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TMI Blog2015 (6) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... al income of Rs. 4,14,180. During the assessment proceeding, on verifying the books of account and other informations available on record, AO found that during the year assessee has undertaken work of supply of labour for civil, mechanical and man power supply to BGR Energy Systems, DC Industrial Services, Indure Pvt. Ld. and Macawber Beekay. Further, assessee has also obtained contract directly from KTPS and NTPS. AO also found that while receipts from execution of work on sub-contract basis amounted to Rs. 1,88,19,898, receipts from work executed on main contract amounted to Rs. 9,22,470. Thus, the major portion of the contract works was executed by assessee is as a sub-contractor. While verifying the expenditure debited to P&L A/c, AO no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed to have maintained bank accounts, submitted audit reports & claimed huge expenditure towards various heads, and had shown the opening & closing stock also. However, the AO has neither obtained the required material & examined them nor had any basis to come to a conclusion on the likely percentage of profit that is adopted by him. 2. When the provisions of sect. 145(3) are invoked, although wrongly for the reason stated in para - (1) supra, if the AO had the ratio of the case of M/s KNR Constructions Ltd., Hyderabad in his mind, then the profit of the assessee should have been estimated @ 12.5% on main contracts and @ 8% on subcontract works. 3. There were huge differences between the figures in the P&L account and the e-filed ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to make an enquiry with regard to the difference between P&L A/c submitted during the course of hearing and e-filed statement. Ld. CIT observed, AO has also not examined the sufficiency of the drawings accounted by partners, therefore, estimation made by him has neither relevant materials nor the nexus or the basis. On the reasons stated above, ld. CIT holding the assessment order to be erroneous and prejudicial to the interests of revenue, set aside the same with the following observations: "7. If we apply the above ratio and explanation to this case, it is clear that the order passed by the AO is erroneous in so far as it is a prejudicial to the interests of revenue for the purpose of section 263 of the Act as the AO has neither t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in execution of civil contract works. It is also evident that major portion of contract executed by assessee is on sub-contract basis and it involves mainly supply of labour. The contract executed by assessee as a main contractor is almost negligible compared to contract executed as sub-contractor. It is also evident that major part of the expenditure, which is incurred in cash, claimed by assessee is on account of labour charges, supply of metal and sand and fabrication. It is also not disputed that these expenses were not supported by any authentic bills/vouchers, but, were only supported through self-made vouchers. Therefore, since the expenditure claimed is not verifiable, AO invoking the provisions of section 145(3) of the Act has re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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