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TMI Blog2018 (7) TMI 1749X X X X Extracts X X X X X X X X Extracts X X X X ..... s ILFS Engineering and Construction Company Limited. Since no work was carried out in respect of the highway road project awarded by M/s ILFS Engineering and Construction Company Limited and no revenue was received therefore, the entire expenses incurred on the same project was shown as work-in-progress at the end of the year. The assessee has declared the sales/contractual revenue reflects in the books of account from the road and industrial township work given by Lafarge Project only. The assessee filed its return of income on 29.09.2012 declaring total income of Rs. 10,24,990/-. During the course of scrutiny assessment the AO asked the assessee to produce separate trading account of each contract work though the assessee produced the books of accounts and other details however, the assessee did not maintain separate trading accounts of each contract work. The AO further noted that the assessee shown a very low gross profit from the work executed during the year under consideration. Further, the expenditure on account of wages was mostly incurred during the period from December to March whereas the assessee has received contract receipts throughout the year. The AO also noted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore allowing interest, depreciation and remuneration to partners on total turnover of Rs. 9,03,14,148/-. 3. Under the facts & circumstances of the case and in law, the Ld. CIT(Appeal), Ajmer erred to confirming the order of Ld AO to disallow TDS credit arises on amount received to assessee according to work order awarded by awarder. May kindly restore the said TDS credit. 4. The appellant craves leave to add, amend or alter vary and/or withdraw any or all the above grounds of the appeal." 3. Ground Nos. 1 and 2 are regarding rejection of books of accounts u/s 145(3) of the Income Tax Act. The ld. AR of the assessee has submitted that the AO has rejected the books of accounts on Guess work, surmises and conjectures and has exercised his discretion arbitrarily and his finding has no nexus with the material on record. The ld. AR has further contended that the ld. CIT(A) has upheld the action of the AO in summary manner without discussing and giving findings on the issues raised by the assessee. He has further submitted that the assessee is maintaining the books of accounts on mercantile system of accounting. The books of account audited, they are certified that the accounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not justified when the entire receipts are on account of execution of composite work awarded to the assessee. 4. On the other hand, the ld. DR has relied upon the orders of the authorities below and submitted that the Assessing Officer as pointed out specific defects in the books of account of the assessee and therefore, the books of account of the assessee do not reflect the true picture. The ld. DR has submitted that the AO has given a specific finding that the assessee has not supported the expenses incurred on account of wages with proper vouchers and further the sub contractor expenses are also not supported by the evidence and particularly when the assessee was asked to produce sub contract the assessee failed to do so. 5. We have considered the rival submissions as well as relevant material on record. During the year under consideration the assessee was awarded the work contract by M/s Lafarge India Pvt. Ltd. for construction of road and industrial township for their green field cement project at Nimbahera Tehshil, District Chittorgarh. The other contract was awarded by M/s ILFS Engineering and Construction Company Limited for construction of highway project however, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executed through the sub contractor is not doubted by the Assessing Officer but the AO insisted the personal examination of the sub contractor. The assessee has produced all the records in respect of the work carried out by the sub contractor which includes the bills raised by the sub contractor, payment through banking channel after deduction of TDS. Therefore, once the assessee discharged his own of producing all the relevant documents and further, when the nature of work requires specific machinery which is not owned by the assessee then the said work executed by the assessee through the sub contractor even otherwise cannot be doubted. Thus, keeping in the view the nature of work got done through the sub contractor and the documents produced by the assessee there is no scope of any doubt about the genuineness of the work done and payment made by the assessee to the sub contractor. Even if the AO has wanted to verify the genuineness of the claim then it was open to the AO to summons the concerned persons and examine. Accordingly, in view of the above facts and circumstances of the case when the assessee produce all the relevant details and evidence then insignificant defects in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). It is trite to say that in the facts and circumstances of present case, account books are maintained as they were ordinarily maintained years after years and which were found to yield a fair result. Mere deviation in GP rate cannot be a ground for rejecting books of account and entering realm of estimate and guesswork. Lower GP rate shown in the books of account during current year and fall in GP rate was justified and also admitted by the AO as well as CIT(A) as well as the Tribunal. Therefore, fall in GP rate lost its significance. Having accepted the reason for fall in GP rate, namely, stiff competition in market and also that huge loss caused in particular transaction, neither the rejection of books of account was justified nor resort to substitution of estimated GP by rule of thumb merely for making certain additions. We are, therefore, of the opinion that the findings arrived at by the Tribunal suffers from basic defect of not applying its mind to the existing material which were relevant and went to the root of the matter. When all the data and entries made in the trading account were not found to be incorrect in any manner, there could not have been any other resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Extended price Delivery date 700203424 Civil-plant 1.00 1 Units .00 10,59,13,974 30/11/11 With reference to your quotation dtd 14.04.2011, subsequent discussion on 21.04.2011 at our Gurgaon office and your final offer dtd 12.05.2011, we are pleased to award you Purchase Order (Services) for construction of Road and Drainage system at Chittorgarh Cement Plant as per the following terms & conditions: Order Ceiling Value - INR 10,59,13,974/- (Rupee Ten Crore Fifty Nine Lacs Thirteen Thousand Nine Hundred and Seventy Four only) FOR Chittorgarh, excluding applicable tax. The above contract price is on given Bill of Quantities (BOQ) however payment will be made by us as per actual work done basis. Scope of Work: Construction of Road and Drainage system as per instruction of site incharge at our Chittorgarh Cement Plant as per annexure A. You have to mobilize the resource as per attached annexure 'B to H'. Getting NOC from NHA (National Highway Authority of India). Dealing with local villagers is under contractor's scope. Getting NOC/ approval from Railway ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the terms and conditions of the contract/work order and found that the liasioning work is inseparable part of the work order given by Lafarge India to the assessee. The Revenue has not disputed the terms and conditions of work order as reproduced by the ld. CIT(A). Accordingly, to the extent to fact the entire receipt as contract receipt we do not find any error or illegality in the order of the ld. CIT(A). 7. As regards the net profit apply at 8% we find that the AO has not applied any comparable case or the prevailing rate in the particular industry therefore, the estimation of the net profit @ 8% by the AO is without any basis. Since, we have already decided the issue of rejection of accounts therefore, this issue becomes academic in nature. However, we find that having regard to the fact that this is the first year of the business activity of the assessee and therefore, the income declared by the assessee at GP rate 7.44% in our view cannot be defaulted with. Accordingly, we set aside the order of the authorities below on account of adopting the net profit at 8%. It is well settled law that the rejection of books of account may not necessary lead to an addition to the declare ..... X X X X Extracts X X X X X X X X Extracts X X X X
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