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TMI Blog2019 (9) TMI 1075X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon at 9%. This is a classic case of rejection of books of accounts of the assessee partially by the ld. CIT(A). As already given our detailed observationsdisregarding the primary contentions of the ld. AO to reject the books of accounts we hold that this is not a fit case for rejection of books of accounts and book results u/s.145(3) of the Act and estimating the net profit of the assessee thereon. At the cost of repetition, we find that both the gross profit and net profit ratios had indeed increased during the year in contract business as well as in the overall business activities. Accordingly, we direct the ld. AO to delete the addition made towards estimation of net profit and accept the book results of the assessee in the facts of the instant case. Accordingly, the grounds raised by the assessee are allowed. - ITA No.3896/Mum/2017 - - - Dated:- 18-9-2019 - Shri M. Balaganesh, AM And Shri Ram Lal Negi, JM For the Assessee : Shri J.P. Tiwari For the Revenue : Shri J. Saravanan ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.3896/Mum/2017 for A.Y.2012-13 aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- as part of his turnover in contract business. The assessee admittedly included this sum of ₹ 5,62,00,000/- as part of his turnover in contract business while filing the return of income for A.Y.2012-13. There was a specific question put by survey team on the assessee vide question Nos.15 18 as to why the said sum of ₹ 5,62,00,000/- should not be treated as part of cash component of sale consideration in contract business for the F.Y.2011-12 relevant to A.Y.2012-13 which the assessee came forward to accept that the said sum of ₹ 5,62,00,000/- to be cash component of sale proceeds in his contract business for the F.Y.2011-12. The assessee declared income from his contract business to the tune of ₹ 5,88,25,751/- which admittedly included ₹ 5,62,00,000/-, pursuant to which the gross profit and net profit ratio worked out to 18.50% and 15.71% respectively. The ld. AO, however, observed that the amount offered in the sum of ₹ 5,62,00,000/- was over and above the regular income offered by the assessee in the return of income and if the said sum of ₹ 5,62,00,000/- is excluded from the profit of contract business, the net prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts and give partial relief to the assessee stating that the direct income and maintenance income are not akin to the receipts from contract business and hence, the same are to be excluded while determining the net profit at 9% on turnover of contract business. Accordingly, he arrived at the turnover of contract business at ₹ 31,82,82,489/- (₹ 37,44,82,489 income offered of ₹ 5,62,00,000/) and applied 9% on the said sum which worked out to ₹ 2,86,45,425/- and from the said sum, he reduced the income already disclosed by the assessee in the sum of ₹ 26,25,750/- (5,88,25,750 ₹ 5,62,00,000/-). By this working, the ld. CIT(A) sustained the addition in the sum of ₹ 2,60,19,675/- towards estimation of net profit against which assessee is in appeal before us on the following grounds: 1. The Hon. CIT (Appeals) erred in confirming addition to the extent of ₹ 2,60,19,675/- on account of estimation of net profit @ 9% of turnover, after rejecting the book results u/s 145(3) of the I. T. Act 1961, not appreciating that the book results could not be rejected on the grounds stated in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire reasoning given by the ld. AO that profit has declined completely vanishes. We find that the ld. AR had placed on record the comparative chart of gross profit and net profit derived by him from his contract business alone as under:- A.Y. G.P Rate NP Rate 2009-10 2.63% 10.21% 2010-11 6.57% 8.71% 2011-12 11.36% 10.44% 2012-13 13.46% 15.72% 5.1. From the above chart, it could be safely concluded that both gross profit and net profit had only increased during the year under consideration and hence, the entire finding of the ld. AO that profit has declined during the year which in turn was due to improper valuation of work in progress, needs to be completely ignored as erroneous. From the perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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