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TMI Blog2015 (12) TMI 697X X X X Extracts X X X X X X X X Extracts X X X X ..... not disputed now. Therefore, we are of the opinion that the A.O. is not correct in including the work in progress for the purpose of determining the gross receipts for estimation of net profit. The CIT(A), rightly excluded the work in progress from the contract receipts. We do not find any error or infirmity in the order of CIT(A). Therefore, we direct the A.O. to exclude the work in progress from the gross turnover. The co-ordinate bench of this Tribunal in the case of ACIT Vs. Teja Constructions [2014 (1) TMI 832 - ITAT HYDERABAD ] has upheld the estimation of net profit at 9% from main contract works. Thus the CIT(A) has rightly estimated the net profit of 9% on the total turnover, excluding work in progress. - Decided against revenue - I.T.A.No.301/Vizag/2013 - - - Dated:- 4-12-2015 - SHRI V. DURGA RAO, JUDICIAL MEMBER SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For the Petitioner : Shri M. Narayana Rao, DR For the Respondent : Shri G.V.N. Hari, AR ORDER PER Bench: This appeal filed by the revenue is directed against the order of CIT (A), Vijayawada dated 18.2.2013 for the assessment year 2009-10. 2. Brief facts of the case, is that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a difference. The assessee further submitted that it has requested the party to rectify the mistakes in form no.26AS. Therefore, requested to accept the declared turnover in the financial statements. The A.O., however after considering the explanations, recomputed the turnover based on form no.26AS and estimated the net profit of 12.5% on main contract works and 8% net profit on sub contract works and 3% net profit on sub contract works given to third parties. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before CIT(A), the assessee contended that the A.O. was not correct in rejecting the books of accounts, as it has maintained proper books of accounts and also bills vouchers for the expenditure debited to P L account. The assessee further contended that the net profit estimated by the assessing officer is very high when compared to the nature of works executed by it during the year under consideration. The assessee submitted that during the year under consideration, it has executed mostly building works, the profit element in these works is quite less, therefore, for estimation of net profit from the business, the assessee s case c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idering the ITAT Hyderabad bench decision in the case of M/s. K.N.R. Constructions Ltd. in ITA No.9/Hyd/2007, estimated 12.5% net profit. The D.R. further argued that the CIT(A) was not correct in excluding the work in progress from the contract receipts, as unless the work in progress is considered in trading account, the correct profit cannot be determined. Therefore, requested to uphold the order of the assessing officer. On the other hand, the A.R. of the assessee strongly supported the order of the CIT(A). 6. We have heard both the parties and perused the materials available on record. We have also gone through the case laws relied upon by the parties. In this case, the assessing officer rejected the books of accounts and estimated the net profit of 12.5% on main contracts, 8% net profit on sub contract works. The CIT(A) scaled down the estimation of net profit from 12.5% to 9% in case of main contract works. While doing so, the CIT(A) directed the A.O. to exclude the work in progress included in the gross turnover. The D.R s contention is that the A.O. has rightly estimated the net profit of 12.5%, considering the facts and circumstances of the case that the assesse did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain portion of profit i.e., around 5 per cent to the sub-contractors. Similar is the position in the case of contracts taken by assessee on subcontract from other parties. Further, the assessee is entitled for depreciation and remuneration, and interests to partners on the profit estimated by AO at applicable rates, because the income estimated as above of the assessee is before the depreciation and interest and remuneration of the partners. accordingly, the AO is directed to compute the income of the assessee afresh. 8. Coming to the inclusion of work in progress for determining the gross turnover. The A.O. included the work in progress for determining the gross turnover and estimated the net profit on work in progress. The assessee s contention is that the work in progress cannot be considered for estimation of net profit, as this was not received by the assessee during the financial year and also the same is received during the next financial year and included in the gross turnover. The CIT(A) accepted the assessee s explanations and directed the A.O. to exclude the work in progress for the purpose of determining the gross turnover. It is an admitted fact that the work ..... X X X X Extracts X X X X X X X X Extracts X X X X
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