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TMI Blog2016 (4) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... understand why Revenue has taken that stand which will reduce the income. Be that as it may, we are of the opinion that Ld. CIT(A) has analysed the issues in detail and has come to correct decision in determining the issues and adjudicating rival contentions. We see no reason to differ from the findings, as Revenue has placed only arguments without any evidence in support. We find no merit in Revenue’s grounds and accordingly, they are rejected. - Decided in favour of assessee - I.T.A. Nos. 976 & 977/HYD/2010, C.O. Nos. 141 & 142/HYD/2012 - - - Dated:- 29-2-2016 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Revenue : Shri B. Kurmi Naidu, DR For The Assessee : Shri K.A. Sai Prasad, AR ORDER PER BENCH : The appeals are by Revenue against the common order passed by the Ld. Commissioner of Income Tax (Appeals), Tirupati having concurrent jurisdiction, dated 18-03-2010 and the Cross-Objections are by assessee. Revenue has filed redrafted revised grounds in both the years on the issues of: a) Ld. CIT(A) accepted cash system of accounts instead of mercantile system followed by assessee; b) Ld. CIT(A) wrongly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the works to them on a sub-contract basis and hence, assessee firm is liable to deduct tax at source and hence the expenditure should be brought into the mischief of Section 40(a)(ia) in both the assessment years. On the other hand, assessee has contested the AO's interpretation by stating that all these works were entrusted to a large number of skilled workers on unit basis and for the sake of convenience of both sides, the payments were made on a group basis to one of them identified as a group leader. Hence, these persons mentioned were not contractors but they were group leaders and for the sake of convenience, the payments were disbursed to individual labourers through the group leaders. Thus, it is argued that the works carried out were not on sub-contract basis and thus, the provisions of Section 40(a)(ia) were not applicable. 5. As assessee has done contract work only with M/s. Allahabad University, Ld. CIT(A) has asked the AO to make further enquiries and matters were remanded regularly. The information obtained from the said contractee was put to assessee and after considering the information on record and nature of work, Ld. CIT(A) passed a detailed order on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of work and sub-items were not mentioned in the work order, which is usually the case in any work order. It is quite difficult for the principals to keep monitoring the progress of work as well as payments without this clarity in work order. Be that apart; the AAI has given contradictory information at different times about the value of works carried out by the appellant, on each project. For instance, a certificate issued by AAI dt.21-7-2005 indicates various works carried, out of which Yeshu Darbar work is stated at ₹ 2.30 cr. as can seen from a copy of the letter below. However, as can be seen from bill dated 18-6-2005, the value of work done on Yashu Darbar is ₹ 6.56 crores. Further, the AO based upon M-Books is also arguing in his Remand Report that ail work of value of ₹ 6.56 crores is completed by 31-3-2004 and no work seems to have been carried out by appellant after 31-3-2004. However, in their letter dated 25/01/2000, the value of work was indicated at RsA.11 crores. Hence, there is a ring of dubiousness around the quality of information given by AAI. All these contradictions were submerged in their correspondence only post-MoU. Thereafter, their corresp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough defective, is accepted . c. On expenditure incurred in AY. 2005-06 on Yeshu Darbar : 4.10. Having said so, the issue of expenditure incurred for earth work in Yeshu Darbar remains to be resolved. In this regard, the primary evidence available in the form of MBooks can be relied upon. It can be seen that the AAI has only disturbed the rate per unit but not disturbed the quantities of the work carried out. Thus, it can be held that the appellant has carried out the works on Yeshu Darbar as can be verified from the M-Book. Coming to the value of work carried out an billed to AAI, it is also seen that the same can be verified from the Bills presented to the AAI on 18-6-2005 and 4-7-2006. From these bills, it is apparent that the appellant had carried out the works, as can be supported by the respective M-Books. Hence, I am not inclined to concur with the AO when he states that the expenditure was not incurred by the appellant firm on Yeshu Darbar earth work. There is adequate evidence to indicate that the work has been carried as can be seen from the Running Bills dated 18-6-2005, and statement furnished by the AAI subsequent to the captioned MoU. Besides, there is str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellant has completed the works by 31-3-2006 and thus all the expenditure could also have been incurred by them. In fact, there was no evidence that any expenditure was incurred after 31-3-2006. This is also corroborated by M-Books and Bills. Hence, all the monies receivable as on 31-3-2006 should have been brought into gross receipts. However, it is noticed that a cumulative amount of ₹ 19,484,702/- only were offered to tax in all assessment years, as arising from the work with AAI but the total receipts liable to be offered to tax, as per MoU is ₹ 26,32,72,391/-. Thus, there is a short-offering by an amount of ₹ 6,83,25,279/which has escaped taxation. The assessee has argued that he has been following cash method of accounting. However, this is held to be incorrect in preceding para. Accordingly, this differential amount also is to be taxed as on 31-3-2006. It is also possible that a certain portion of it might be coming from earlier assessment years as a brought forward work-in-progress. But in the absence of any material, it is difficult to discern the same relating to earlier years. Hence the entire differential sum is proposed to be taxed in AY 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utlej Cotton Mills Ltd. (SC) 116 ITR 1 and UPSIDC 225 ITR 703 (SC). The scenario applies squarely to the case here and in this backdrop, it is the duty of Revenue to reject the books of account and estimate the profits. I am guided by the ratio in the case of Sarangpur Cotton Mfg.Co.Ltd. (PC) 6 ITR 36 and Sundaram Co. Ltd. 36 ITR 162 (Mad.). By drawing power and authority to reject the books of account is derived by me from the decision of Me.Millan Co. (1958) 33 ITR 182 (SC) and Namasivayam Chettiyar (SN) (1960) 38 ITR 579 (SC), it is decided to reject the books and estimate the profits. Rejection of books based on conclusion backed by valid reasons is a question of fact, as what is the profit of trade is a fact that must be ascertained with reference to relevant evidence and after due opportunity to the assessee. The notice dated 9-3-2010 and the response thereto vide appellant's letter dated 12-3-2010 are considered adequate to meet the .obligation of giving a notice for estimation of income. Having decided so, the next logical corollary would be to determine the rate of profit. It is noticed that in civil contract cases, the gross profit is estimated at 8% generally and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as during the appeal proceedings. The clarity of mind, the pin-pointed enquiries and presentation skills commanded by him in the assessment as well as appeal proceedings is exemplary . 6. Ld. DR reiterated the arguments of AO whereas Ld.AR relied on the order of Ld. CIT(A) which was accepted by assessee. Ld. Counsel submitted that ground No. 10 in AY. 2006-07 is in fact in favour of assessee, as assessee has not received the amount in dispute and has incurred loss, so excluding the same from AY. 2006-07 is beneficial to assessee. He submitted a chart indicating the incomes that were determined after Ld. CIT(A) s orders. Asst. Year 2005-06 Asst. Year 2006-07 Gross receipts admitted 11,24,38,255 4,45,09,000 Income admitted 54,52,614 22,54,187 Income assessed 3,76,66,336 1,14,73,395 Income as CIT(A)- MO Gross receipts 11,24,38,255 10,99,32,270* ..... X X X X Extracts X X X X X X X X Extracts X X X X
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