9911796707
TMI Blog2020 (8) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... the action of AO regarding applying the Net Profit Rate (before depreciation and interest) @ 8% on gross construction receipt of the assessee. 3. On the facts and in the circumstances and in law the ld. CIT(A) erred in confirming the ld. CIT(A) erred in confirming the addition of Rs. 73,780/- which was made by the AO u/s 2(24)(x) read with section 36(1)(va) of Income Tax Act, 1961 on account of late deposit of employee contribution to EPF more so the same was deposited by the assessee before filing return of income u/s 139(1) of the Act. However, no separate addition was made by AO in the total income of assessee on this account as the profit was estimated by applying NP Rate. ITA No.161/JP/2019 - A.Y. 2014-15 ''1. On the facts and in the circumstances and in law the ld. CIT(A) erred in confirming the action of AO regarding rejecting the books of accounts of assessee by invoking the provisions of Section 145(3) of the Act. 2. On the facts and in the circumstances and in law the ld. CIT(A) erred in confirming the addition of Rs. 30,84,987/- out of total addition of Rs. 37,09,931/- made by the AO. The ld. CIT(A) further erred in confirming the action of AO regarding applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal vouchers hence not verifiable. 2.3 The AO in his order u/s 143(3) of the Act estimated income from contract @ of 8% of contract received subject to separately allowable depreciation and interest which was calculated at Rs. 60,77,860/-. However while computing the estimated income from contract, the AO allowed interest expenses at Rs. 29,84,683/- as against finance cost of Rs. 40,75,834/- claimed by the assessee and he separately assessed the income from consultancy at Rs. 3,01, 371/- and interest from FDR Rs. 9,38,293/-. He further held that an amount of Rs. 73,780/- is not allowable u/s 36(1)(va) r.w.s 2(24)(x) on account of late deposit of EPF Contribution of employees. However, he has not made separate addition for this amount since he estimated the profit by applying NP rate. In this way the AO assessed income on estimated basis at Rs. 73,17,520/- against the declared income of Rs. 35,10,760/-, resultantly addition of Rs. 37,99,760/- was made. 2.4 By the impugned order, the ld. CIT(A) upheld the rejection of books of account by holding that the facts of this year are different than last year. She further upheld the estimation of the profit by applying 8% of NP rate subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of labour expenses were paid in cash but it is not tantamount that the expenses paid in cash are not verifiable. It is known practice not only in assessee industry but in all industries that the wages paid in cash on fixed dates or regular interval due to their own nature. The assessee has also adopted the same practice and wages paid monthly. The company has claimed Rs. 86.78 lacs only towards labour expenses which was represents only 7.13% of total gross receipts of construction business. Further, the company account was also subject to statutory audit under the Company Act, 1956 and also tax audited under the Income Tax Act, 1961. 2.9 From the record, we found that the company has already produced books of accounts including supporting documents. In fact, assessee has maintained complete records of labour expenses in the shape of wages sheets and payment thereof which was produced during assessment proceeding having details of: * Name of labour * Designation or nature of work where labour engaged * Father or husband name * Date of birth * Date of joining * Sex * Gross wages rate per day * Number of day attended or labour worked in the month * Gross wages pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Act, the AO has to bring on record material on the basis of which he has arrived at the conclusion with regard to correctness or completeness of the accounts of the assessee or the method of accounting employed by it. In the instant case, it was not the case that the assessee had not followed either cash or mercantile system of accounting. It was also not the case that the Central Government had notified any particular accounting standard not followed by assessee. Hence, the second part of sub-section (3) of section 145 would not apply to the instant case. 3.1 Ground No. 2 relates to confirming the addition of Rs. 28,68,475/- on estimation basis by applying NP rate of 8% subject to depreciation and interest. 3.2 In this regard, we observed that the assessee came in this business since AY 2012-13. In AY 2012-13. This business was carried out under the status of partnership. The assessee was awarded the contracts by private parties and the assessee accepted the contract just to create an existence in market as the assessee was new in the field i.e. experience of 1 year only in the field. Due to this, Govt contracts were not awarded to the assessee. The main reason of lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any justification for allowing interest cost at Rs. 29,84,683/- in place of Rs. 40,75,834/-. 3.9 Accordingly, we direct the AO to allow deduction of 40,75,384/- instead of Rs. 29,84,683/- as interest cost while income derived according to net profit formula. 3.10 We also observed that the profit declared by the assessee is @ 6.62% (calculation chart is as below) subject to Finance cost and depreciation which is most reasonable considering the fact that (i) the assessee is new in this business (ii) contract was awarded by private party (iii) in road construction contract there is cut throat competition, (iv) the location of the work in very remote area and (v) the assessee left the Pune project awarded by M/s ILFS Engineering And Construction Company Limited due to non-viability and geographical limitation in same year. Total contract receipt considered by AO 11,99,22,995 Add: - Consultation Receipt (Para 2.6.1) 16,85,400 Add: -Interest Income on Bank FDR (Para 2.6.3) 9,38,293 Total Contract Receipt 12,25,46,688 NP @ 6.62% 81,12,591 Less: - Depreciation 5,31,296 Less: - Total Finance cost including interest Exp. (2.6.3 read with Para 2.6.2) 40,75,384 Tot ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
