2012 (2) TMI 639 - AT - Income Tax

Summary

Issues involved: Cross appeals against the order of CIT(A)-I, Bhopal for the assessment year 2007-08.

Assessee's Grounds:
1. CIT(A) erred in invoking provisions of Section 145(3) by rejecting books of account.
2. CIT(A) erred in confirming addition of Rs. 7,16,800/- out of total addition of Rs. 56,43,419/- by estimating net profit @ 6.5%.
3. Charging of interest u/s 234D is not justified.
4. Initiation of penalty proceedings u/s 271(1)© is not justified.

Revenue's Ground:
CIT(A) erred in deleting the addition of Rs. 49,26,619/- out of Rs. 56,43,419/- made by the Assessing Officer on account of suppression of net profit.

Facts:
The assessee, a civil contractor firm, filed return showing income of Rs. 9,30,00,580/- from contract receipts totaling Rs. 1,44,18,05,859/-. The Assessing Officer estimated net profit @ 8% on work done by the assessee and 6% on subcontract basis, resulting in an addition of Rs. 56,43,419/-.

CIT(A) Decision:
CIT(A) confirmed addition of Rs. 7,16,800/- by applying net profit rate of 6.5%, considering past history and nature of work. Both assessee and Revenue appealed.

ITAT Decision:
ITAT found no infirmity in CIT(A)'s order. CIT(A) applied more appropriate net profit rate of 6.5% based on assessee's own showing of 6.45%. Thus, addition of Rs. 7,16,800/- was upheld. Both appeals were dismissed.

This judgment highlights the dispute over net profit estimation, rejection of books of account, and the application of relevant provisions under the Income Tax Act.