TaxTMI 
TaxTMI 
2024 (11) TMI 384
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....bitrarily. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in upholding G.P. rate of 7% on turnover from entire receipts (including manufacturing and contracting) without appreciating the fact that Hon'ble ITAT in assessee's own case for A.Y. 2012-13 has accepted the GP rate declared by assessee, thus the application of GP rate of 7% deserves to be struck down and the GP declared by assessee deserves to be accepted. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in allowing re-computation of turnover declared by assessee by incorporating therein turnover of assessee's branch situated at Srilanka of Rs. 4,72,66,291/- and estimating net profit by applying 7% of turnover even on such turnover (when the assessee had already incorporated net profit from such branch in its profit & loss account) by grossly ignoring the fact that rate of 7% as applied to business run in India and therefore could not be applied on branch run outside India, thus the action of Id. CIT(A) in upholding the enhancement of the gross receipts and applying net profit rate of 7% deserves to be held bad in la....
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....ly on 24.12.2018 stating that the different is on account of receipts of Rs. 4,00,52,739/- which is received from IRCON towards the work executed by the assessee at Sri Lanka through its overseas branch. The entire receipts from this project stood credited to the respective branch who had executed the work and declared the receipts in its balance sheet at Srilanka, copy of that audit report was placed on record. Further, the assessee has credited the profits from the Srilanka Branch in its profit & loss account at Rs. 12,82,233.64. If this amount of receipt of Rs. 4,00,52,739/- is excluded from the gross receipts as per form 26AS at Rs. 82,99,48,240.20, the resultant receipts would be less than the receipts declared by the assessee at Rs. 81,77,01,489.88. It is because in some cases TDS has not been deducted through work executed by assessee company and consequent receipts are included in the gross receipts declared. 3.2 The ld. AO noted that the assessee has declared total contract receipts of Rs. 81,77,01,489/- in its P&L account (excluding work done with IRCON at Sri Lanka) however, in form 26AS the assessee has received total contract receipts of Rs. 82,99,48,240/-, which....
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....Assets) accordingly. Further the Balance Sheet of branch duly audited by firm of chartered accountant in Sri Lanka which is enclosed herewith for your kind perusal and record. With regard to the stock register, as has already been submitted assessee has not maintained day to day stock records and goods purchased are directly charged to revenue which is also reported by the auditors in the report. Further the stock lying at the yearend is physically verified and the same is declared ion actual verification. The site wise records of expenses claimed are tendered herewith alongwith the other bills and vouchers of the expenses claimed of more than Rs. 10.00 le the P&L account. Also produced muster rolls for your kind verification" The above reply has been considered carefully by the ld. AO, however, it is not found satisfactory as the assessee could not provide complete books of accounts in regard to contract work done at Sri Lanka with IRCON. The assessee simply said in its reply dated 24.12.2018, that "the receipts of Rs. 4,00,52,739/-received from IRCON toward the work executed by the assessee at Sri Lanka through its overseas branch". Thus, from the above mismatch of....
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....t is noted that the case was selected in scrutiny and the appellant was issued statutory notices as per law. The appellant is engaged in contractual and manufacturing activities during the relevant financial year and the AO has compared the GP Rate and figures of the turnover and gross profit of preceding two assessment years with the instant assessment year. The AO issued notice u/s.142(1) of the Act to furnish details of expenditures debited in the P&L A/c, but the appellant failed to furnish complete details. The AO issued show cause notice dated 19.12.2018 requesting for reconciliation of receipts shown in ITR vis-à-vis receipts shown in Form 26AS, production of complete stock register, bills and vouchers of site wise expenses, books of accounts and details regarding contract work done at Sri Lanka, muster roll of labour works and bills and vouchers of expenses incurred above Rs. 10 Lakh of each head of P&L A/c. The AO was not fully satisfied with the submissions made by the appellant as mentioned in para 2.5 of the assessment order and pointed out that the bills and vouchers, books of accounts were not produced and no details of opening and closing stock were produced, ....
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....T in A.Y. 2009-10 and 2012-13 and since the appellant had continued with the same line of business, based on the substantial reduced turnover in the instant assessment year as compared to earlier year, learned CIT(A) sustained the addition to the extent of Rs. 12 lakhs for contractual receipts and Rs. 1 lakh for trading receipts. The appellant has relied upon the past appellate history in its case in the submissions made before the NFAC. It is noted that Hon'ble ITAT has not disagreed with the AO / CIT(A) as regards rejection of books of accounts, in A.Y. 2009-10-ITA No.712/JP/2012 dated 26.04.2013, para 14 of order of Hon'ble ITAT, Jaipur, but reduced the quantum of profits estimated and partly allowed the appeal of the assessee/Revenue. Similarly. in A.Y. 2012-13 also, as per Hon'ble ITAT order ITA No.897/JP/2015 dated 28.11.2016, the facts were as per earlier years and there is no change in position. Further, in para 5.4 of this order, it has been specifically mentioned that "the books of accounts rejected u/s.145(3) are not in dispute. The limited issue for our consideration relates to estimation of GP rate in relation to the appellant's contractual activities u....
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....rdingly, ground No.1 filed by the appellant is dismissed. 5.3 As regards the submissions of the appellant where it has been pointed out that the addition sustained by the appellate authorities is not 8% but a lower figure, it needs to be clarified that facts of every year are not exactly similar and for estimation of profits, every year has to be examined separately Since the appellant has failed to submit necessary evidences before the AO/NFAC despite repeated opportunities and simply relied upon its own ledger accounts and did not reconcile its stock details, did not furnish expenditure evidences above Rs. 10 lakhs and other necessary details in support of the claims of GP rate / NP rate, it is held that the addition made by the AO with respect to the NP rate be restricted to 7% instead of 8% as adopted by the AO after going into the parts of the instant assessment year. Furthermore, the appellant has submitted in its submission dated 02.06.2023 that there is a mistake in calculation of trading addition for which the petition u/s.154 of the Act has already been made before the AO on 22.01.2019, copy of which filed before DCIT, Circle-4, Jaipur has been submitted before N....
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.... of the work was executed and income received was declared. Apart from this, assessee also owned two Wind Mill plants installed at Jaisalmer where electricity generated is sold to state owned electricity Boards. Return of Income for the year under appeal was filed declaring total income at Rs. 2,71,32,290/- after claiming deduction 80IA at Rs. 52,40,124/- on the Wind Mill income and assessment was completed u/s 143(3) at Rs. 6,52,17,770/- after making trading addition of Rs. 3,80,85,480/- by invoking the provisions of section 145(3) of the Income Tax Act, 1961. Against this order passed by ld.AO, assessee decided to file an appeal before CIT(A) wherein ld. CIT(A) erred in confirming the rejection of the assessee's books of accounts and invoking the provisions provided u/s 145(3) of the Income Tax Act,1961 (hereinafter referred as the 'Act"). However, in the order passed by ld. CIT (A) u/s 250 of the Act, the expenses of depreciation and interest as requested in the application filed u/s 154 are allowed and reduced the NP rate to 7% applicable on the total turnover of the appellant (both contractual and manufacturing activities and including contractual turnover of....
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....sessee had no role in maintenance and storage of the stock required for executing the daily work requirements of the railways as per the contracts and also provides for the verifiability and accountability of all the purchases and consumption of all the major items due to the railway authorities' interference in the process. Moreover, the practice of physical verification of the stock remaining unutilized at the end of the year in the stock yards being also declared on actual verification proves for the accountability of the assessee and the Railway authorities in the case at hand. For the failure of assessee to provide the muster roll of labourers working at their sites, assessee had earlier explained the difficulties posed by the nature and the geographical limitations of the work sites for non-employment of permanent labourers and the need for the engagement of contract labourers for undertaking the works carried out for the Indian railways in remote areas having lack of access to basic human necessities of food, water and a place to stay making it inefficient and impractical to employ permanent labourers. So the works assigned to the assessee's company had been complet....
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....s and assessee is eligible for claim of credit of the taxes paid in Srilanka on such profits as per the DTAA executed between India and Sri Lanka. However, in the instant case the assessee has not claimed any credit for the taxes paid on such profits in Sri Lanka and the action of ld.AO doubting the completeness and correctness of the books of accounts of the branch at Srilanka is outside the scope the Indian Tax authorities. Grounds of Appeal No. 2& 3: In these grounds of appeal, the assessee had challenged the action of ld. CIT(A) in upholding the G.P. rate of 7% on turnover from entire receipts (including manufacturing and contracting and also of the contract work executed by the overseas branch at Sri Lanka) without appreciating the fact that Hon'ble ITAT in assessee's own case for A. Y. 2012-13 has accepted the GP rate declared by assessee. Ld. CIT(A) has further erred in allowing re-computation of turnover declared by assessee by incorporating therein turnover of assessee's branch situated at Srilanka of Rs. 4,72,66,291/- and estimating net profit by applying 7% of turnover even on such turnover (when the assessee had already incorporated net pro....
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....pts as per form 26AS,the remaining figure of contract receipts would be even less than the gross contract receipts declared by the assessee in its Profit & Loss account from Indian operations. For such negative difference it was explained that in some cases TDS has not been deducted though work is executed by Assessee Company and consequent receipts are included in the gross receipts declared. Ld. AO has failed to appreciate this fact and wrongly included the receipt of Sri Lanka branch for making estimation of profit which action is confirmed by ld. CIT(A) by fully ignoring the fact, as submitted above, that the turnover of overseas branch cannot be included in the total turnover for taxing the income earned from Indian operation by the assessee company. Moreover, while making the estimation of income by including the contract receipts of overseas branch at Sri Lanka, ld.AO as well as ld. CIT(A) has failed to appreciate one more important fact that assessee itself has included the net profit from Sri Lanka branch in the Total income declared by crediting the same in its P&L account, thus again computing the profit on the said contract receipts tantamount to multiple taxat....
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....rival contentions and perused the material available on record. It is a settled legal proposition that once the books of accounts have been rejected and have not been disputed as in the instant case, the Assessing Officer is required to estimate the N.P rate in the hands of the assessee. In the instant case, the assessee company has reported segmental results in respect of its manufacturing as well as contract activity wherein it has reported NP rate of 6% in respect of its manufacturing activities and 5.42% in respect of its contractual activities. The AO has applied NP rate of 8% across both the segments and Id CIT(A) has reduced it to 7% in respect of manufacturing activities and has done a lump sum disallowance of Rs 25 lacs in respect of contractual activities. Further, the Id AR has relied upon the decision of the Tribunal in assessee's own case for AY 2009-10 and AY 2012-13 where lumpsum disallowance was sustained at Rs 10 lacs in respect of contractual activities. However, we find that both the Id CIT(A) and the Tribunal have not gone into the issue of reasonable and proper estimate by applying average NP rate based on past history as held by the Hon'ble Jurisdictio....
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....ode nor the manner of maintaining the books of accounts by the assessee has changed, as also the principal i.e. Indian Railway have remained the same. Therefore, ld.CIT(A), while passing orders for A.Y.2014-15 & 2015-16 has also sustained certain ad hoc additions and deleted the balance additions. Further reliance is placed on the following decisions: 65 DTR 196 CIT V/s. Amrapali Jewels (P) Ltd. (Raj.) Appeal (High Court). Substantial question of law. Estimation of income and GP rate. It is essentially for the taxing authorities to decide as to what should be percentage rate of GP that should be applied on particular turnover of the assessee. It is a matter of discretion to be exercised on settled practice world. Once the Tribunal accepted the factual explanation of assessee and accordingly, deleted the additions in question made by AO in exercise of its appellate discretionary powers, then it would not involve any substantial question of law. 316 ITR 125 Inani Marbles (Raj.) That in case of profit application past year history of the assessee is best guide. 99 TTJ 164 Ajay Goyal Vs. ITO (Jd.) Accounts - Rejection - GP rate - Be....
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.... AO regarding the maintenance of books of accounts are general in nature and no specific defect has been brought on record in support of the allegations made by the Ld. AO. It is thus submitted that the results declared deserves to be accepted and the additions made by applying profit rate of 7% deserves to be deleted. 6. While hearing, the ld. AR of the assessee in addition to the written submission so filed vehemently argued that profit of Sri Lanka project is already reflected in the profit and loss account already on record. There cannot be any further addition on estimation to that profit and turnover already reflected in the accounts. The income so disclosed and the related facts placed on record has not been appreciated by the lower authorities. The ld. AR of the assessee also submitted that in past also the books of accounts of the assessee were rejected and in respect of the contract receipt, the profit were estimated. That profit so estimated if compared with the current year profit then the assessee has shown the better results. To explain that aspect of the matter he relied upon the following chart; A.Y. Declared by Assessee Applied by AO Applied by CIT(A....
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....isputed as in the instant case, the Assessing Officer is required to estimate the N.P rate in the hands of the assessee. In the instant case, the assessee company has reported segmental results in respect of its manufacturing as well as contract activity wherein it has reported NP rate of 6% in respect of its manufacturing activities and 5.42% in respect of its contractual activities. The AO has applied NP rate of 8% across both the segments and ld CIT(A) has reduced it to 7% in respect of manufacturing activities and has done a lump sum disallowance of Rs 25 lacs in respect of contractual activities. Further, the ld AR has relied upon the decision of the Tribunal in assessee's own case for AY 2009-10 and AY 2012-13 where lumpsum disallowance was sustained at Rs 10 lacs in respect of contractual activities. However, we find that both the ld CIT(A) and the Tribunal have not gone into the issue of reasonable and proper estimate by applying average NP rate based on past history as held by the Hon'ble Jurisdictional High Court in case of CIT vs Gupta K N Construction 116 DTR 377 as well as in various other decisions wherein it has been held that the best guide in the case of fair estim....