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2022 (2) TMI 321 - AT - Income TaxAddition in respect of income from contract receipts by assessing less than 8% of the total contract receipts - HELD THAT - Admitted facts are that the assessee is a civil contractor having gross contract receipt of ₹ 39,47,319/- and admitted net profit at ₹ 2,08,500/- as against assessed by the AO at ₹ 4,70,258/-. It is an admitted fact that the assessee has filed Form No.3CB 3 CD for the assessment year 2000-01 as required u/s.44AB of the Act with the Department on 24.10.2000. The due date for filing of this audit report is 31.10.2000 and return of income is also 31.10.2000. The assessee has filed this evidence i.e., the audit report was filed with the Department and audit was carried out u/s.44AB of the Act on 15.10.2000. All these shows that these events are prior to due date of filing of audit report as well as return of income. Even now, before us the ld.senior DR could not controvert the above evidences filed or the authenticity of the same are not doubted. In view of the admitted facts, we are of the view that the CIT(A) has rightly accepted the contention of the assessee and estimated the profit at a lower rate than 8% of the gross contract receipts. Therefore, we uphold the order of CIT(A). - Decided in favour of assessee.
Issues:
1. Addition made by AO in respect of income from contract receipts. 2. Validity of audit report filed by the assessee. Issue 1: Addition made by AO in respect of income from contract receipts: The appeal by the Revenue and cross objection by the assessee arose from the order of the Commissioner of Income Tax (Appeals) regarding the addition made by the AO in respect of income from contract receipts. The Revenue contended that the CIT(A) erred in deleting the addition made by the AO, as the assessee admitted net profit less than 8% of the total contract receipts and did not file Form 3CD as per Sec. 44AB. The CIT(A) allowed the claim of the assessee based on the evidence submitted, including the audit report filed in accordance with Sec. 44AB. The Tribunal upheld the CIT(A)'s decision, emphasizing that failure to comply with Sec. 44AB does not render the assessee's claim void ab initio, and the consequences are dealt with under Sec. 271B. The Tribunal cited previous decisions to support its ruling, highlighting that the audit report's late filing only leads to a penalty under Sec. 271B. Issue 2: Validity of audit report filed by the assessee: The second issue revolved around the validity of the audit report filed by the assessee. The AO had questioned the authenticity of the audit report filed by the assessee, leading to the addition of income by the AO. However, the CIT(A) found no reason to doubt the evidence submitted by the assessee, including the audit report filed in Form No. 3CD as required under Sec. 44AB. The Tribunal, after considering the evidence and legal provisions, concluded that the CIT(A) rightly accepted the contention of the assessee and estimated the profit at a lower rate than 8% of the gross contract receipts. The Tribunal's decision was supported by previous rulings and legal interpretations emphasizing that the late filing of the audit report does not nullify the assessee's claim for lower profits, and any consequences are limited to penalties under the Income Tax Act. In conclusion, the Tribunal upheld the CIT(A)'s decision regarding the addition made by the AO in respect of income from contract receipts, emphasizing the validity of the audit report filed by the assessee and the legal provisions governing such filings. The Tribunal dismissed the appeal by the Revenue and the cross objection by the assessee, affirming the CIT(A)'s ruling based on the evidence and legal interpretations presented during the proceedings.
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