AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (11) TMI 717
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....re was search & seizure operation u/s 132 of the I.T. Act in the case of M/s. Madhucon Projects Ltd and its group on 4.2.2011. The assessee, being one of the sub-contractors of Madhucon Group, was also searched. Pursuant there to, a notice u/s 153A of the Act was issued to the assessee on 13.01.2012. During the assessment proceedings u/s 143(3) r.w.s. 153A of the Act, the AO called for various details from the assessee and the assessee furnished the same. After considering the said material, the AO observed that M/s. Madhucon Projects Ltd had diverted the funds of the subcontractors, (the assessee being one of them) and has siphoned off the same during the financial year 2008-09 relevant to the A.Y 2009-10. The AO, in Para 3.6 of his order, has tabulated the amounts given and taken from the assessee. Observing that these amounts were never used by the assessee for its business activities and that these amounts were disallowed in the hands of the Principal Contractor i.e. M/s. Madhucon Projects Ltd, he made the addition protectively in the hands of the assessee firm. Thereafter, he also estimated the business profit of the assessee at 8% of the gross receipts and brought it to tax. ....
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....y reference, the relevant paragraphs are reproduced hereunder: "2. Facts of the case common in all these cases are that there was a search and seizure operation under S.132 of the Act in the case of Madhucon Projects Limited and group of cases on 4.2.2011. After the search in the case Madhucon Projects Ltd. and its group concerns including the assessees herein, notices under S.153A were issued to the assessees. In response thereto, the assessees filed returns of income for relevant assessment years. During the assessment proceedings, under S.143(3), the books of account maintained by the assessees were rejected and the income of the assessees was estimated at 8% of the gross receipts, and the Assessing Officer accordingly made additions to the income returned by the assessees. 3. Further, the Assessing Officer also observed that the company's address given by M/s. Madhucon Projects Ltd. was actually a small room on the terrace and no documents or papers relating to the assessee or M/s. Madhucon Group were available. He further observed that during the course of search and in the post search proceedings, though the assessees were given sufficient time to produc....
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....round in these cases also being same, income of these assessees herein should also be estimated at 5%. 6. As regards the estimation of income, the Learned Departmental Representative submitted that there is no fixed percentage of gross receipts, which can be adopted to estimate the income of the assessees, and that as the books of account of the assessees are not reliable, the Assessing Officer on a notional basis can estimate the income. According to her, the estimation of income at 8% of the gross receipts is quite reasonable and justified. 7. As regards the Revenue's appeal against the deletion of additions made on protective basis, the Learned Departmental Representative submitted that since the substantive additions made in the hands of M/s. Madhucon Projects Ltd., are pending adjudication by the CIT(A), these appeals may be kept pending, to which the learned counsel for the assessee objected. The Learned Departmental Representative also relied upon the decision of the coordinate Bench of this Tribunal in the case of Prabhu Wines in ITA No.1100/Hyd.2013 dated 23.10.2013, wherein after considering the principles laid down in Indwell Constructions (232 ITR ....
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....allowed in the hands of the appellant, we have to first establish that the specific withdrawals were accounted in books as expenditure incurred during the year and further, the expenditure was not only revenue in nature but was also debited to the P&L account to be disallowed as expenditure. In the absence of books and vouchers, one cannot specifically conclude that the amounts withdrawn were indeed deployed and were incurred towards revenue expenditure and got debited to P&L acct. It is also seen that the withdrawals were actually more than the entire turnover of the appellant firm in AY 2011-12 indicating that all withdrawals could not have been debited in the appellant's books as expenditure. Similar feature was found in the case of the other two subcontracting firms namely, M/s. Varalakshmi Constructions, the withdrawls from bank were more than turnover for assessment year 2010-11. For M/s Ragini Constructions, the withdrawals were more than the turnover for A.Y. 2010-11 and A.Y. 2011-12." The Learned Departmental Representative, had relied upon the decision in the case of Madhu Wines cited (supra), but we find that the decisions relied upon by the Learned Departme....
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....ways (cited Supra), we have already held that where the income is estimated after rejection of books of account, no further disallowance of business expenditure can be made. In the case before us also, the AO has made the estimation on the ground that the assessee had not incurred any expenditure and the amounts were never used for its business activities and were returned back to the main contractor. Since the facts and circumstances are the same before us as in the case of Maa Highways and since we have confirmed the estimation of income by the AO at 8% in the case of main contractor and 5% in the case of a sub-contractor, we see no reason to interfere with the order of the CIT (A). 8. In the result, Revenue's appeal is dismissed. ITA No.202/Hyd/2015-A.Y 2011-12 9. In this case, the assessee is challenging the order of the CIT (A) in confirming the estimation of income at 8% of its gross receipts. According to the assessee, the assessee is a sub-contractor and therefore its income should be estimated at 5% of the gross receipt and not at 8% of the turnover as held by the Coordinate Bench of this Tribunal in the case of Maa Highways in ITA Nos. 200 & 201/Hyd/2015. The lea....