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TMI Blog2016 (7) TMI 1283X X X X Extracts X X X X X X X X Extracts X X X X ..... facts available on record, we find that the assessee is a large contractor having turnover of more than ₹ 100 crores. Therefore, keeping in view of facts & circumstances of this case, we are of the view that to meet the ends of justice, we direct the A.O. to adopt a net profit of 10% on direct works contracts and 6% net profit on sub contract works. - Decided partly in favour of revenue - I.T.A. No. 523/Vizag/2014 - - - Dated:- 22-7-2016 - V. Durga Rao (Judicial Member) And G. Manjunatha (Accountant Member) For the Appellant : M. N. Murthy Naik, DR For the Respondent: G. V. N. Hari, AR ORDER G. Manjunatha (Accountant Member) This appeal filed by the revenue is directed against the order of CIT(A), Vijayawada dated 30.7.2014 and it pertains to the assessment year 2011-12. 2. The brief facts of the case are that the assessee is a partnership firm, which is engaged in the business of civil contracts filed its return of income for the assessment year 2011-12 on 23.9.2011 declaring total income of ₹ 7,70,76,240/-. The case was selected for scrutiny and accordingly, notices u/s 143(2) 142(1) of the Income Tax Act, 1961 (hereinafter called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome, however, allowed deductions towards interest on capital and remuneration to partners under the provisions of section 40(b) of the Act. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has made elaborate written submissions and contended that the assessing officer is erred in rejecting the books of accounts by invoking the provisions of section 145(3) of the Act, even after verifying the books of accounts, bills, vouchers, sub contract agreements and other relevant information, for the reason that the expenses relating to labour, curing labour expenses, earth work expenses, masonary expenses, road bending expenses, and scaffolding expenses are supported by self-made vouchers. The assessee further submitted that during the course of assessment proceedings, it has reconciled the errors pointed out by the A.O. and also submitted bills vouchers in respect of most of the expenditure, except few expenses under the head labour and other like charges . The labour and other like charges are incurred mainly in cash, because it has executed works contract in remote forest places, where it has hired labour on da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. D.R. submitted that the Ld. CIT(A) was erred in scaled down the net profit estimated by the A.O. from 12.5% to 8% in respect of direct works, 8% to 6% in respect of sub contract works without appreciating the fact that the books of accounts of the assessee are not susceptible for verification. The D.R. further submitted that the assessee has failed to furnish supporting bills vouchers for expenditure claimed under the head labour and like charges. Most of the expenditures incurred by the assessee are supported by self made vouchers. The books of accounts maintained by the assessee are inconsistent with the financial statement furnished along with the return of income. Under these circumstances, the A.O. rightly estimated net profit of 12.5% 8% in respect of direct works contracts sub contracts. The D.R. further submitted that the CIT(A) failed to appreciate the fact that the assessee itself admitted income from the contract it awarded to its sub contractors @ 9.71%. The D.R. further argued that the assessee has admitted an income of ₹ 7,70,76,240/-, whereas the income determined by the CIT(A) is at ₹ 6,81,79,734/- which is below the admitted income. Under an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein the estimation of net profit of 12.5% 8% was upheld. It is the contention of the assessee that the net profit estimated by the A.O. is quite high when compared to the nature and place of works contract executed. The assessee further contended that it has executed works contract in remote places and forest, where expenditure is quite high, therefore, the A.O. was not correct in adopting a net profit of 12.5% 8% by relied upon the decision of M/s. KNR Constructions Pvt. Ltd. 10. We find that while estimating the net profit of 12.5% on direct works and 8% on sub contract works, the A.O. has relied upon the decision of ITAT in the case of M/s. KNR Constructions Ltd. On the other hand, the assessee has relied upon the decision of ITAT, in the case of Shri Easwar Reddy Company Vs. ACIT wherein 8% and 5% net profit was upheld. It is an admitted fact that estimation of net profit from civil construction business is consistently followed by the department on various rates depending upon the facts and circumstances of each case. But, there should be a basis for estimation, either past history of assessee or comparable cases which are having similar nature of works and risks asso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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