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TMI Blog2021 (11) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the facts and in the circumstances of the case, whether the ld. CIT(A) was justified by ignoring the categorical findings of the AO who has established beyond doubt that all the subcontractor to whom the payment of Rs. 2,16,00,000/- was made were non-existing and fictitious. 3. On the facts and in the circumstances of the case whether the Ld. CIT(A) was justified in ignoring the facts that when assessee was confronted with all the facts and documents as well as statement of Shri Amit Kethsarwani and Shri Abhishek Kesharwani, the assessee could not offer any explanation and preferred not to reply. 4. On the facts and in the circumstances of the case, whether the Ld. CIT(A) was justified in ignoring the facts that narrated in the assessment order including the fact that shri Amit Kesharwani alleged prop. of M/s Kesharwani Engineers and Shri Abhishek Kesharwani, alleged prop. of M/s Kesharwani Engineers and Shri Abhishek Kesharwani, alleged prop. of M/s. A K construction, sub-contractor, have categorically denied of any acquaintance with the assessee and also categorically denied to have carried out any survey work for Hospital in M.P. 5. On the facts and in the circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C (Health Centre). This work is allotted by the Health Department of M.P. Government. The assessee declared n.p. of Rs. 22,30,955/- in M/s. MKM Associates and a n.p. of Rs. 6,96,039/- in Insite Architects. The Assessing Officer noted that on perusal of P & L account of Insite Architects, there are receipts of amount of Rs. 4,34,84,255/- and on examination, it is found that the receipts of Rs. 2,17,40,000/- got from the Health Deptt. had been credited in the bank account of M/s. Insite Architects. The assessee submitted that the same is advance given by the deptt. for executing the work for up-gradation of CHCs. However, the assessee explained that the works have actually been carried out by him on subcontract basis and Rs. 2,18,46,000/- were paid by him to three sub-contractors. In support, the assessee furnished copies of MOU between him and the sub-contractors and claimed that amounts were transferred by cheques and TDS had been deducted and deposited in due course. As per the books, the assessee made payment of Rs. 72 lakhs each to three sub-contractors for the work on sub-contract basis totaling to Rs. 2,16,00,000/-. However, the Assessing Officer held that the entire subcontra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e completion of the works allotted to the assessee and after verification of the work, final payment was made to the assessee. Further, we find that the assessee went into arbitration and the Hon'ble District Court in Arbitration Proceedings 52/2011 vide order dated 30.9.2013 held that the assessee had submitted detailed report for all 763 centers. The amount withheld by the MP govt. was held not to be proper and as such, MP govt. was directed to find any discrepancies in the report and the assessee was directed to correct the defects, if any, within 60 days. Thereafter, the payment was released. We find that in view of the facts/material available on record and submission thereof, the ld. CIT(A) restricted the addition to Rs. 29,68,826/-. The relevant portion of the order of the ld. CIT(A) is reproduced hereunder: "...............Being the work is spread all over the Madhya Pradesh, the assessee engaged the sub-contractors for doing the work. TDS was deducted on all the payments made to subcontractors. The sub-contractors are also assessed to tax having their own Permanent Account No. (PAN). The books of accounts of the sub-contractors were also audited u/s 44AB of the Act and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment, if want, can enquire the same from the sub-contractor. Thus, from all comers, it is clearly established that the work is given on subcontract basis and hence, there is no justification to add back the same in the hands of the appellant and particularly where the appellant maintains proper and regular books of accounts and submitted the audited final accounts alongwith the return. In any civil contract business earning profit margin of 33.5% is unthinkable. The AO made the elaborate efforts and examined the subcontractors and from such examination it is found that the CHC (Health Center) was actually executed. The AO also mentioned that the appellant is a civil contractor. During the course of search at the Officepremises of Shri Ashok Nanda at A- 5, Kasturba Nagar, Office of Vinayak Properties and Hindustan Institute of Pharmakon Pvt. Ltd. documents related to the order given by CIDC to the appellant for up gradation of CHC was found and on that basis only the assessment has. been completed u/s 153C. The Actual document found during the, course of search suggests that the appellant is a civil contractor for health department. The only thing objected by the AO was claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. On consideration of above, we find that it is an undisputed fact that the project was undertaken, therefore, ld. CIT(A) is justified in holding that the Assessing Officer was to estimate a reasonable net profit on same as when the assessee had undertaken the project, the expenditure on same must have been incurred. Thus, if the entire amount is disallowed, it would result in a profit rate of 21.52%, which would be unjustified. Therefore, for tax purposes, as equitable considerations cannot override the provisions of Act, the ld. CIT(A) made a proper estimation of income on the ground that the actual document found during the course of search suggests that the assessee is a civil contractor for health department and the only thing objected by the AO was claim of higher expenses but the Assessing Officer went on making addition largely on the basis of assumption and to some extent on the basis of deliberation of facts, gathered. Thus, the ld. CIT(A) was correct in observing that the assessee as well as Assessing Officer were not justified in so far as the assessee offered income only at Rs. 29,26,994/- from the total contract receipt of Rs. 7,36,97,747/which is only 4% net profi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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