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TMI Blog2020 (8) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... b-contractor or from some third person, but considering the fact that the actual contract has been completed to the satisfaction of the contractee i.e. ONGC in the present transaction routed through LPPL assessee might have earned a little more profit than actually shown by it in its books of accounts in earlier years or this year. Therefore, we do not find any error in the finding of the ld.CIT(A) for rejection of the books of accounts as well as estimation of profit at 7% on the total turnover. No justification at the end of the AO to estimate profit at 40% of the turnover, which is merely based on some illogical consideration of facts and figures. AO has not provided any material for estimation that profit must have been earned at 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue authorities are that the assessee is a builder and civil contractors. It filed its return of income on 21.9.2013 declaring total income at ₹ 39,46,540/-. After processing the return under section 143(1), the case of the assessee was selected for scrutiny assessment by issuance of notice under section 143(2) of the Act on 4.9.2014. On verification of the record, it was noticed by the AO that the assessee has debited a sum of ₹ 6,45,25,179 being sub-contract charges paid to M/s.Limestone Properties P. Ltd., Kolkata ( LPPL for short) for the work of excavation of tunnel on behalf of the assessee, which assessee has received from ONGC Petro. The ld.AO vide show cause notice 18.12.2015 sought for details and explanation fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R acknowledgement of LPPL for A.Y.2013-14, copy of bank statement of LPPL confirming the receipt of payment etc. However, the ld.AO did not accept the explanation of the assessee. He rejected the claim of the assessee on the ground that transaction entered with the said LPPL is bogus, and the said company did not exit; that statement of Shri Praveenkumar Agarwal supports this aspect; that the assessee has suppressed the income by getting bogus contract, which was utilized for black money generation. He accordingly rejected the books of accounts of the assessee as the same are not reliable and did not reflect true and fair picture of assessee s business. He estimated the net profit @40%. He accordingly worked out addition of ₹ 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te TDS has also been deducted on such payments; that the addition made by the assessee merely on the basis of presumption and surmises. Further, provisions of section 145 did not apply to the assessee, as the AO has not pointed out any material error in the maintenance of books of accounts of the assessee, and rejection of the books of accounts was bad in the eyes of law and thus consequential addition made on such rejection was liable to be deleted. However, it was alternatively pleaded by the assessee before the ld.CIT(A) that assessee has been regularly filing its return of income and has been accepted by the department. The average rate of net profit declared by the assessee in the present year and the subsequent years comes to 5.95%, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53% in the Asstt.Year 2011-12 and 8.62% in the Asstt.Year 2010-11. The estimation of net profit at 40% was without any basis and without considering the above historical accounting results, and held such high rate of net profit to be unexpected and unreasonable. The ld.CIT(A) accordingly worked out net profit at the rate of 7% of the total a turnover of ₹ 7,58,32,901/- and estimated suppression of the net profit to the extent of ₹ 13,19,651/-. Aggrieved by the relief granted by the ld.CIT(A) to the assessee by restricting addition to the extent of 7% of the total turnover the Revenue is appeal before the Tribunal, while the assessee is in appeal for not giving full relief. 5. Before us, both the parties advanced their argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the same to the assessee-company. Assessee again sub-contracted the work to LPPL , and accordingly fulfilled the contractual obligation. The only lapse in the whole transaction is that the assessee might have got the work completed through some third party instead of LPPL . The LPPL would have only facilitated the assessee for providing bill, though this factor could not be proved with positive evidence by the Revenue, but Revenue was unable to collect information about the antecedence of LPPL . The LPPL is the assessee s sub-contractee and the assessee failed to produce any person from LPPL for confirming that sub-contractor has carried out the work. The assessee has only produced documents i.e. ledger of the assessee in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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