2022 (12) TMI 212 - AT - Income Tax

Net profit estimation - adopting 3% of receipts from civil contract as net profit by stating that his volume of work was more and due to heavy competitions - HELD THAT - In the assessment year 2014-15, the assessee has estimated the net profit at 3% and the AO determined the net profit at 3.50% u/s 143(3) of the Act. In the assessment year under consideration, the assessee has declared the net profit at 3% and the AO has estimated the net profit at 8%. On appeal, CIT(A) scale it down to 4% without depreciation. We find that by referring to various case law and after considering earlier assessment years estimation of the AO, CIT(A) has reduced the net profit to 4%. Thus, we find no infirmity in the order passed by the ld. CIT(A). Thus, the ground raised by the Revenue is dismissed.

Summary

Issues:
Delay in filing appeal before the Tribunal; Estimation of income for a civil contractor based on turnover percentage; Net profit margin determination; Adjudication of the appeal filed by the Revenue.

Delay in Filing Appeal:
The appeal filed by the Revenue was delayed by three days, prompting a petition for condonation of the delay. The DCIT Circle filed the petition, which was not objected to by the ld. Counsel for the assessee. The Tribunal condoned the delay due to sufficient cause and admitted the appeal for adjudication.

Estimation of Income for Civil Contractor:
The assessee, a civil contractor working for state P.W.D. departments, did not maintain audited accounts and estimated income at 3% of turnover. The Assessing Officer, under section 44AD of the Act, estimated income at 8% due to lack of maintained accounts. The ld. CIT(A) restricted the net profit margin to 6% with depreciation or 4% without depreciation, based on earlier years' assessments and case law references.

Net Profit Margin Determination:
The Revenue appealed the net profit margin determination, arguing that the 8% estimation by the Assessing Officer was fair and reasonable for a civil contractor not maintaining books. The ld. DR supported this stance. In contrast, the ld. Counsel for the assessee backed the ld. CIT(A)'s decision. The Tribunal reviewed the arguments, previous assessments, and case law references, ultimately upholding the ld. CIT(A)'s reduction of the net profit to 4%, finding no fault in the decision.

Adjudication of the Appeal:
After considering all aspects, the Tribunal dismissed the appeal filed by the Revenue, affirming the ld. CIT(A)'s decision to reduce the net profit margin to 4%. The order was pronounced on 12th October 2022 in Chennai.

This detailed analysis covers the issues of delay in filing the appeal, estimation of income for a civil contractor, determination of net profit margin, and the final adjudication of the appeal filed by the Revenue, providing a comprehensive overview of the legal judgment delivered by the Appellate Tribunal ITAT Chennai.