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TMI Blog2020 (9) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... 18-8-2020 - SHRI RAMESH C SHARMA, AM AND SHRI SANDEEP GOSAIN, JM Assessee by : Shri Vijay Goyal (FCA) Revenue by : Smt. Runi Pal (DCIT) ORDER PER: R.C. SHARMA, A.M. This is an appeal filed by the assessee against the order of ld.CIT(A)-IV, Jaipur dated 31/01/2019 for the A.Y. 2015-16 in the matter of order passed U/s 143(3) of the Income Tax Act, 1961 (in short, the Act). 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. In this appeal, the only grievance of the assessee relates to upholding the ad hoc disallowance of ₹ 10.00 lacs out of contract expenses. 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is in the business of contractor. The assessee filed his return of income on 30/10/2015 declaring total income of ₹ 46,86,640/-, which was assessed by the A.O. after making various additions at ₹ 84.21 lacs. During the course of assessment proceedings, the A.O. made ad hoc disallowance of various expenses. By the impugned order, the ld. CIT(A) had upheld the ad hoc disallowance of ₹ 10.00 lacs, against whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preceding years. The Hon ble Rajasthan High Court and the Coordinate Benches of the ITAT, Jaipur held in the various cases that the net profit @ 8% of gross receipts subject to further deduction on account of depreciation and interest are held to be reasonable. Such view has been held by the Hon ble Rajasthan High Court in the case of CIT Vs Jain Construction Co ors. (2000) 245 ITR 527 (Raj). The relevant portion of the Hon'ble High Court s order is as under: The Division Bench of this court in CIT V. S.M. Bhatiya Associates (1997) 226 ITR 675 has held that the finding recorded by the Tribunal on appreciation of evidence available on record, is a finding of fact and does not give rise to the question of law for reference under section 256(2) of the Act, and thereby rejected the applications seeking reference of similar questions. In the instant case, the Tribunal while allowing the appeal has directed the assessing authority to recompute the total income as estimated by him and allow relief on account of payment of interest and claim of depreciation. The finding recorded by the Tribunal is purely a finding of fact, based on proper appreciation of material on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debited a sum of ₹ 14,00,93,774/- to the P L account under the head contract for which the AO required the specific query with regard to such contract expenses vide note u/s 142(1) dated 5-09-2013 which was replied by the assessee vide its letter dated 24-10-2013. The AO considered the reply of the assessee and found irrelevant to the queries raised in show cause notice dated 11-02-2014. The AO in the assessment order that the assessee had not produced the books of account, no day today consumption of material was produced, no workwise and headwise details of the expense has been produced and no evidence in the form of bills/ vouchers had been produced. The AO thus invoked the provisions of sec 145(3) of the Act. The AO also observed that the assessee on its part had done absolutely nothing to either substantiate its own position or to furnish reasonable explanation for the queries raised. The AO thus in the present set of facts made a disallowance of 3% on total contract expenses of ₹ 14,00,93,774/- which works out to ₹ 42,02,813/-. However, the ld. CIT(A) gave a relief of ₹ 8,02,363/- to the assessee by sustaining an addition of ₹ 34,00,450/-. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer net profit in spite of the fact that over all gross profit of the assessee was more than the last year as per following chart. Particulars In AY 2010-11 In AY 2011-12 Difference Depreciation 58,97,727 82,65,004 23,67,277 Sales Tax 6,54,678 10,75,725 4,21,047 Royalty 2,09,219 7,89,592 5,80,373 Labour Cess 0.00 3,13,993 3,13,993 Total 67,61,624 1,04,44,314 36,82,690 It is also noted that estimation of trading results in the case of contractor is @ 8% of contract receipt subject to deduction of depreciation and interest. It is also further noted that ITAT Jaipur bench in the case of DCIT vs Rishabh Construction Pvt.Ltd in ITA No.1081/JP/2011 vide its order dated 30-08-2012 for the A.Y.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Profit shown by assessee 4737173 Further Addition if any 0 Taking into consideration the submissions of the ld.AR of the assessee and orders of the lower authorities and also the decision as relied on by the assessee in the present case, we hold that the ld. CIT(A) is not justified in sustaining the addition of ₹ 34,00,450/- and the same is deleted. Thus Ground No. 1 of the assessee is allowed and Ground No. (i) and (ii) of the Revenue are dismissed. Considering all these relevant facts, the Bench hold that the ld. CIT(A) was not justified in sustaining the part addition in both business of the assessee. Hence, appeal of the assessee stands allowed. 5. From the record we found that the assessee is an individual and civil contractor. The assessee has filed his return of income on 30/10/2015 declaring total income of ₹ 46,86,640/-. The case was selected for scrutiny/s 143(3) of the Act on the basis of CASS. The assessee produced audited books of a ..... 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