TaxTMI 
TaxTMI 
2018 (9) TMI 864
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....e's past history and other comparable cases on the same area, same nature of works and of the contemporaneous period. The application of net profit rate at 8% resulting in an addition of Rs. 5041687/- may be deleted." 2. The effective issue for adjudication is whether the estimation of income of the assessee by the AO by applying net profit rate of 8%and confirmed by the CIT(A) was justified. 3. Briefly stated the facts of the case are that the assessee is engaged in the business of electric contract work with government and semi government department and maintained regular books of accounts, bills and vouchers, duly audited accounts u/s 44AB of IT Act. The AO vide para 2 required the assessee to file certain details regarding site- wise proof of payments, sand purchase, expenses in respect of sub contract, stock inventory etc. Being not satisfied with the reply of the assessee, the AO has applied net profit rate of 8% on the gross receipt of Rs. 9,82,78,472/- after rejecting the books of account of the assessee u/s 145(3) of the Act. 4. The Ld. CIT(A) while confirming the order of the AO observed vide para 6 as under: "6. I have considered the facts of the case, the....
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....d to the total income. The contention of the -: assessee was that there are several decisions of contract where 5% Net Profit rate has been applied for estimation of income from contract business. It has also been submitted that in Assessment Year 2005-06 the Net Profit rate was only 4% wherein in the case under consideration the Net Profit rate is 5.02%, The Assessing Officer applied 8% Net Profit rate without giving any basis. The assessee has also pointed out that on similar situation the Net Profit rate upto 6% has been accepted even I.T.A.T. level. It was also submitted by the assessee in the written submission before the CIT(A) that the interest income of Rs. 79,400/- is business income of the assessee, therefore, separate addition is not warranted. The estimation of contract receipt includes this interest income also. After considering the totality of the facts of the case, past history of the assessee and statutory presumptive tax scheme of the Act, section 44AD wherein for such cases 8% rate of profit on total turnover has been prescribed to determine the business income. We are aware that though the said section 44AD does not directly apply to the case under consideration....
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....uchers, duly audited accounts u/s 44AB of IT Act. The assessee filed return of income declaring total income of Rs. 27,73,510.00 during the year and shown net contract receipts of Rs. 9,82,71,472/- showing NP rate of 2.87%. the case was taken under scrutiny by the learned. AO u/s 143(3) and AO examined the accounts. 2. The contract work are done in the interior places, villages by the assessee. The material purchased locally at places of sites and vouchers so far available are maintained and other purchases internal vouchers are maintained. The learned AO vide para 2 noted that site-wise proof of payments of wages on different dates not furnished, no evidence of purchases made locally and expenses made in cash, no stock inventory for goods was made available to him 3. The assessee replied each queries noted in para 3 by the AO and furnished the list of payment of wages which is on record of AO. Sand was purchased locally for laying on runway and other upper side of cabling. Internal vouchers were available. Part of contract work for about Rs. 3.00 crores was given to sub contractors for completion at 2% profit. It was submitted that payment to sub-contractor was made on the sam....
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....report. No major defect has been found by the learned AO in the accounts, except some non maintenance of vouchers etc. the rejection of the accounts was not proper u/s 145(3) of IT Act. Past History case not followed 2. Secondly, the learned AO has completely ignored the past history in this case. Assessee is doing business since A.Y. 2007-08 chart showing past history of the case is filed at page 1 of the paper book all along in the past 2007-08 to 2009-10, profit varies from 2.7% to 2.93% on the contract receipts upto A.Y. 2009-10 was shown by the assessee and learned ITO in A.Y. 2007-08 made a similar addition and assessed the net profit of 3.2%. similarly in 2009-10, he also made small addition and as against net profit rate of 2.93% shown a total turnover of Rs. 11,39,80,532, he assessed the net income at 3.3% making a small addition of Rs. 3.2 lakhs only. 3. That in the year under reference the fantastic addition of Rs. 50,41,687/-has been made by AO and sustained by CIT Appeal by applying a net rate of 8% which is neither based on the material on record nor as per the discussion of application of 5% NP Rate made with JCIT during the assessment. Assessee therefore submi....
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....ized representative (AR) Shri Mahendra Agrawal, Advocate, attended the proceedings from time to time and represented the case of behalf of the assessee. The details called for have been furnished which are placed on record." 8. The counsel for the assessee submitted that during the course of assessment proceedings, the AO, JCIT, Gwalior, test check and verified complete and full accounts maintained and duly supported by subsidiary records and most of the bills/vouchers for material and expenses. The accounts were audited under section 44AB by a Chartered Accountant, the books of accounts backed by most of the bills and vouchers. The Assessing Officer without appreciating the nature of business of Electrical contractor carried out at interior and odd places and other constraints mechanically rejected the accounts u/s 145(3) wrongly stating that no any bills/vouchers are maintained and accounts are not susceptible to verification and applied a very high, exorbitant, imaginary and impracticable rate of net profit of 8% on the contract receipts without considering assessee's own past history and other comparable cases of similar facts. 9. It is further submitted that the authorit....
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..... The factual matrix proved that the objections of the AO, the ld. CIT(A) and Sr DR as regards to the site-wise proof of payments, sand purchases, expenses in respect of sub contract, stock inventory are based on presumption, surmises and suspicion. The authorities below ought to have either considered the past trading results and comparable cases in the same line of business or contract line of business or brought relevant material evidence to point out specific deficiency in the books of accounts of the assessee. Moreover, the assessee is a govt. contractor where all the contract receipts are subject to TDS under as per the provisions of the Act. Further, the assessee has agreed for a NP rate of 5% for the minor irregularities if any, although none pointed out by the department. Following Apex Court, in the case of Lal Chand Bhagat Ambica vs. CIT (1959) (Supra) and Uma Charan Shaw & Bros. Vs. CIT (1959) (Supra), no addition can be made or sustained based on mere presumption, surmises and suspicion and accordingly, we do not find the objections of the department justified and as such, rejected. 17. The main grievance of the assessee is regarding the estimation of income of the as....