2012 (7) TMI 208 - AT - Income Tax

Applying net profit rate of 10% on the contract receipts declared by the assessee - the assessee did not produce books of account nor furnished the details called for - Held that - The assessee s claims to derive income from contractor ship business is not acceptable as no proof of having done any contract work was submitted by the assessee - as per provisions of Section 44AD even if assessee does not maintain books of account where the turnover is less than Rs. 40 lakhs, maximum profit which can be estimated is 8 %. However, in the instant case there exists no dispute to the fact that the assessee was engaged in civil construction work and even no proper books of accounts are maintained, where the turnover was exceeding the prescribed limit, the CIT(A)was justified in estimated 10% profit on the gross contract receipts - against assessee.

Summary

Issues:
Cross appeals filed by assessee and Revenue against CIT(A) order for AY 2008-09 regarding applying net profit rate on contract receipts.

Analysis:
1. Assessment by AO:
- AO framed assessment u/s 144 as assessee didn't produce books or details called for.
- Entire contract receipts treated as income due to lack of evidence.

2. Assessee's Contentions:
- Assessee claimed genuine reasons for non-compliance.
- Additional evidence under Rule 46A submitted before CIT(A).

3. CIT(A) Decision:
- CIT(A) considered new evidence and submissions.
- Held AO unjustified in treating entire receipts as income.
- Accepted appellant's evidence of contract work with companies.
- Applied net profit rate of 10% on gross contract receipts.

4. ITAT Decision:
- ITAT found assessee engaged in civil construction work.
- Upheld CIT(A)'s application of 10% net profit rate.
- Noted assessee's failure to maintain books of account.
- Directed Department to take action for non-compliance.

Conclusion:
Both appeals by assessee and Revenue were dismissed, upholding CIT(A)'s decision to apply 10% net profit rate on the contract receipts. The ITAT found no issue with the assessment and directed the Department to address the lack of bookkeeping by the assessee. The judgment emphasized the importance of maintaining proper records and complying with audit requirements, especially when dealing with significant contract receipts.