TaxTMI 
TaxTMI 
TaxTMI 
2017 (6) TMI 1033
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.... In the scrutiny assessment completed vide order dt. 27-12-2006, the total income was assessed at Rs. 5,80,91,575/-. The AO on noticing that assessee has not maintained vouchers for certain expenditure and after recording statements from the Accounts Manager, rejected the books of account and estimated the income at 12.5% of the gross receipts declared by assessee at Rs. 46,47,32,596/-. On appeal, Ld.CIT(A) while upholding the rejection of books of account however, following the Special Bench decision of ITAT restricted the estimation of net profit to a rate of 8% (clear of all expenses and depreciation) on the contract receipts. Assessee however, preferred further appeal and ITAT vide its order in ITA No. 86/Hyd/2008, dt. 28-06-2013, direc....
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....ct and balance 11.73% pertaining as works executed on its own. Accordingly, AO determined the taxable income as under: (in Rs) Gross Receipts 46,47,32,596 1. Works Executed as Main Contractor NIL 2. Works Executed on its own - 11.73% of the Gross Receipts on which Income @8% 5,45,13,134 8% 43,61,050 3. Works Executed through subcontractors-88.27% of the Gross receipts on which Income @5% 41,02,19,462 5% 2,32,36,629 Net Taxable Income 2,75,97,679 4. Aggrieved on the above, assessee reiterated the objections stating that ITAT's direction of estimating contracts has to be construed for the whole contract and not for the contract during the year and the ratio ....
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....ted for AY. 2004-05 on standalone basis (being 95.21% of the total receipts) for applying rate of 5%. 7. Ld.DR, however, relied on the orders of the AO and CIT(A). 8. We have considered the rival contention and perused the record and the order of ITAT. Assessee's contention that the estimation should be based on the total contract spread over five years is not valid, as the books of account were rejected only in the impugned assessment year and the entire appellate proceedings before the CIT(A) and the ITAT pertain only to the receipts during the year. The contention raised during the consequential order proceedings i.e. for the whole contract, is an after thought and not based on the facts. In fact, the ITAT in para 3 has recorded the fa....
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....on, the AO should have determined the sub-contract receipts pertaining to this year only on standalone basis, instead of the whole contract period. As assessee's contention of estimating the profits for the whole contract and adjusting the profits declared in other years is not accepted in Ground No.2 to 4, the contention that the sub-contract percentage should be worked out on standalone basis on the receipts of this year alone has to be accepted. Therefore, modifying the order of AO, the profit should be estimated on receipts during the year- at 95.21% of the receipts at 5% being sub-contracted work and balance at 8% being contract work on own basis. The ground is allowed and AO is directed to modify the order. Accordingly, in the result,....