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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 ..... e only at ₹ 29,26,994/- from the total contract receipt of ₹ 7,36,97,747/which is only 4% net profit and on the other hand, the Assessing Officer estimated a much higher net income from contract at ₹ 2,44,33,621/- which comes to an unreasonable net profit from contract. Considering both of the net profits as unjustified and incorrect, the ld. CIT(A) rightly estimated the net profit of the assessee at 8% of the contract receipt - IT(SS)A No.157/Ind/2016 And C.O. No. 27/Ind/2016 (arising out of IT(SS)A No.157/Ind/2016) - - - Dated:- 25-10-2021 - Hon ble Rajpal Yadav, Vice President And Shri Manish Borad, Accountant Member For the Revenue : Shri Rajeeb, Jain, CIT-DR For the Respondent : S/Shri Ashish Goyal N.D. Patwa, ARs ORDER PER MANISH BORAD, A.M The above captioned appeal filed at the instance of the Revenue Cross Objection by the assessee for Assessment Year 2008-09 are directed against the orders of Ld. Commissioner of Income Tax(Appeals) (in short Ld. CIT(A)], Bhopal dated 27.05.2016 which are arising out of the order u/s 153C r.w.s.153A r.w.s. 143(3) of the Income Tax Act 1961(In short the Act ) dated 31.12.2009 framed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 and thus notice u/s 153A/153C cannot be issued for A.Y. 2008-09. 2. That on the facts and in the circumstances of the case, the ld. Commissioner of Income Tax (Appeals) erred in confirming the addition of ₹ 29,68,826/- out of total addition of ₹ 2,16,00,000/- by estimating the profit @ 8% of the turnover without considering the facts properly and without accepting the explanation offered by the assessee. 3. That the appellant craves leave to add, to urge, to later or to amend any of the grounds of cross objections on or before the date of hearing. 2. Brief facts of the case as culled out from the records are that search and seizure action u/s 132 of the Act was conducted at the office premises of Shri Ashok Nanda at A-5, Kasturba Nagar, Office of Vinayak Properties and Hindustan Institute of Pharmakon Pvt. Ltd. on 07-09-2007. During the course of search, the documents LPS1/6 page 33-37 were seized which is order given CIDC to MIKM Associates on 05-06-2006 for upgradation of CHC as FRU and agreement no. is 01/06-07 for amount of ₹ 2,00,90,914/-. Page 37 another order on 18-10- 2006 given to MKM Associates and HIPL together for ₹ 2,59,99,708/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the finding of Ld. CIT(A) regarding deletion of addition, submitted that ₹ 216 lakhs were paid to three parties @₹ 72 lakhs each and in support, the assessee had submitted memorandum of understanding, audited accounts and affidavits of all three parties, TDS details, PAN information. Statements of the parties were recorded behind the back of the assessee and their cross-examination could not be done. Alternatively, learned Counsel for the assessee also submitted that it is an undisputed fact that the project was undertaken, therefore, the Assessing Officer was to estimate net profit on same as it is impossible to say that although assessee had undertaken the project, expenditure on same would not have been incurred. Thus, if the entire amount is disallowed, it would result in a profit rate of 21.52%, which would be an impossible figure, therefore, the assessee pleaded that in respect of the receipts, for which he was unable to justify the expenditure, a reasonable profit rate may be taken, which would be 3-4% but the ld. CIT(A) estimated the same to be 8% which was not justified. Accordingly, learned Counsel for the assessee submitted that for tax purposes, equitable c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as made and if the said disallowance is added to the total income, the net profit comes to ₹ 2,45,26,994/- (₹ 29,26,994 + ₹ 2,16,00,000) which is nearly 33.5% of the total turnover which is very high and unreasonable in this line of business. It is submitted that as held by various courts that if the AO is not satisfied about the correctness of the expenditure claimed by the appellant, he should invoke the provisions of section 145 which is as under: Section 145(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where. the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144. Thus, it is clear that if the AO has any doubt about any expenditure claimed by the appellant, the provisions of section 145 should be applied and profit should be determined at reasonable figure. All the payments made to the aforesaid three contractors were by account payee cheques only and they have shown the receipts in thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a result out of the total addition of ₹ 2,16,00,000/-, an addition of ₹ 29,68,826/- (₹ 58,95,820/- - ₹ 29,26,994/-) is sustained and the appellant will get the relief of Rs.l,86,31,174/-. On this issue reliance is placed on the decision in case of Shyam Biri Works Ltd (2013) 38 taxmann 228 (Allahabad) and Suresh Chand Talera (2005) 152 Taxmann 348 (M.P.). In case of Jogender Singh Co. Etah, ITAT Agra Bench, Agar in ITA No. 213/ Agra/20 12 in order dated 26-07- 2013 held in similar situation that CIT(A) was correct in applying suitable NP rate instead of disallowances of 50% of expenses. In case of Mis Choudhary and Brothers, Jaipur, ITAT Bench A, Jaipur in ITA no. 879/JP/2011 vide order dated 25-05-2012 held that the AO was not justified in making separate additions on different heads, under deemed rejection of books of a/c u/s 145(3). It is rather felt that he should have made a composite/common addition towards the lower net profit shown by the appellant. The Hon'ble ITAT, Indore while deciding the case of S.K. Jain v Dy. CIT(2016) 27 IT] 113 (Trib.Indore) in ITA Nos.211Ind/2013 and 604/Ind/2012 and appeal no. (2016) 28 IT] 123(Trib.Indore) estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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