9911796707
TMI Blog2012 (10) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... Profit @ 10.70% by the A.O. and confirmed by the CITA @ 8%. 3. The Revenue has raised ground challenging reduction of G.P. rate from 10.7%d to 8% by the CIT(A). 4. The brief facts of the case are that the assessee company is a builder and undertakes construction activities. The assessee has also sold flats of its own and the revenue is recognised as per the payment received. The assessee has worked in the capacity of contractor for Anamika Sahakari Awas Samiti for the project Mangalam Estate. The gross receipt in the capacity of contactor was Rs.5,04,79,328/- and the payment received on sold out flat Rs.4,02,006/-. The total amount of work done during he year was Rs.5,08,81,928/-. The A.O. noticed that the assessee has maintained a combi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed mercantile system of accounting. The A.O. also noted that the assessee did not maintain stock register and consumption register. Some of the payments were also made in cash. The A.O. has noted some instances where cash payments more than Rs.20,000/- was paid. Transport bills were missing in most of the purchases. Purchases of raw-materials were from unorganized sector and important to note that the payment has been made in cash which is not open for verification. It has also been noted by the A.O. that the assessee has shown lesser N.P. rate before Director remuneration in comparison to earlier year i.e. 4.82% whereas this rate was shown at 8.66% in A.Y. 2005-06 and 9.6% in A.Y. 2004-05. The A.O. rejected the books of account under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Work done -contractorship 3,041,906.00 24.23 22,606,650.00 71.51 50,479,328.00 99.21 Work done -Building Activity 9,511,222.00 75.77 9,007,895.00 28.49 402,600.00 0.79 Sub-total 12,553,128.00 100.00 31,614,545.00 100.00 50,881,928.00 100.00 Gross Profit 3,318,393.75 6,217,393.00 7,444,384.00 G.P. Rate 26.05 19.58 14.63 N.P. Rate before Dir. Rem. & Dep. 11.95 10.70 6.75 N.P. Rate after Dir. Rem. 9.06 8.66 4.82 Net Profit Rate 4.82 6.21 3.29 7. The CIT(A) followed the judgement of Hon'ble Madras High Court in the case of CIT vs. A. Vajjiram & Bros., 326 ITR 551 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were made before the CIT(A) and submitted that merely on account of non-maintenance of stock register, books of account cannot be rejected. Ld. Authorised Representative in support of his contention relied upon the order of I.T.A.T., Agra Bench in the case of Dass Friends Builders Pvt. Ltd. Vs. DCIT, 88 TTJ (Agra) 651. Ld. Authorised Representative has also relied upon the judgments of Hon'ble Rajasthan High Court in the case of CIT vs. Gotan Lime Khanij Udhyog, 256 ITR 243 (Raj.), judgement of Hon'ble Delhi High Court in the case of CIT vs. Smt. Poonam Rani , 326 ITR 223 (Delhi), judgement of Hon'ble Allahabad High Court in the case of CIT vs. Rajni Kant Dave, 281 ITR 6 (All.) and order I.T.A.T., Hyderabad Bench in the case of Visha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies i.e. construction as well as builder. In both the activities different method of accounting has been followed. In case of construction the assessee has followed percentage completion method while in respect of builder activities the assessee has followed cash method. The A.O. noticed that the assessee has failed to furnish basis of valuation of work in progress particularly under the circumstances where the assessee followed cash method in respect of project/builder activities. Raw material in the form of gittis etc. are supported by self-made vouchers as noted by the CIT(A). Apart from the non-maintenance of the stock register, various mistakes noted by the A.O. coupled with law G.P. in the year under consideration. We find that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. However, the CIT(A) followed the judgement of Hon'ble Madras High Court in the case of CIT vs. A. Vajjiram & Bros. in respect of applying the profit rate of 8%. The 8% rate applied by the CIT(A) is supported by the statutory rate provided u/s.44AD of the Act. There are good reasons for estimating the profit by this 8% rate of profit even in case of big contractors having turnover more than Rs.40 lacs. The assessee as well as the Revenue both have failed to point out how this rate of 8% applied by the CIT(A) was unreasonable. There are no material on record based on which a different rate can be applied at this stage for estimation of the profit. We are aware that section 44AD is directly not applicable to the facts of the case under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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