2024 (8) TMI 923 - AT - Income Tax

Estimation of 8% profit on gross contract receipt - CIT (A) accepted the contention of the assessee for estimating 5% profit on gross contract receipts, however, directed the AO to verify the claim of the assessee of gross contract receipt based on Form 26AS filed for the relevant A.Y and any other relevant documents - HELD THAT - We find that in Form 26AS, number payments has been booked on various dates and the same has been subsequently reversed. If we go by the entries in Form 26AS, in our considered view, the argument of the appellant that the main contractor M/s. Madhucon Projects Ltd has filed revised statement of TDS and corrected misreporting of turnover in the name of the assessee and the same has been finally updated in Form 26AS appears to be bonafide and genuine. Therefore, we are of the considered view that, when the appellant is able to file necessary evidences including Form 26AS to justify the turnover reported for the year under consideration, then the AO is incorrect in adopting the turnover of Rs. 58,00,87,847/- only on the basis of letter filed by the assessee. Although the CIT (A) has in principle agreed with the contention of the assessee in respect of rate of profit and turnover, but erred in directing the AO to verify the claim of the assessee in light of Form 26AS and any other relevant documents. In our considered view what is the other relevant documents is not explained by the learned CIT (A). In absence of any evidences or other relevant documents which supports the contention of the AO that the appellant has received gross contract receipt in our considered view the arguments of the assessee that it has received gross contract receipt needs to be accepted. Thus, we reverse the findings of the learned CIT (A) and direct the AO to estimate the net profit @ 5% on total contract receipt as per Form No.26AS filed by the assessee for the A.Y 2016-17. Assessee appeal allowed.

Summary

Issues:
- Discrepancy in assessment of income for A.Y. 2016-17
- Validity of assessment completed under section 144 r.w.s. 147 of the IT Act, 1961
- Consideration of Form 26AS and other relevant documents for estimating profit on gross contract receipts
- Applicability of principles of natural justice in assessment proceedings

Analysis:

1. Discrepancy in assessment of income for A.Y. 2016-17:
The appeal was filed against the order of the CIT (A) relating to the assessment year 2016-17. The case involved a partnership firm engaged in civil contract works that did not file its return of income. The Assessing Officer reopened the assessment under section 147, estimating the total income at Rs. 4,64,07,030 based on gross contract receipts of Rs. 58,00,87,847. The appellant contested this estimation, claiming the actual gross receipts were Rs. 22,31,24,260 as per updated Form 26AS.

2. Validity of assessment completed under section 144 r.w.s. 147 of the IT Act, 1961:
The Assessing Officer completed the assessment under section 144 r.w.s. 147 due to non-filing of the return by the assessee. The appellant argued that the assessment was completed without providing sufficient opportunity and against the principles of natural justice. The Tribunal noted discrepancies in the reported gross contract receipts and directed the Assessing Officer to estimate profit at 5% on the actual turnover of Rs. 22,31,24,260 as per Form 26AS.

3. Consideration of Form 26AS and other relevant documents for estimating profit on gross contract receipts:
The CIT (A) directed the Assessing Officer to estimate profit at 5% on gross contract receipts based on Form 26AS and other relevant documents. The appellant contended that the updated Form 26AS reflected gross receipts of Rs. 22,31,24,260, while the Assessing Officer considered Rs. 58,00,87,847. The Tribunal found the appellant's evidence credible, reversing the CIT (A)'s decision and directing the assessment based on the actual turnover reported in Form 26AS.

4. Applicability of principles of natural justice in assessment proceedings:
The appellant raised concerns regarding the lack of sufficient opportunity provided during the assessment proceedings and the failure to consider relevant documents. The Tribunal emphasized the importance of verifying actual turnover through Form 26AS and other supporting documents to ensure a fair assessment process. The decision to estimate profit at 5% on the accurate turnover upheld the principles of natural justice and fair assessment practices.

In conclusion, the Tribunal allowed the appeal, reversing the CIT (A)'s decision and directing the Assessing Officer to estimate the net profit at 5% on the actual contract receipt reported in Form 26AS for the assessment year 2016-17.