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TMI Blog2007 (2) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... The facts indicate that the business of the assessee as noted by Ld. CIT(A) is buying plots, constructing residential houses on the same, furnishing the houses and then selling the product to prospective buyers/clients. 3. Return declaring income of Rs. 61,940 for the relevant assessment year was accepted under section 143(1). Subsequently, Assessing Officer found that though returned income is less than 8 per cent of the gross receipts, the return is not accompanied by audited statement of accounts. Sub-section 6 of section 44AD provides that an assessee engaged in the business of civil construction or supply of labour for civil construction may claim lower net profit than the presumptive rate of 8 per cent as envisaged in section 44AD, if he maintains books of account and other documents as required under sub-section 2 of section 44AA and gets his accounts audited and furnishes a report of such audit as required under provisions of section 44AB. Since the return was not accompanied by audit report and audited statement of accounts, it was held that there was escapement of income. The Assessing Officer for this reason has reopened the assessment under section 147 and recompute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see engaged in business of civil construction has to maintain books as per provisions of section 44AA and file audited statement of accounts as required under provisions of section 44AB in case he desires that he be assessed at a rate lower than the presumptive rate of 8%, it means that any person engaged in civil construction who violates the above mentioned mandate and files a return of income showing lower than 8% profit and not accompanied by audited statement of accounts, will be covered by the mischief of the provision and his income will be deemed to be 8% of his gross receipts. Since in this case, the assessee returned net profit of 2.04% and did not filed audited statement of accounts there is deemed escapement of income. Therefore, the action of the Assessing Officer was very much in accordance with law. I also do not accept the argument of the counsel of the appellant that assessee is not engaged in business of civil construction. Had it been a case of a single property one could have said that he had purchased the plot for construction of his own residence and this is sold for any reason whatsoever. However, when the assessee does this action repetitively, it means that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esidential unit on the land purchased or arranged from the land owners and after obtaining all the requisite approvals from the competent authority, the construction of residential units is done and the same are sold to the intending purchasers after having furnished them. The return filed by assessee declaring income after working out of the profit of such transaction was processed under section 143(1) and without resorting to scrutiny assessment notice under section 148 was received which is not proper and legal inasmuch as there is a change of opinion where the Assessing Officer came to the conclusion that section 44AD is applicable in this case whereas CIT(A) has opinioned that after amendment of section 147 by Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1-4-1989, the words omission and failure have been omitted from it but such opinion of Ld. CIT(A) is unjustified and erroneous in view of decision of M.P. High Court in the case of Asstt. CIT v. Yashoda Dairy (P.) Ltd. [2006] 153 Taxman 410 and CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 Delhi Full Bench which clearly suggests that change of opinion cannot be a ground for reopening of the case. Therefore, very i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee submits that expression "Civil Construction" which defined in section 44AD includes construction or repairs of any building, bridge, dam or other structure or of canal or road and further execution of any works contract, it is worth noting that the words used are only construction or repairs and not the sale. Further, the words followed the word building i.e. bridge, dam or other structure or any canal or road cannot be sold and the construction or repairs of these works can be done only on contract basis. The associated words used in the section which gives meaning can be used to construct the intention of the statute. The aforesaid words clearly establishes that it is only the works done on contract basis comes within the purview of section 44AD. 13. Section 44AD was inserted by the Finance Act of 1994 w.e.f. 1-4-1994. The speech given by the Finance Minister on 28-2-1994 while giving Budget Speech read as follows (1994) 206 ITR (St.) 31 : Para 115: "In addition, I am introducing a new estimated income scheme for contractors with a turnover of up to 15. 40 lakhs and for truck-owners who own up to ten trucks. In the case of contractors, the net profit will be estim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s different meanings. 17. Ld. DR strongly pleaded that even on plain reading of sub-section 6 to section 44AD would make it amply clear that civil construction includes the construction or repair of any building, bridge, dam or other structure or of any canal or road besides the execution of any construction work. Therefore, the case of the assessee squarely comes within the provision of section 44AD because despite having shown less profit than envisaged in section 44AD, the assessee has not got his accounts audited as is mandatorily provided under section 44AD. Therefore, the Assessing Officer has validly initiated reassessment proceedings by invoking the provision of section 147 and applying presumptive rate of 8% on the gross receipts to work out net income of the assessee which was shown at much lesser amount. Therefore, there was every justification for the Assessing Officer to make the reassessment and by applying the provision of section 44AD to make the impugned addition and since furnished house are being sold, therefore, Ld. CIT(A) has correctly passed direction to give necessary relief in that regard. As such it was pleaded for confirmation of the impugned order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any other works contract. It will, thus, include work related to electrical fittings, plumbing job, landscaping work, etc. The rate of 8% is comprehensive. All deductions under sections 30 to 38 including depreciation, will be deemed to have been already allowed and no further deduction will be allowed under these sections. The scheme provided under this section is optional. A system of rebuttal has been provided. A person can claim that his income in respect of the abovementioned business is lower than the specified estimate of income. In such a case, he must produce necessary evidence and he should properly maintain books of account and they should have been audited as required under section 44AB and he is required to furnish the report of such audit. So the prime requirement is that one should be engaged in the business of civil construction or supply of labour for civil construction which is a must to apply the said provision. Whereas, in the case in hand, the assessee is found to have been engaged in the business of builder. So in my considered view his business which is that of a builder, cannot be acquainted with that of civil construction or supply of labour for civil co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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