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TMI Blog2016 (6) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... not only generally accepted in various cases relied on, but also in the immediately preceding year which assessee has accepted. Keeping these in mind, we do not find any reason to differ from the order of Ld. CIT(A), which is in tune with the various orders of this forum. - Decided against assessee - ITA No. 40/Hyd/2015 - - - Dated:- 13-5-2016 - Smt P. Madhavi Devi, Judicial Member And Shri B. Ramakotaiah, Accountant Member For the Appellant : Shri V. Raghavedra Rao For the Respondent : Shri Jagadish Babu CIT-DR ORDER Per B. Ramakotaiah, Accountant Member This is an appeal by assessee against the order of learned Commissioner of Income-tax (Appeals) IV, Hyderabad dated 22.10.2014. The issue involved in this appeal is whether Assessing Officer is correct in rejecting the books of account and resorting to estimation of income. 2. Briefly stated, assessee is engaged in the business of civil works and filed its return of income on 29.10.2010 admitting a total income of ₹ 8,33,92,911. A survey under S.133A had been conducted in the case of the assessee on 23.3.2011 during which the internal audit files of the assessee were impounded. The audit files r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer but they would form cartloads. The Authorised Representative for the assessee also submitted that the assessee had not disputed the rejection of books and estimation of income for assessment year 2009-10 since the addition to the total income was for an insignificant sum of ₹ 2 crores approx, while for the AY 2010-11, the Assessing Officer had made a huge addition of ₹ 6-crores. He also submitted that in the preceding years, additions had been made towards unverifiable cash vouchers but such additions were made as a percentage of the expenses (and not as an estimate of the profit) and ranged from ₹ 5,00,000 in assessment year 2006-07 (out of expenses of ₹ 50,25,51,000) to ₹ 10,00,000 in assessment year 2003-04 (out of expenses of ₹ 46,24,000) and that the mere fact that a survey had been conducted in the case of the assessee did not justify such huge additions, particularly when no incriminating material had been found during the survey. The Authorised Representative for the assessee further submitted that the cash vouchers impounded during the survey were for an insignificant sum of ₹ 18,00,000, that cash vouchers were unavoidable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions, an addition which the appellant did not dispute at all, should not serve as the best precedent. 15. It is apparent from the facts as narrated in the assessment order that the appellant had failed to establish the correctness of the books and under the circumstances, the rejection of the books was justified. 16. That being so, the next issue that requires consideration is whether the estimation of profits made by the Assessing Officer was justified. The rate at which profits should be estimated has been adjudicated upon by the jurisdictional ITAT in a number of cases, In the case of Shri K Ramkrishna Contractors (P) Ltd (ITA 461/Hyd/2006, dated 4.12.2009), the ITAT upheld the estimation of profits at 8% for main contract and 5% for sub-contracts. This decision was also followed in Shiva Balaji Constructions ([TA 368/H/2011, dated 14.10.2011). In the case of Teja Constructions 129 TTJ (Hyd) (UO) 57, the ITAT held that profits be estimated at 9% on own contracts, 8% on contracts taken by the assessee on subcontracts and 5% on contracts given by assessee to third party on sub-contract, 17. Indeed, the ITAT has upheld the estimation of profits at rates much hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit with reference to total contract receipts where it is only the expenditure on labour expenses that was held not supported by verifiable vouchers for expenses. 3(a) Without prejudice to Ground No. 2(a), (b) (cl learned CIT(A) is not justified in not allowing depreciation and expenditure on interest which affect the percentage of profit. (b) Learned CIT(A) has grossly erred in holding that whenever an estimate is made in cases of contracts business, deeming provision u/s. 44AD applies. Sec.44AD provides for assessment on the basis of presumption in cases for smaller turnovers. 5.1 Assessee also raised following additional ground which is legal in character and was admitted- 1. .. 2. On the facts and circumstances adverted to by the CIT(A), it does to lead to a finding that the Books of Account are not correct ad complete. 3. The lower authorities have failed to specify the vouchers or the internal audit files on the basis of which the accounts could be termed incorrect and incomplete. 6. Learned counsel reiterated the submissions made before the learned CIT(A) and contended that there is no need to rejecting the books of account and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as per the provisions of section145 of the I.T. Act and estimate the profit. In this respect, the assessee vide letter filed in hearing dt:8/12/2011, agree to the same. 8.2 Similar reasons were stated by the Assessing Officer in this year. Assessee for the reasons best known to it, has accepted rejection of books of account in that year and consented in writing whereas in the impugned year disputing the same. We do not see any reason to differ in this year. Facts being same, and reasons being same, the rejection of books are to be accepted. 8.3 Assessee contends that the non-availability of vouchers and internal audit reports do not lead to rejection of books of account which are audited. There is merit in assessee contentions, considering the legal principles on the issue decided by various judicial forums, but in the fact situation, we are unable to accept the same. In earlier years, Assessing Officer have accepted the books of account and disallowed certain portion of expenditures upto assessment year 2008- 09. Therefore, there is no problem in accepting the opening figures etc. in the later years. But assessee has accepted rejection of books of account, similarly aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee claimed depreciation also in the assessment year under consideration. However, if the assessee give up the claim of depreciation in the assessment year under consideration, then the ratio laid down by the Tribunal in its own case for the ay 2003-04 could be applied. Alternatively, the decision of this Tribunal in the case of M/s Krishna Mohan Construction Company cited supra to be followed. Now, the assessee got two options to determine his taxable income for the year under consideration. Hence, we hold that the assessee can opt either one of the above. In the case of sub contracts, the assessee cannot expect the same ratio of profit, as in the contract carried out by the assessee by himself. Accordingly, in the case of sub contract, we direct the assessing officer to consider the net profit at 5%. According this ground of the assessee is partly allowed. 8.6 As can be seen from the above, the estimation can be done at 12.5% and thereafter depreciation and interest can be allowed depending on facts or the net profit can be estimated at 8% on the works undertaken. On sub-contract works, it is generally at 5% which was not disputed in many cases. 8.7 As already s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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