation of profit. 11. The A.O. has relied upon certain judicial precedents to e....