TaxTMI 
TaxTMI 
2025 (4) TMI 976
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....ine and this disallowance of Rs. 32,38,02,815/-(70% of 46,25,75,450/-) was included in estimated addition by applying N.P. rate of 10.32%, 2. Whether in the facts and circumstances of the case, the Id. CIT(A) is justified in deleting addition of Rs. 13,87,72,635/- made u/s 40(a)(ia) which was disallowed by assesse itself and it should not have been made part of estimation of Net Profit. 3. Whether in the facts and circumstances of the case, the Id. CIT(A) is justified in estimating net profit @0.11% and not separately considering the disallowance u/s 40(a)(ia) of Rs. 13,87,72,635/- and disallowance of Rs. 32,38,02,815/-being non genuine expenses and accordingly whether the Id. CIT(A) is justified in relying upon the judgement of Hon'ble ITAT and High Court in the case of assesse for earlier assessment year when the facts of the case are distinguishable. 4. Whether in the facts and circumstances of the case, the Id. CIT(A) is justified in excluding amount of Rs. 1,72,77,91,273/- from turnover of the assesse for determining GP 29.29% whereas the above amount was shown by assesse itself in its ITR under the had "other income" in P&L account so it is part....
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....48,176/- (11.96%). On being asked it was submitted that contract receipts of the assesseecompany during the year declined considerably to Rs. 2,46,73.49.728/- from Rs 4,28,36,27,201/- as it was in immediately preceding year. The reasons for this down fall as is explained by the assessee reads as under : "Decrease in contract receipts is approximately 42.40% as compared to last year. All work contracts are allotted on the basis of tender system. It is further submitted that in this line of business competition is very high and the assessee-company has to compete with other big players in the business and sometimes it is very difficult to compete with them on price. Many times to obtain work contract, competitive prices are quoted yielding lower profits. Moreover, cost of construction and other expanses keep on increasing Various contracts were required to be completed within strict time frame failing which contractual penalties were also too high. Besides these factors, the assessee-company took some of the projects on sub-contract basis on low profit margins." 3.2 On perusal of the audited financial of the company, ld. AO noted that under the head "Long Term Loans and A....
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.... Transfer (DBFOT) Basis Notice by the concessionaire for payment of compensation on account of delay events, additional works/change of scope and breach of contract by the authority." In view of the facts furnished by the assessee, the amount of Rs. 1,72,77,91,273/- shown in the ITR as other income, was treated as contract receipts of the assessee which the assessee itself has disclosed and offered for taxation. 3.3 In respect of amount shown as trade payable under the head sundry creditors for goods and expense in the balance sheet, assessee was specifically requested to file the name of all the persons / parties from shown as Trade Payable- Sundry creditor for goods and expenses in the Balance Sheet, the assessee simply filed name of the parties with amount as on 31.03.2017. In the absence of the complete present postal address, the genuineness of the transactions with the parties as claimed by the assessee could not be examined / verified by ld. AO. 3.4 During the course of the assessment proceedings, the assessee was specifically requested to furnish quantitative details of all the items shown under the head opening and closing stock with supportive bills and vouchers ....
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.... payment of Rs. 46,25,75,450/ -. The books of accounts as well as ledger account of the parties and details of work carried out by them has not been furnished by the assessee. In absence of which, it is not clear whether such payment was actually made by the assessee for any type of work sublet or carried out by them. By disallowing 30% of the total expenditure of Rs. 46,25,75,450/-, the assessee had actually enhanced its expenditure by 70%, as the same might not have been incurred / paid by the assessee at all. Considering these facts as observed by the ld. AO it was evident that the book results declared by the assessee suffers from various defects and deserves to be rejected by invoking provisions of 145(3) of the Act. While holding so ld. AO also noted that in the immediately preceding i.e. A. Y. 2016-17 assessment was completed u/s 143(3) and on account of assessee's failure to prove the authenticity of books of account, book results were rejected u/s 145(3) and NP rate of 7.23% was applied as against negative NP rate of 6.97% shown by the assessee-company. On appeal by the assessee, vide appellate order dated 22.07.2018 the Ld. CIT (A-2), Udaipur in Appeal No. 10181....
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....wed a sum of Rs. 13,87,72,635/- u/s 40(a)(ia) of the Income-tax Act, 1961 and added to the total income. Hence, the income so disallowed by the assessee itself u/s 40(a)(ia) to the tune of Rs. 13,87,72,635/- separately added to the total income of the assessee. 3.12 Ld. AO noted that apart from interest income of Rs. 2,58,85,880/- and other non-operating income of Rs. 1,23,88,682/- as disclosed by the assessee in the ITR separately considered for calculating the income of the assessee. As discussed in the earlier para and as observed by the AO that the assessee has not disclosed works contract receipt of Rs. 57,56,57,561/- in its ITR whereas detail of the same was available in Form 26AS. The assessee has also shown the difference of Rs. 57,56,57,561/- in the reconciliation chart given. This works contract receipt of Rs. 57,56,57,561/- has been considered for application of NP rate after rejecting the books of account as discussed above by the ld. AO. While doing so the ld. AO noted that if the contention of the assessee that complete books of account have been maintained along with relevant bills and vouchers and trading results should be accepted as such, is considered then als....
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....ess expenditure for non-deduction of tax. Since the AO has applied net profit rate on total turnover no separate disallowance should be made. The separate addition so made is bad in law and bad on facts." This ground is being taken ahead of ground no. 2 since it is embedded in computation of total income made on estimate basis which is challenged by the appellant in ground no. 2. In this ground, the appellant has challenged disallowance of expenses on which TDS was not made. This disallowance was made by the AO as there were certain expenses on which TDS was not made and the appellant himself had admitted this fact and made disallowance in his ITR. The stand of the appellant is that once income is assessed on estimate basis, no separate disallowance should be made u/s 40(a)(ia) of the Act. The appellant has also quoted provisions of section 44AD of the Act in his support. These provisions take care of all provisions of the Act from section 28 to 43C of the Act. As per this section, when income is computed on the basis of presumptive tax scheme, provisions of inter alia section 40a(ia) are not attracted. Same thing is provided in provisions of section 44AD, A44AE, 44AF, 44B....
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....his regard have been discussed in the order and in appeal the appellant has not demonstrated that the defects in the books of account, as discussed in the order, were incorrect. In fact, such defects were also noticed in assessment proceeding for AY 2016-17 and action of the AO regarding rejection of books of account was upheld in first as well as second appeal. This ground in as much as it challenges action of the AO regarding rejection of books of account is therefore, dismissed. Remaining part of the ground-which challenges application of net profit rate of 10.32% and not providing deduction for depreciation and interest expenses - is taken for adjudication. In this case, the AO rejected books account and estimated income after applying net profit rate of 10.32% and further disallowing expenses in respect of which TDS was not made by the appellant. The basis for adopting this net profit rate is the order of Ld CIT (A) for immediately preceding assessment year ie. AY 2016-17. The appellant was in appeal before Ld. CIT (A) against the order of AO for AY 2016-17 where net profit rate of 7.6% was applied and neither deduction towards depreciation and interest was allowed no....
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....ts 8,63,509/- (iv) Disallowance u/s 40(a)(ia) @ 30% of 1,25,21,09,040/- 37,56,32,712/- Total 30,64,71,567/- Less: Depreciation as per chart u/s 32 30,67,88,728/- Loss /UAD (3,17,161/-) 5.2 The case was selected for scrutiny. During the proceedings u/s 143(3) the A.O called for various details and documents in support of entries in the books of account but the assessee failed to furnish such evidence. The notices calling for specific details have been reproduced in the order under appeal and non- compliances by the assesseeare also noted. 5.3 The A. O required the assessee to show-cause why books of accounts may not rejected in response the assesses submitted as under- "As regard to your proposal for rejection of books of accounts in sutimittedinat through there may be some technical defects in the maintenance of books of account, but still the Income can very well be computed fhore such books of accounts it is submitted that the starting point for computation of income should be from books of accounts unless they are such untrust worthy that proper determination of income i....
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....f work being executed various loans had become non performing. There was loss of Rs. 31,30,33,272/ during the year. In the computation of total income the assessee had already made disallowance of Rs 37.56.32, 712/ out of expenses u/s 40(la), which is almost 8 76% of the revenue Any further addition to the total income was not justified in the facts of the case. 3 In subsequent years also the appellant company had suffered heavy losses and it was submitted to the Id AO that in AY 2017-18 and A Y. 2018-19 there are heavy losses Even if any estimation was required to be made, the net profit rate can be estimated only subject to deduction of depreciation and interest separately 4 It is also submitted that the net profit estimation if any made should be maple subject to further claim of depreciation and interest. Various judicial decisions as well as guidelines Issued by the Board also suggests that the estimation should be subject to depreciation and interest to third parties These are peculiar facts and may not be a common feature amongst various contractors Some of the contractor may have substantial loans and some may have their own funds Similarly certain contrac....
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....o Accrete Consultancy. The proper facts could not be appreciated which resulted into this addition. As regards contention of the Id. AO that in earlier year the expenses claimed on 7 account of sub-contract payment made to Inter Ocean Videsh Limited being disallowed also does not hold any validity, as the said addition was also deleted in appeal by Hon'ble ITAT and the expenses were found to be genuine. The said reason so given by the Id. AO was also not justified in rejecting the books of accounts and estimation being made at such a high amount. 8. As regards consultancy fees paid and some disallowance made in earlier years on account of payment to SREI Limited, was also found to be not correct and the same addition was also deleted in appeal and was also approved by Hon'ble ITAT in appeal The services of professional and technical support provided by the said company was found to be correct and justified, and the addition was deleted. The details of such consultancy services paid was also submitted and the details of the same are as under: Party Name Amount Rakesh Kumar Navkar 20,000 Accrete Consulting Engineering Pvt Ltd 5,58,804 Ac....
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....nce of 30% of the expenditure amounting to Rs. 1.25.21.09.040/- on which TDS had not been deducted. The disallowance of Rs. 37,56,32,712/- has been made in the computation of total Income. The addition for the said disallowance has already been made by the assessee 14 The total sundry creditors during the year under consideration is Rs. 105 11 crores as compared to Rs. 63.43 crores in the last year. The amount due to creditors had increased on account of financial crisis being faced by the company and it was not possible to repay the creditors in schedule time. The current liabilities had increased on account of increase in current maturity of long term borrowings which had increased to 113.27 crores from 89.89 cores in the past year. 15 Outward remittance is mainly on account of payment of term loans and interest on account of loan from Standard Chartered Bank: The copy of certain 15CA in relation to the same is enclosed herewith. The payment of foreign remittance has no connection with the income of the assessee, as this is the repayment of loans taken. 16 The amount of Rs. 18,89,88,076 is on account of current account and loan taken from directors, and....
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.... were defects in the books of account. In such facts, the rejection of books of accounts is hereby upheld. 7.2 Next, the issue of estimation of income by the A. O, is discussed The AO has estimated net profit by taking the average rate of net profit over the three immediately preceding years. The assessee has contended that estimation of profits should be made sect to further claim of depreciation and interest. This argument would hold good where interest and depreciation claimed are verifiable and therefore an estimate of profitsare that neither loan confirmations nor complete details of interest expenses were furnished In such facts. I find that estimation has to be made of profits after interest expense So far as the issue of depreciation is concerned, the A.O has noted that details and evidence in support of additions to assets during the year was not furnished by the assessee I find from the record that in the immediately preceding assessment year, AY 2016-16, a search was conducted in the case of the assesses, assessment was completed under scrutiny provisions and there was no adverse finding regarding claim of depreciation in these facts the AO could have disallowed....
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.... 9 The fifth ground of appeal is as under "The Ld. AO has erred in initiating penalty proceedings uis 274 and 271(1)(C) 9.1 The initiation of penalty is not appealable. The ground of appeal is therefore dismissed as not maintainable. In the result appeal is partly allowed. (Vandana Verma) Commissioner of Income Tax (Appeals-2) Udaipur ITA No. 10181/2018-19 A.Y. 2016-17 Date:22:07:2019 Copy to the 1. The Director General of Income Tax (Inv.), Rajasthan, Jaipur 2 The Pr. Commissioner of Income Tax (Central), Jaipur 3. The Addl/Jt. Comm. of Income Tax, Central Range, Jodhpur/ Udaipur 4. The Assessing Officer 5. The Appellant Commissioner of Income Tax (Appeals-2), Udaipur In the Order, though the AO adopted net profit rate of 10.32%, he made separate addition towards disallowance of expenses on which TDS was not made as the appellant had already disallowed a sum of Rs. 13,87,72,635/- in his I'TR. The appellant was in appeal before Ld ITAT against the order of CIT (A) for AY 2016-17 but by the time assessment order for AY 2....
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....ssment order, the A.O. also stated that there is a claim of bad debts of Rs. 24,31,584/- and there were dues to the directors and associates in the balance sheet. From the record, we found that the assessee had submitted various details as required by the AO. vide letter dated 06/12/2018 and 14/12/2018. The details were submitted comprises of details of bad debts, foreign remittances, detailsofstatutory dues, consultancy charges, borrowings on which interest was being paid. However, the A O. of the view that complete details were not submitted and the results declared are not fully verifiable The AO also observed that in the immediately preceding you Le. AY, 2015-16, a disallowance of Rs. 53.63 crores was made on account of payment to Inter Ocean Videsh Limited in respect of the expenses of Rs. 30.09 crores which was treated as bogus. The A.O. also that the assessee had claimed net loss of 6 97% as compared to the net profit rate of 7.23% shown in the immediate preceeding year, therefore, books of account are liable to be rejected. After making comparsion of net profit of last three years, the A. O. applied net profit rate of 7.6% to the total receipts of this year which was result....
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....egard with are required to be appreciated white estimating net profit in the wise of the assesses: a. CIT v. Jain Construction Co. (2000) 245 ITR 527 (Raj) Reference Question of Fact Findings of Tribunal based on appreciation of material on record and evidence produced by assessee-Same pure finding of (act- No referable question of law arose CBDT circular -Binding nature of circular-Powers of CBDT under 119 Scope In exercise of power unders. 119, CBDT is competent to reduce the rigor of low and bring about fait enforcement of it Act by issuing circulars-Such circulars are binding on IT authorities. Date of such Order Accounts-Rejection of Accounts-of accounts and estimation of income- Allowability of depreciation and interest / salary to partners-Even in a case of estimation of profits by rejection of books, depreciation and salary/interest to partners is separately allowable. x x &....
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....s to apply GP rate or net profit rate by considering the past history of the case along with other relevant circumstances in the instant case, there was a substantial increase in the receipts of the assessor to Rs 3,47,98.8 19 in the relevant year from Rs. 1,20,45,423 in the immediately preceding you while there was decrease in GP rate to 1.20 per cent in the relevant year in comparison to 10.25 per cent in the earlier year Explanation of the assessee that the substantial increase in gross receipts resulted in reduced margin has not been controverted Another explanation of the assessee that the contract works were executed by it in the military and air force areas where the working hours were less in comparison to normal civil work and thus various expenses and cost of material have increased is also not rebutted by bringing substantial material on record-Therefore, GP rate of 12.50 per cent applied by the AO on the basis of the case of another contractor IC & Co for asst, yr. 1994-95 and 1999 2000 is not justified, particularly when the assessment year involved in the present case is 2008-09 and there is nothing on record to show that the facts of the present case are identical to....
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....imation being made at such a high amount. 12. With regard to claim of consultancy fee paid and some disallowance made in earlier years on account of payment to SREI Limited, was also found to be not correct and the same addition was also deleted in appeal and was also approved by ITAT in appeal. The services of professional and technical support provided by the said company was found to be correct and justified, and the addition was deleted. The details of such consultancy services paid was also submitted and the details of the same areas under: Party Name Amount Rakesh Kumar Navkar 20,000 Accrete Consulting Engineering Pvt Ltd 5,58,804 Accrete Consulting Engineering Pvt Ltd 14,85,021 Rajendra Awasthi 56,180 Arun Kumar 2,40,000 Accrete Consulting Engineering Pvt Itd 12,59,500 India Institute of Technology 1,71,750 Accrete Consulting Engineering Pvt Itd 36,29,078 Accrete Consulting Engineering Pvt Itd 14,45,292 SREI Infrastructure pvt ltd 4,00,00,000 SREI Infrastructure pvt ltd 25,83,67,944 SREI Infrastructure pvt ltd 37,30,994 SREI Infrastructure pvt ltd 37,30,994 TOTAL 31,09,64,563 ....
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....he profits are still lower. 18. The Id AR also invited our attention to the total sundry creditor during the year under consideration is Rs. 105. Tores as compared to Rs 63.43 crores in the last year. The amount due to creditors nag increased on account of financial crisis being laced by the company and it was not possible to repay the creditors in schedule time. The current liabilities had increased on account of increase in current maturity of long-term borrowings which had increased to 113.27 crores from 89.89 cores In the past year. 19. With regard to outward remittance, it was submitted that there are mainly on account of payment of term loans and interest on account of loan from Standard Chartered Bank. The copy of certain 15CA in relation to the same was also placed on record The payment of foreign remittance has no connection with the income of the assessee, as this is the repayment of loans taken As per the Id AR, the amount of Rs. 18,89,88,076 is on account of current account and loan taken from directors, and is not an advance given to then the company had been facing acute financial problem and to meet urgent business needs, the funds were being taken ....
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....th regard to each and every objection of the A O and the Id. CIT(A) in their respective orders. We had also deliberated on the various judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the Id AR and the Id DR during the course of hearing before us in the context of factual matrix of the case There is no dispute to the fact that there were some technical mistakes in the maintenance of the books of account. Some of the observation made by the A.O. appears to be correct with regard to certain expenditure, however, the A.O. should not loose site of the gross profit rate shown by the assessee during the year as compared to the gross profit rate shown in the immediatepreceding year while coming to the conclusion of rejecting the books of account and estimating net profit rate. From the record, we found that during the year under consideration, the gross profit rate shown by the assessee is 29 29% as compared to the gross profit rate of 27.87% shown in the immediately preceding year. Thus, we found that the gross profit rate shown during the year is much better than the gross profit of prereading year Under these facts and circumstanc....
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....w of the above factual discussions and genuineness and reasonableness of expenditure claimed by the assessee, we direct the AO to assess income of the assessee at Rs .50 Lacs in place of returned loss of Rs. 3,17.161/- We direct accordingly 28. Before parting, it is noted that the order is being pronounced after ninety (90) days of the hearing. However, taking note of extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days to be excluded. For coming to such a conclusion, we rely upon the decision of the Coordinate Bench of the Mumbai Tribunal in the case of DCIT vs JSW Limited in ITA No. 6264/Mum/2018 & 6103/Mum/2018, Assessment Year 2013-14, order dated 14th May, 2020. As a result, the appeal of assessee is allowed in part 29. In the result, appeal of the assessee is allowed in part. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962 by placing on the notice board." The revenue preferred appeal against the order of Ld ITAT. Hon'ble Rajasthan High Court (the High Court) dismissed the revenue's appeal. The matter thus attained finality in as much as assessmen....
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....at there was no dispute with regard to nature of claim in as much as its nature is concerned. There is no doubt that this was an unilateral claim which was made on the part of the appellant and which was not accepted by the parties concerned. Now the questions that arises is whether such claim gives rise to any income and is it taxable. Courts have held that such claim gives rise to only notional income. Income may accrue in the year in which a cause of action arises if within the taxable year the other party admits liability even though the exact amount is left to later negotiations if there is a reasonable basis upon which it may be estimated. The estimated income is accrued at once subject to correction when the amount is agreed upon. If the amount of the liability is litigated however even though liability is admitted it has been held that income does not accrue until the litigation is finally terminated. But if liability is not admitted income does not arise from mere accrual of a cause of action. The income may not be accrued until a settlement is made or if the claim is litigated until all possible appeals have been taken or the liability has become final by the expiration o....
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....,92,15,998/- 3. Depreciation Rs. 23,68,58,343/- Total Rs. 97,05,59,476/- Net profit/total income Rs. 16,45,86,794/- (-) The net result of computation of net profit is loss. The result of computation of income made by Ld ITAT in respect of AY 2016-17 was also in loss as is evident from para 25. 26 and 27 of its order. As per calculation done in para 26 of order of Ld ITAT, total income was arrived at Rs. 76.51-Rs. 95.19 (70,96+24.23) (-) Rs. 18.68. However Ld ITAT determined total income at Rs. 50,00,000/ -. In the present case also, result of computation of total income is loss ie Rs. 16,45,86,794/- but following rate of net profit of 11%, adopted finally by the Ld' ITAT for arriving at figure of Rs. 50,00,000/-,total income on turnover of Rs. 2,75,16,99,154/- (excluding Claims) comes at Rs. 30,26,869/ -. The AO is directed to assess total income of the appellant at Rs. 30,26,869/-and delete remaining addition. GoA no. 2 is, therefore, allowed. 8.5. GoA no. 5- "The Id. AO has erred in making addition in respect of difference of income shown in return of income and 26AS in the gross turnover. The Id....
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.... 2017-18 in many cases. While in some cases, receipts shown in the books are on higher side, in some cases, it is on lower side, In one case, both the figures are same. The appellant has also invited attention towards this difference in AY 2016-17 when total receipts as per Form 26AS were at Rs. 4,39,73,61,640/- and as booked in P/L account were at Rs. 4,48,83,51,085/- but no adverse inference was drawn by the AO in that year while passing assessment order. Copies of Form 26AS and copies of contractors' accounts for AY 2016-17 are filed by the appellant. I have considered the submission of the appellant, gone through copy of financials for AY 2016-17, copy of assessment order for AY 2016-17, and copy of account of contractors for AY 2016-17. In AY 2016-17, though there was difference between figures of receipts as per Form 26AS and that shown in the P/L account, no addition was made by the AO while passing assessment order. Similar is the situation this year but the stand of the AO is different. While making the addition, the AO did not consider explanation offered by the appellant where he submitted a detailed chart in respect of each deductor showing against them amo....
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.... the appellant while taking GoA no.2, this ground stands already allowed. GoA no. 5 is, therefore, allowed. 8.6. GoA no. 6- "The Id. AO has erred in making separate addition for Rs. 2,58.85,880 for interest income and Rs. 1,23,88,682 for other non-operating income, which are part of the business receipts. The addition so made is bad in law and bad on facts." This ground challenges action of the AO regarding making separate addition for interest income and other non-operating income. 8.6.1. As regard separate addition for interest income, it is noticed from the Order that the AO found that the appellant had shown interest income in ITR and, therefore, the AO included this amount in total income of the appellant. The appellant's submission is that the interest was received on margin-money and security deposit and he booked interest expenses as expenditure net of interest received. It is noticed from computation of income filed with ITR that profit as per P/L account was taken at Rs. (-) 32,77,48,176/- and income under this head was the only income for AY 2017-18. As per P/L account, interest expenses were at Rs. 8,29,76,390/ a....
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....also, this income was shown at Rs. 1,13,20,333/- but it is noticed from assessment order for AY 2016-17 that no separate addition was made and this income was included in business receipts. Ld ITAT in its order for AY 2016-17 has not made separate addition with respect to this receipt and included this amount in receipts from operations for the purpose of arriving at gross profit rate. Since facts are similar this year, no separate addition on this count is called for. Further, while discussing GoA no. 2, this amount has been included in receipts from operations for the purpose of applying gross profit rate. This addition of Rs. 1,23,88,682/- is, therefore, deleted. This part of ground of appeal is allowed. GoA no. 6 is allowed. 8.7. GoA no. 7- "The Id. AO has erred in charging interest under section 2348" This ground is regarding wrong charging of interest u/s 2348 of the Act. Since this interest is to be computed afresh at the time of giving effect to this order, this ground does not require adjudication at this time and is, therefore, dismissed. 8.8. GoA no.8- "The Id. AO has erred in initiating pen....
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....mpany filed Nil income. In that return the assessee claimed carried forward of unabsorbed loss of Rs. 5,52,17,083/- (b/f loss of AY 2016-17 Rs. 3,17,161 + current year's loss of Rs. 5,48,99,877/-). The case was selected for scrutiny through CASS and notice u/s 143(2) dated 17.08.2018 was digitally served on the registered email of the assessee-company through ITBA module by the DCIT, Central Circle-1, Jodhpur. In the assessment proceeding assessee in compliance to notices issued from time to time, filed its reply through E-proceeding facility. As is evident from the record that the assessee-company was incorporated in 2008 and is engaged in road construction work and other civil works. For the year under consideration ld. AO observed that the assessee on gross receipts of Rs. 2,73,93,10,472/- declared gross loss of Rs 1,03,37,47,372/- (37.74%) and net loss of Rs. 32,77,48,176/- (11.96%). On being asked it was submitted that contract receipts of the assessee- company during the year declined considerably to Rs. 2,46,73.49.728/- from Rs 4,28,36,27,201/- as they were in immediately preceding year. The reasons for this down fall as is explained by the assessee stating that De....
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....AN India Infrastructures P Ltd, and others from claiming bank guarantee for performance security bearing no. 316020351949/AP dated 04.04.2011 for Rs. 5,50,00,000/-, bank guarantee for performance security bearing no. 3160203519958/AS dated 04.04.2011 for Rs. 8,25,00,000/- and bank guarantee for performance security bearing no. 316020453474/AN dated 26.06.2013 for Rs. 10,00,00,000/ -. Assessee also filed a copy of letter 31.12.2015 signed by authorized signatory of M/s Kurukshetra Expressway (P) Ltd. addressed to the Project Director, NHAI, Project Implementation Unit, 305, Vidhya Niketan Road. D Park Model Town Rohtak-124001. (Haryana), subject of which was "Four laning of Rohtak- Bawal Section of NH-71 from KM 363.300 (Design KM 363,300) to KM 450.800 (Design KM 445.853) under NHDP III in the state of Haryana on Design, Build, Finance, Operate and Transfer (DBFOT) Basis Notice by the concessionaire for payment of compensation on account of delay events, additional works/change of scope and breach of contract by the authority. In the light of that facts furnished by the assessee, the amount of Rs. 1,72,77,91,273/- shown in the ITR as other income, was treated as contract receipt....
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....tantiate labour charges/wages (Rs. 6,85,26,505), salaries, bonus and other allowances (Rs. 16,83,84,454) with wage/labour/attendance register etc. The assessee also failed to justify the site wise expenditure on these heads. Ld. AO from the records also noted that during the year, the assessee has itself disallowed a sum of Rs 13,87,72,635/- u/s 40(a)(ia) of the Income-tax Act, 1961. This shows that the assessee violated the provisions of Section 40(a)(ia) by not deducting tax on payment of Rs. 46,25,75,450/ -. The books of accounts as well as ledger account of the parties and details of work carried out by them has not been furnished by the assessee. In absence of which, it is not clear whether such payment was made by the assessee for any type of work sublet or carried out by them. By disallowing 30% of the total expenditure of Rs. 46,25,75,450/-, the assessee had enhanced its expenditure by 70%, as the same might not have been incurred / paid by the assessee at all. Based on these observations ld. AO noted that the book results declared by the assessee suffers from various defects and deserves to be rejected by invoking provisions of 145(3) of the Act. While holding so ....
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.... Rs.1,23,88,682/- as disclosed by the assessee in the ITR separately considered for calculating the income of the assessee. As discussed in the earlier para and as observed by the AO that the assessee has not disclosed works contract receipt of Rs.57,56,57,561/- in its ITR whereas detail of the same was available in Form 26AS. The assessee has also shown the difference of Rs.57,56,57,561/- in the reconciliation chart given. This works contract receipt of Rs.57,56,57,561/- has been considered for application of NP rate after rejecting the books of account as discussed above by the ld. AO. While doing so the ld. AO noted that if the contention of the assessee that complete books of account have been maintained along with relevant bills and vouchers and trading results should be accepted as such, is considered then also there would be an addition of Rs.57,56,57,561/- to the income declared by the assessee being excess work receipt not disclosed in the ITR. Ld. AO also noted that as the addition after rejection of books of account is more than the addition which could be made on account of difference in works contract receipts, without rejecting the books of account, so it is found rea....
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....his contention of the assessee the ld. CIT(A) has held as under: The judicial pronouncements relied upon by the appellant also approve this view. Ld ITAT in its order for AY 2016-17 in the case of appellant has also computed income of the appellant without making separate addition on account of section 40(a)(ia) of the Act though the appellant had disallowed amount of Rs. 37,56,32,712/- in computation of income (para 5.1 of Ld CIT(A) order for AY 2016- 17). But in their order for AY 2016-17, neither LdCIT(A) nor Ld ITAT made any separate addition on this count. LdCIT(A) in para 7.6 of his order gave categorical finding that "This disallowance being 8.76% of the revenue, further addition to total income was not justified". It is also logical that when income is being estimated, no addition on account of section 40(a)(ia) be made. The AO is directed to delete separate addition of Rs. 13,87,72.635/- made u/s 40(a)(ia) of the Act. As is available from the above, finding that while allowing the grounds of appeal of the assessee, ld. CIT(A) has considered the decision of the ITAT in the case of the assessee's case and has accordingly allowed the grounds of appeal....
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....eft to later negotiations if there is a reasonable basis upon which it may be estimated. The estimated income is accrued at once subject to correction when the amount is agreed upon. If the amount of the liability is litigated however even though liability is admitted it has been held that income does not accrue until the litigation is finally terminated. But if liability is not admitted income does not arise from mere accrual of a cause of action. The income may not be accrued until a settlement is made or if the claim is litigated until all possible appeals have been taken or the liability has become final by the expiration of time to appeal from a judgement for the taxpayer. This amount, therefore, cannot be taken as base for applying net profit rate on estimate basis. As we note that in the assessment proceeding the assessee was asked to explain the claim of Rs. 1,72,71,91,273/- shown under the head long term loans and advances with supportive documents. It was also requested as to how and why claims of Rs. 1,72,71,91,273/- has been transferred /shown in the ITR under the head "other income as other claims". In response to this specific query the assessee filed a reply vide ....
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....too when book results are rejected and at that point of time only the real income be taxed and not the litigated income be considered while estimating the income. In the light of this observation we do not find any infirmity in the finding of the ld. CIT(A) and therefore ground no. 4 raised by the revenue stands dismissed. 12. Ground no. 5 raised by the revenue challenges the decision of the ld. CIT(A) in excluding amount of Rs. 73,98,982/- from turnover of the assessee for determining GP @ 29.29% when the assessee failed in the appellate proceedings to explain the difference in amount shown in form 26AS and amount credited in books of accounts in the cases of M/s Rajasthan State Road Development and Construction Corporation Ltd. (difference of Rs. 71,98,207/- and M/s JMC Projects India Ltd. (difference of Rs. 2,56,778/-). Apropos to this ground the relevant finding of the ld. CIT(A) is as under: I have considered the submission of the appellant, gone through copy of financials for AY 2016-17, copy of assessment order for AY 2016-17, and copy of account of contractors for AY 2016-17. In AY 2016-17, though there was difference between figures of receipts as per Form 26AS....
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.... Since the difference stands explained, and no adverse inference drawn in AY 2016-17, the difference is not to be included in figure of contract receipts and gross profit rate is not applied on this difference while computing gross profit. Since this difference has not been included in turnover and not considered for estimating income of the appellant while taking GoA no.2, this ground stands already allowed. As is evident from the above finding of the ld. CIT(A) has favored the assessee on two reasons one the similar issue was raised in the A.Y. 2016-17 and the ld. AO accepted the explanation of the assessee, and the matter has reached to finality as the appeal before the High Court was not considered. Secondly the ld. CIT(A) has considered the explanation of the assessee and hold that difference stands explained, and no adverse inference drawn. Before us the ld. DR did not demonstrate any perversity in the explanation of the assessee and finding of the ld. CIT(A) and therefore, we do not find any merits in the ground raised by the revenue and the same stands dismissed. 13. Now the left-over ground no. 1 wherein the grievance of the revenue is that ld. CIT(A) was no....
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..... Contract revenue Rs. 2,73,93,10,472/- 2. Other operating income Rs. 1,23,88,682/- Total Rs. 2,75,16,99,154/- (Since it has been held in foregoing paragraph that Claims are just notional income and they are neither income nor give arise to any profit) Less- Operating expenditure Rs. 3,77,30,57,843/- 1. Change in inventory Rs. 1,07,16,52,251/- 2. Operating expenditure Rs. 2,70,14,05,592/- Gross profit Gross profit % (-)37.11% Rs. 1,02,13,58,689/- This year there is gross loss @ 37.11% as against gross profit @ 29.29% for AY 2016-17. Since books of account are defective and, therefore, have been rejected, gross profit rate for AY 2016-17 is applied and gross profit comes at Rs. 80,59,72,682/- ( Rs. 2,75,16,99,154/-x29.29%). In AY 2016-17, Ld ITAT disallowed 20% of employees' benefit expenses and administrative expense on account of theybeing non-verifiable. From above, indirect expenses on account of these two expenses, debited by the appellant in the P/L account, are, therefore, allowed to the extent of 80% for the defects pointed out by the AO in para 11-14 of the Order. Amount debited with respect to these two ....