2021 (12) TMI 1177 - AT - Income Tax

Net profit estimation - assessee is agitating for the higher net profit rate applied by the ld. CIT(A) ignoring past net profit track of the assessee - HELD THAT - Respectfully following the decision of this Tribunal in the case of M/s B.B.C. Project Services Pvt. Ltd 2018 (11) TMI 1884 - ITAT KOLKATA consistent business of contract work carried out by the assessee and the net profit rate offered in the financial statements and being fair to both the parties are of the view that application of net profit rate of 0.6% on the turnover of contract business during the year i.e. ₹ 87.46 Cr. will meet the end to justice. We accordingly order so and direct the revenue to compute the net profit for the year @ 0.6%. We further make it clear that this net profit rate of 0.6% will take care of all the business expenses including interest and depreciation incurred for the purpose of running contract business and related to the turnover of ₹ 87.46 cr. Accordingly assessee will get part relief on this common issue and revenue fails to succeed. Ground No.1 of the assessee s appeal for A.Y. 2012-13 is partly allowed. Addition for sale of immovable property - HELD THAT - We find merit in the contentions of the assessee that the alleged amount of sale consideration of ₹ 2,81,70,890/- is just one of the many transactions of sale of property executed by the assessee on behalf of the purchaser and the income earned by the assessee from such transactions of purchase/sale carried out in past as well as in the year under appeal have been routed through its books of account and the commission income earned from such transactions have been duly disclosed in the financial statements and offered to tax. We, therefore, set aside the finding of ld. CIT(A) and delete the addition made by the Ld. AO. Thus, ground no.2 raised by the assessee is allowed. Unexplained cash deposit - HELD THAT - As assessee has made general submissions that this cash deposited in the bank are out of the business receipts but no such evidence in the form of extract of the cash book of the relevant date has been filed so as to make possible for us examine this fact that whether the assessee had sufficient cash in hands in the books as on the date of deposit of the alleged amount with the HDFC Bank. In lack of necessary evidences, we find no merit in this ground raised by the assessee

Summary

Issues Involved:
1. Estimation of net profit rate.
2. Addition of unexplained income from the sale of immovable property.
3. Addition on account of cash deposit.
4. Addition of unexplained advance from customers.
5. Disallowance of expenses and purchases.
6. Disallowance of interest payable for delayed deposit of TDS liability.

Detailed Analysis:

1. Estimation of Net Profit Rate:
The assessee, a Private Ltd. Company engaged in construction, declared an income of ?35,09,550/- for A.Y. 2012-13. Due to non-compliance with notices, the AO disallowed total expenses and assessed income at ?113.41 Cr. The CIT(A) applied a net profit rate of 8% on the gross business turnover, which was contested by both the assessee and the revenue. The Tribunal, referencing a sister concern case, determined that a net profit rate of 0.6% on the turnover would be appropriate, considering past profit rates and the nature of the business. This rate was deemed to encompass all business expenses, including interest and depreciation.

2. Addition of Unexplained Income from Sale of Immovable Property:
The AO added ?2,81,70,890/- as unexplained income from the sale of immovable property. The assessee argued that it acted as a broker, with all transactions recorded in the books and income from brokerage disclosed. The Tribunal found that the transactions were part of the regular business of earning commission from property sales, consistent with previous years. The addition was deleted, applying the principle of consistency.

3. Addition on Account of Cash Deposit:
The AO added ?2,00,000/- for unexplained cash deposits. The assessee claimed this was from business receipts but failed to provide sufficient evidence. The Tribunal upheld the addition due to the lack of necessary documentation to substantiate the claim.

4. Addition of Unexplained Advance from Customers:
The AO added ?62.01 Cr. as unexplained advance from M/s Trishakti Power Pvt. Ltd. The CIT(A) deleted the addition, noting the advance was for contract work, recorded in audited financial statements, and adjusted in subsequent years. The Tribunal upheld this deletion, confirming the genuineness of the transaction and the proper recording of the advance in the books.

5. Disallowance of Expenses and Purchases:
The AO disallowed expenses and purchases, questioning their genuineness. The CIT(A) estimated net profit at 8%, which was contested. The Tribunal, considering past accepted results and a sister concern's case, applied a net profit rate of 0.6%, encompassing all business expenses.

6. Disallowance of Interest Payable for Delayed Deposit of TDS Liability:
The AO disallowed ?53,906/- for interest payable on delayed TDS deposit, treating it as penal in nature. The assessee did not press this ground, and the Tribunal dismissed it.

Conclusion:
The Tribunal provided a detailed analysis, adjusting the net profit rate to 0.6% based on past records and comparable cases, deleted the addition for unexplained property sales, upheld the addition for unexplained cash deposits due to lack of evidence, confirmed the deletion of the addition for unexplained advances, and dismissed the ground for disallowance of interest on delayed TDS deposit. The appeals were partly allowed for the assessee and dismissed for the revenue.