9911796707
TMI Blog2017 (5) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... sments for the assessment year 2007-08 and 2008-09 have been completed u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as 'the Act') on 13.11.2009 and 4.6.2010, determining total income at Rs. 4,96,10,750/- and Rs. 4,54,49,410/- respectively. Subsequently, the assessments for the assessment years 2007-08 & 2008-09 have been re-opened u/s 147 of the Act, for the reason that the assessee has understated its closing work in progress, which results in escapement of income chargeable to tax for the assessments and accordingly, issued notice u/s 148 of the Act, calling for return of income. In response to notice u/s 148 of the Act, the assessee has filed a letter on 9.5.2015 stating that the original return filed u/s 139(1) of the Act, may be treated as return filed in response to notice issued u/s 148 of the Act. 3. Subsequently, the cases have been selected for scrutiny and accordingly, notices u/s 143(2) & 142(1) of the Act were issued. In response to notices, the authorized representative of the assessee appeared from time to time and furnished books of accounts and other details called for. During the course of assessment proceedings, the assessee was asked to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O. and participated in the assessment proceedings, therefore, there is no merit in the claim of the assessee, hence, the ground raised by the assessee is dismissed. In so far as rejection of books of accounts and estimation of net profit from business, the CIT(A) observed that the assessee has failed to produce necessary bills and vouchers in support of expenditure debited in the P&L account. Therefore, the A.O. left with no option but to estimate the net profit, proceeded to estimate net profit by following the decision of ITAT, Hyderabad in the case of M/s. KNR Constructions Limited, therefore, there is no merits in the claim of the assessee that the A.O. was erred in rejection of books of accounts. As regards estimation of net profit, the CIT(A) by following the decision of ITAT, Hyderabad in the case of M/s. Srinivasa Lakshmi Constructions Vs. DCIT in ITA No.1347/H/2010 directed the A.O. to estimate net profit of 8% on main contract works and 6% on sub contract works. In so far as sub contract works given to third parties for execution, the CIT(A) upheld the estimation of net profit of 4% made by the A.O. In so far as additions towards interest income and other miscellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be given so as to restrict the assessed income to the income returned by the assessee. 8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. rejected books of accounts and estimated net profit from the contract receipts. The A.O. was of the opinion that the books of accounts maintained by the assessee are not susceptible for verification. The A.O. further was of the opinion that the assessee has failed to prove expenditure with supporting bills and vouchers. Most of the expenditure debited under the head 'labour and like charges' are supported by selfmade vouchers, therefore, opined that the books of accounts maintained by the assessee does not give true and correct profit from the business. The A.O. further observed that net profit declared by the assessee is quite low when compared to the nature and size of works contract undertaken. The A.O. further observed that the jurisdictional ITAT, under similar facts and circumstances has directed the A.O. to estimate net profit of 12.5% on main contract works and 8% on sub contract works, therefore, estimated net profit of 12.5% on main contract works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The A.O. has relied upon certain judicial precedents to estimate net profit, wherein net profit of 12.5% and 8% in respect of main contracts and sub contracts are upheld. The A.O. has given his own reasons for taking particular rate of net profit. The assessee has relied upon certain judicial precedents, wherein the net profit of 8% and 5% is upheld. The assessee also relied upon its own case for the earlier year, wherein the ITAT, Visakhapatnam bench in ITA No.523/Vizag/2014 for the assessment year 2011-12, directed the A.O. to adopt a net profit of 10% on direct works contracts and 6% on sub contract works. Though, the assessee claims that because of peculiar nature of works contract, its profit margin is very low when compared to general works contract executed by other contractors, failed to justify its stand with necessary evidences. There is no straight jacket formula for estimation of net profit. Before estimation of net profit, facts and circumstances of each case should be considered. In the present case on hand, on perusal of the facts available on record, we find that the assessee is a large contractor having a turnover of more than Rs. 90 crores. Therefore, keeping in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We do not find any error or infirmity in the order of the CIT(A), hence, we inclined to upheld CIT(A) order and reject the ground raised by the assessee. 13. The next ground raised by the assessee towards estimation of net profit on contract works given to others. The A.O. estimated net profit of 4% on contract works given to others for execution. The assessee contended that the net profit estimated by the A.O. is on higher side when compared to the nature of business of the assessee, therefore, requested to estimate net profit of 3% on contract works given to others. We find that the assessee has failed to advance any reasons for estimation of 3% net profit on sub contract works given to others. We further observed that the A.O. has adopted net profit of 4% which is quite reasonable when compared to the nature of business of the assessee. Therefore, we uphold the net profit estimated by the A.O. and reject ground raised by the assessee. 14. In the result, the appeals filed by the revenue in ITA Nos.261 &262/Vizag/2015 for the assessment years 2007-08 & 2008-09 are partly allowed and cross objections filed by the assessee in CO Nos.13 & 14/Viag/2017 for the assessment years 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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