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TMI Blog2012 (9) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... contract receipts. 2. The Hon ble CIT(A) erred in holding that the provisions of section 145 of IT Act cannot be invoked as no defect has been found in the books of account though in the present case no proper books of accounts were maintained by the assessee and as per the provisions of section 145(3) of IT Act the AO shall be satisf ied about the correctness or completeness of the accounts. 3. Briefly the facts of the case are that the assessee is in association of persons consisting of M/s Progressive Constructions Ltd. (PC) and M/s Saudi A1-Terais Trading Industrial Construction Company Ltd. (STICCO) constituted under a joint venture agreement. It was claimed in the return of income that after getting the contract allotted, the Joint Venture (JV) had in turn distributed the work among the constituents (Members of the JV) in the ratio of 99.5% to M/s PCL and 0.5% to M/s STICCO on the basis of subsequent Joint Venture Agreement (SVJA) dated 09/07/2001, superseding the earlier memorandum of understanding (MOU) dated 06/07/2001. The JV was awarded a contract work of widening to 4/6 lanes and strengthening of the existing 2 lane carriage way of NH-5 in the State of Orissa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective partners in the same proportion. 8. During the course of assessment proceedings, the AO was of the view that the work was executed by the assessee through its members who are to be treated as sub-contractors for the extent of work executed by each member. He observed that the work had been split into two portions and entrusted to its members. He accordingly held that the contract receipts received from NHAI and subsequently passed on to individual members as per the subsequent agreement amounted to expenditure incurred by the assessee in the execution of contract work and such expenditure is excessive and unreasonable. Therefore, 2% of the above mentioned payment is to be treated as excessive and unreasonable and disallowed. Alternatively, 2% of the receipts should be estimated as net income clear of all expenses of the assessee by invoking the provisions of section 145 of the Act. In view of the aforesaid reasons, the AO estimated the income of the assessee at 2% of the total contract receipts at ₹ 17,42,876/-. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the CIT(A). 9. Before the CIT(A), the assessee argued that the JV ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical purposes. ITA NO. 1517/Hyd/2011 14. In this appeal, the assessee has raised the following grounds of appeal:- 1. The learned CIT(A) has erred on facts and in law. 2. The lower authorities are not justif ied in assessing the income of the assessee @ 2% of the contract receipts of ₹ 23,34,23,083/-. 3(a) The lower authorities failed to appreciate that no income accrued or arose to the Joint Venture AOP u/s 5(1) of the Act, 1961. 3(b) The assessment has been made on hypothetical basis by surmising what could have been earned but not earned by the assessee. Such an assessment is not at all justif ied either on facts or in law. 4. The lower authorities have erred in applying provisions of section 40A(2). They ought to have followed the Board Circular issued No. 6-P(LXVVI-66) of 1968, dated 06/07/1968. Paras 73-75. 5. The lower authorities have erred in applying the provisions of section 145(3) of the Act, since the accounts of the assessee are correct and complete. 15. The assessee named PCL-MVR Joint Venture , admitting its status as an Association of Persons (AOP), filed its return of income for the AY 2007-08 on 30/10/07 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from NHAI constitute revenue receipts and the amounts disbursed by the assessee for getting the work done as its expenses. The AO held that if an unrelated party was to take up the job of carrying out the work as laid down in Schedule A and B and such third party had been a person at arms-length , the assessee would certainly have derived income for the services rendered to such outsider and accordingly estimated 2% of the gross receipts amounting to ₹ 46,68,462/-. Further, alternatively, invoking the provisions of section 145 of the Act, 2% of the receipts attributable to work estimated as net income of the assessee from the portion of the work receipts. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the CIT(A). 16. Before the CIT(A), the assessee contended that the AO is not correct in holding that the income accrued to the JV u/s 5 of the Act and the same is assessable in the hands of the JV u/s 4 of the Act. After considering the submissions of the assessee, the CIT(A) following the decision of his predecessor in the case of PCL Intertech Lenhydro Consortium JV for AY 2005-06 order dated 31/12/2008, confirmed the action of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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