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TMI Blog2013 (4) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... tantially low as compared to the net profit shown in the immediately preceding year giving rise to net profit rate of 6.45%. The Assessing Officer further stated that during the course assessment proceedings the assessee produced the agreements with the sub-contractors. From the agreement it is seen the profit charged by the assessee from its sub-contractors ranges between 5% to 7%. Thus, it is clear that the assessee after keeping its margin ranging from 5% to 7% and deducting TDS @1.02% the balance amount was given to subcontractor, which makes the net profit percentage enjoyed by them on hire. In most of the case the profit is either 6% or 7%. The Assessing Officer further observed that during the course of search assessment proceedings for the assessment year 1999-2000 to 2005-06, it was also examined that the sub-contractors of the assessee firm have shown net profit in the range of 4% to 8%. If the margin/profit sharing of sub-contractor of the assessee firm is considered, the profit margin in respect of all these receipts of work allotted to assessee firm works out to 9% to 12%. Therefore, the profit margin ratio in the case of work allotted to subcontractor as shown @4% by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, the Assessing Officer may make an assessment in the manner provided in section 144 of the Act. Accordingly, provisions of section 145(3) of the Act were invoked and the Assessing Officer rejected the books of account and estimated net profit at 8% on own work and 6% on work done by sub-contractor. This observation of the Assessing Officer was as under: In view of the discussion made in above paras it is reasonable enough to estimate the profit @8% on the work done by the assessee itself and @6% on the work allotted to the sub-contractors. The working of the profit will be as under:- Estimating the net profit @8% on work done by the assessee itself of ₹ 60,26,85,585 Rs.4,82,14,868 Estimating the net profit @6% on work done by the sub-contractors of ₹ 1,02,41,64,969 Rs.6,14,49,898 Total estimated net profit Rs.10,96,64,766 Less:Net profit as shown by the assessee ₹ 5,54,19,410 Balance ₹ 2,42,45,356 5. Against the above order the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... almost average of profit charged from the sub-contractors. c) The Assessing Officer has not disputed the submission of the appellant that all the sub-contract are given by assigning proper agreements and the list of sub-contractor was filed at the time of assessment. d) I find that the assertion of the Assessing Officer with regard to profitability from sub-contracted business is not by virtue of any reference drawn from the agreement with the sub-contractors. It is not the case of the Assessing Officer that the appellant has shown excessive payment to any sub-contractor over and above what was mentioned in the agreement. e) I do find force in the submission of the appellant that the percentage of work given on sub-contract is comparatively much higher than in comparison to earlier years. I am in agreement with the submissions of the appellant that net profit ratio on the work done by own is much higher than the net profit ration on work given on sub-contract basis and I find that the Assessing Officer has also accepted the version of the appellant as he has adopted differential net profit rates for two types of work. It is seen that the proportion of sub-contract work, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,20,844/- out of ₹ 2,42,45,356/- made by the Assessing Officer on account of suppression of net profit. 9. It was argued by Learned A. R. that overall of net profit of 5.25% was offered by the assessee and which has been enhanced by CIT(A) to the extent of 5.75%. The contention of Learned A.R. was as under: At the outset the analysis of net profit chart is tabulated hereunder: Net profit offered by Appellant A.Y. 04-05 05-06 06-07 07-08 08-09 Own work (%) 6 2.96 8.79 9.37 7.37 Contract work (%) 4 4 4 4 4 Overall N.P.** 5.85% 3.39% 5.47% 6.45% 5.25% **varies with the proportion of work and subcontract work Net profit rate applied/upheld by I.T.A.T. for earlier year A.Y. 04-05 05-06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded by the Assessing Officer, the CIT(A) has upheld the action of the Assessing Officer for rejection of books of account. In view of the defects pointed out and the discussions made by the Assessing Officer and CIT(A) in their respective orders, we are in agreement with the finding of CIT(A) for upholding the rejection of books of account. Now coming to the estimation of profit as shown by the assessee during the year keeping in view the work undertaken by the assessee as a main contractor as well as sub-contractor, we found that on similar facts, the assessee was before the Tribunal in the immediately preceding year 2007-2008 wherein the Tribunal has upheld the net profit rate of 6.5% in its order dated 15/02/2012. Following is the precise observation of the Tribunal: 7 .However, on merit of addition, the Learned CIT(A) found that on the similar facts in earlier year, the Tribunal in assessee s own case has upheld the net profit rate of 6% in the assessment year 2004-05. Since during the year under consideration, the assessee himself has shown net profit rate of 6.45%, the CIT(A) applied net profit rate of 6.5% and computed profit at ₹ 9,37,17,380/-, as against n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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