9911796707
TMI Blog2025 (4) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... of 46,25,75,450/-) was included in estimated addition by applying N.P. rate of 10.32%, 2. Whether in the facts and circumstances of the case, the Id. CIT(A) is justified in deleting addition of Rs. 13,87,72,635/- made u/s 40(a)(ia) which was disallowed by assesse itself and it should not have been made part of estimation of Net Profit. 3. Whether in the facts and circumstances of the case, the Id. CIT(A) is justified in estimating net profit @0.11% and not separately considering the disallowance u/s 40(a)(ia) of Rs. 13,87,72,635/- and disallowance of Rs. 32,38,02,815/-being non genuine expenses and accordingly whether the Id. CIT(A) is justified in relying upon the judgement of Hon'ble ITAT and High Court in the case of assesse for earlier assessment year when the facts of the case are distinguishable. 4. Whether in the facts and circumstances of the case, the Id. CIT(A) is justified in excluding amount of Rs. 1,72,77,91,273/- from turnover of the assesse for determining GP 29.29% whereas the above amount was shown by assesse itself in its ITR under the had "other income" in P&L account so it is part of business receipts along with amount of Rs. 2,73,93,10,472/- from rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany during the year declined considerably to Rs. 2,46,73.49.728/- from Rs 4,28,36,27,201/- as it was in immediately preceding year. The reasons for this down fall as is explained by the assessee reads as under : "Decrease in contract receipts is approximately 42.40% as compared to last year. All work contracts are allotted on the basis of tender system. It is further submitted that in this line of business competition is very high and the assessee-company has to compete with other big players in the business and sometimes it is very difficult to compete with them on price. Many times to obtain work contract, competitive prices are quoted yielding lower profits. Moreover, cost of construction and other expanses keep on increasing Various contracts were required to be completed within strict time frame failing which contractual penalties were also too high. Besides these factors, the assessee-company took some of the projects on sub-contract basis on low profit margins." 3.2 On perusal of the audited financial of the company, ld. AO noted that under the head "Long Term Loans and Advances an amount of Rs. 1,72,77,91,273/- was shown as "Claims". In the immediate preceding year, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, additional works/change of scope and breach of contract by the authority." In view of the facts furnished by the assessee, the amount of Rs. 1,72,77,91,273/- shown in the ITR as other income, was treated as contract receipts of the assessee which the assessee itself has disclosed and offered for taxation. 3.3 In respect of amount shown as trade payable under the head sundry creditors for goods and expense in the balance sheet, assessee was specifically requested to file the name of all the persons / parties from shown as Trade Payable- Sundry creditor for goods and expenses in the Balance Sheet, the assessee simply filed name of the parties with amount as on 31.03.2017. In the absence of the complete present postal address, the genuineness of the transactions with the parties as claimed by the assessee could not be examined / verified by ld. AO. 3.4 During the course of the assessment proceedings, the assessee was specifically requested to furnish quantitative details of all the items shown under the head opening and closing stock with supportive bills and vouchers so that the valuation of the opening and closing stock can be verified. However, despite specific query, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried out by them has not been furnished by the assessee. In absence of which, it is not clear whether such payment was actually made by the assessee for any type of work sublet or carried out by them. By disallowing 30% of the total expenditure of Rs. 46,25,75,450/-, the assessee had actually enhanced its expenditure by 70%, as the same might not have been incurred / paid by the assessee at all. Considering these facts as observed by the ld. AO it was evident that the book results declared by the assessee suffers from various defects and deserves to be rejected by invoking provisions of 145(3) of the Act. While holding so ld. AO also noted that in the immediately preceding i.e. A. Y. 2016-17 assessment was completed u/s 143(3) and on account of assessee's failure to prove the authenticity of books of account, book results were rejected u/s 145(3) and NP rate of 7.23% was applied as against negative NP rate of 6.97% shown by the assessee-company. On appeal by the assessee, vide appellate order dated 22.07.2018 the Ld. CIT (A-2), Udaipur in Appeal No. 10181/2018-19 upheld the rejection of books and further directed to estimate profit before depreciation @ 10.32% subject to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40(a)(ia) to the tune of Rs. 13,87,72,635/- separately added to the total income of the assessee. 3.12 Ld. AO noted that apart from interest income of Rs. 2,58,85,880/- and other non-operating income of Rs. 1,23,88,682/- as disclosed by the assessee in the ITR separately considered for calculating the income of the assessee. As discussed in the earlier para and as observed by the AO that the assessee has not disclosed works contract receipt of Rs. 57,56,57,561/- in its ITR whereas detail of the same was available in Form 26AS. The assessee has also shown the difference of Rs. 57,56,57,561/- in the reconciliation chart given. This works contract receipt of Rs. 57,56,57,561/- has been considered for application of NP rate after rejecting the books of account as discussed above by the ld. AO. While doing so the ld. AO noted that if the contention of the assessee that complete books of account have been maintained along with relevant bills and vouchers and trading results should be accepted as such, is considered then also there would be an addition of Rs. 57,56,57,561/- to the income declared by the assessee being excess work receipt not disclosed in the ITR. Ld. AO also noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income made on estimate basis which is challenged by the appellant in ground no. 2. In this ground, the appellant has challenged disallowance of expenses on which TDS was not made. This disallowance was made by the AO as there were certain expenses on which TDS was not made and the appellant himself had admitted this fact and made disallowance in his ITR. The stand of the appellant is that once income is assessed on estimate basis, no separate disallowance should be made u/s 40(a)(ia) of the Act. The appellant has also quoted provisions of section 44AD of the Act in his support. These provisions take care of all provisions of the Act from section 28 to 43C of the Act. As per this section, when income is computed on the basis of presumptive tax scheme, provisions of inter alia section 40a(ia) are not attracted. Same thing is provided in provisions of section 44AD, A44AE, 44AF, 44B, 44BB, 44BBA, and 44BBB. Provisions of section 44AD are reproduced below - "Notwithstanding anything to the contrary contained in section 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of teh total turnover or gross receipts of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This ground in as much as it challenges action of the AO regarding rejection of books of account is therefore, dismissed. Remaining part of the ground-which challenges application of net profit rate of 10.32% and not providing deduction for depreciation and interest expenses - is taken for adjudication. In this case, the AO rejected books account and estimated income after applying net profit rate of 10.32% and further disallowing expenses in respect of which TDS was not made by the appellant. The basis for adopting this net profit rate is the order of Ld CIT (A) for immediately preceding assessment year ie. AY 2016-17. The appellant was in appeal before Ld. CIT (A) against the order of AO for AY 2016-17 where net profit rate of 7.6% was applied and neither deduction towards depreciation and interest was allowed nor addition towards disallowance u/s 40(a)(ia) of the Act was made since this disallowance had already been made by the appellant in the ITR for AY 2015-16. In his order Ld. CIT (A) applied net profit rate of 10.32% but allowed deduction towards depreciation as also did not uphold separate addition u/s 40(a)(ia) of the Act. Relevant discussion in this regard is made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details have been reproduced in the order under appeal and non- compliances by the assesseeare also noted. 5.3 The A. O required the assessee to show-cause why books of accounts may not rejected in response the assesses submitted as under- "As regard to your proposal for rejection of books of accounts in sutimittedinat through there may be some technical defects in the maintenance of books of account, but still the Income can very well be computed fhore such books of accounts it is submitted that the starting point for computation of income should be from books of accounts unless they are such untrust worthy that proper determination of income is not possible." 5.4 The AO noted that the assessee company had itself admitted that there were some technical defects in the maintenance of books of accounts Further, the A. O noted that non- production of bills of major expenses, purchases, closing stock details, led to the legitimate Inference that the books/supporting evidences/bills vouchers had not been properly particularly when there was a steep fall in net profit rate, in the year under consideration there was loss of 6.97% of receipts whereas in the immediately preceding yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to deduction of depreciation and interest separately 4 It is also submitted that the net profit estimation if any made should be maple subject to further claim of depreciation and interest. Various judicial decisions as well as guidelines Issued by the Board also suggests that the estimation should be subject to depreciation and interest to third parties These are peculiar facts and may not be a common feature amongst various contractors Some of the contractor may have substantial loans and some may have their own funds Similarly certain contractors may own their own equipment's and vehicles while some may take the on hire. It will be useful to draw your honours kind attention towards the following judicial decisions in this regard which may kindly be appreciated while estimating the net profit in the case of the assessee 5 It is also submitted that as regards claim of bad debts is concerned the appellant had submitted complete details of parties in relation to which the bad debts was claimed, and had also submitted their account statements indicating the amount running from various years and the income which had been accounted for in earlier years, and since the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also found to be not correct and the same addition was also deleted in appeal and was also approved by Hon'ble ITAT in appeal The services of professional and technical support provided by the said company was found to be correct and justified, and the addition was deleted. The details of such consultancy services paid was also submitted and the details of the same are as under: Party Name Amount Rakesh Kumar Navkar 20,000 Accrete Consulting Engineering Pvt Ltd 5,58,804 Accrete Consulting Engineering Pvt Ltd 14,85,021 Rajendra Awasthi 56,180 Arun Kumar 2,40,000 Accrete Consulting Engineering Pvt Itd 12,59,500 India Institute of Technology 1,71,750 Accrete Consulting Engineering Pvt Itd 36,29,078 Accrete Consulting Engineering Pvt Itd 14,45,292 SREI Infrastructure pvt ltd 4,00,00,000 SREI Infrastructure pvt ltd 25,83,67,944 SREI Infrastructure pvt ltd 37,30,994 SREI Infrastructure pvt ltd 37,30,994 TOTAL 31,09,64,563 9. The consultancy charges so paid is fully verifiable and the entire payment so made is also fully verifiable and is through banking channels. These are regular parties and services are taken from them on regular basis. ITMEN 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of payment of term loans and interest on account of loan from Standard Chartered Bank: The copy of certain 15CA in relation to the same is enclosed herewith. The payment of foreign remittance has no connection with the income of the assessee, as this is the repayment of loans taken. 16 The amount of Rs. 18,89,88,076 is on account of current account and loan taken from directors, and is not a advance given to them. The company had been facing acute financial problem and to meet urgent business needs, the funds were being taken from the directors The Id. AO has wrongly. 17. In these facts, & is submitted that such high rate plied by the the Jus sited It is submitted that though there may be some technical defects in the maintenance of books of accounts. but still the income can very well be computed from such books of accounts if is submitted that the starting point for computation of income should be from Decks of accounts unless they are such untrust worthy that proper determination of income is not possible. The turnover of the company had declined substantially during the year, and the company had suffered heavy Insets. There were acute financial crisis and it was also very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the year was not furnished by the assessee I find from the record that in the immediately preceding assessment year, AY 2016-16, a search was conducted in the case of the assesses, assessment was completed under scrutiny provisions and there was no adverse finding regarding claim of depreciation in these facts the AO could have disallowed depreciation only on the assets assessee claimed to have added curing the FY 2015-16, which were not substantiated with evidence. 7.3 In view of the discussion in Para 72 above, it is relevant to compare the position of profits after interest but before depreciation in the year under appeal and in the preceding years. The position is tabulated as under- S. No. Particulars A.Y 2013-14 A.Y 2014-15 A.Y 2015-16 A.Y 2016-17 1 Total receipts 475.17 606.49 671.13 448.83 2 Net profit as per P/L a/c 46.38 35.22 48.51 (31.30) 3 Add back depreciation 12.83 15.28 19.77 24.23 4 Profit before depreciation (but after interest ) 59.21 50.50 68.28 (7.07) 5 PBD/Total Receipt (%) 12.46% 8.33% 10.17% 1.57% 7.4 The average rate of profit before depreciation in the three immediately preceding years is 10.32%. Therefore I co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ITAT against the order of CIT (A) for AY 2016-17 but by the time assessment order for AY 2017-18 was passed, order of Ld ITAT was not received. In its order, Ld. ITAT made discussion regarding adoption of gross profit rate-which being 29.29%- in its opinion was appropriate in comparison to AY 2015-16. From the gross profit as shown by the appellant, Ld ITAT allowed deduction towards interest and depreciation. In its order, Ld ITAT has discussed various judicial pronouncements and CBDT Circular dated 31.08.1965 the crux of which is that once the income is estimated after rejecting books of account, the assesse is entitled to get deduction towards depreciation and interest. The reason behind adopting gross profit and allowing deduction towards interest and depreciation was peculiar facts and circumstances of each case as in one case, the contractor might be working with own capital and machines taken on lease while other, working with borrowed funds and self-acquired machinery. Before arriving at this conclusion, Ld ITAT admitted arguments of the appellant regarding adoption of net profit rate subject to further deduction towards interest and depreciation and discussed various case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit rate of 7.6% to the total receipts of this year which was resulted into determination of income at Rs. 34.11 crores 4. By the impugned order, the Id. CIT(A) has confirmed most of the additions, againd, which the assessee is in further appeal before the ITAT. 5 It was submitted by the Id AR appeared on behalf of the assessee that the turnover of the company had declined substantially during the year and the company had suffered heavy losses. There were acute financial crisis and it was also very difficult to repay the bank loans and instalments to financial institution. The amount due to various creditors and others liabilities was also mounting. These facts had not been properly appreciated by the AO 6 He has further contended that the company had been not able to get good tenders, and therefore in such a situation had incurred heavy losses on account of fixed cost. The operating expenses had alsoincreased substantially on account of low volume of work being executed, Various loans had become non performing There was loss of Rs 31,30,33,272/- during the year in the computation St total income the assessee had already male disallowance of Rs. 17,56,32,712/- aut of expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; x x b. DCIT vs. Allied Construction (2007) 105 ITDT 1 (Del)(SB) Income from Other Sources-Vis a vis income from business-Investment in fixed deposits out of surplus funds generated from business out of award of arbitrators for damages for breach of contract-Offer of FD as security for various facilities availed by the assessee from banks- Interest received not a part of contract receipts for civil construction business-Hence, interest income is chargeable under other source. Interest expense claimed against the same cannot be allowed since no expense wasactually incurred in earning the award. Accounts-Contractreceipts of contractor-Hybrid method of accounting followed by the assessee --- Rejection of books of accounts by the AO-Hence, assessee to change adopt one method of accounting Accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustaining GP rate at 8 per cent which is on higher side-Therefore, in view of the peculiar facts of the case, it is fair and reasonable to apply profit rate of 7.50 per cent subject to deduction of interest, depreciation and salaries to partners. 10. The Id. AR has also invited our attention to the details of bad debts submitted before the A.O. duly mentioning complete details of parties in relation to which the bad debts was claimed, and had also submitted their account statements indicating the amount running from various years and the income which had been accounted for in earlier years, and since the amount was not receivable the same was written off as bad debts. The Chart of income parties and their corresponding Income shown as work receipts in earlier year submitted below. In some of the cases the advance was given towards the petty expenses which were also being received but final bills were not received and were only towards expenses and nothing was receivable, therefore the same was also written off. The entire expenses was towards expenses only, and the same was fully allowable. Party Name Bad Debts Written Off Total Work received Receipts KEPL (COS & Additional W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taken from them on regular basis. 14. By inviting our attention to the audited financial statement, the Id AR has contended that the turnover during the year under consideration had declined considerably, and the same was only Rs. 428.36 crores as compared to Rs. 667.79 crores in the immediately preceding previous year There is downfall of about 36% in the total turnover of the assessee during year under consideration. 15. With regard to claim of interest of expenditure, the Id AR has contended that the interest is mainly related to banks, financial institutions and working capital limits. There are various equipment finance loans being taken and in some of the vehicle's finance in earlier year the interest was for part of the year, while in the current year thesame is for full year. The details of these loans had also been given in the Audited Balance Sheet. 16. Our attention was also invited to the computation of income filed longwith return of income wherein the assessee had had already made is allowable of 30% off the expenditure amounting w Rs. 1,25,21,09,040/ on which TDS had not been deducted. The disallowance of Rs. 37,56,32,712/- has been made in the computatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me technical defects in the maintenance of books of accounts, but still the income can very well be computed from such books of accounts It is submitted that the starting point for computation of income should be from books of accounts unless they are such untrust worthy that proper determination of income is not possible. The turnover of the company had declined substantially during the year, and the company had suffered heavy losses. There were acute financial crisis and it was also very difficult to repay the bank loans and instalments to financial institution. The amount due to various creditors and other liabilities was also mounting. The company had been not able to get good tenders, and therefore in such a situation estimation of profit at 7.6% would be too high income to be estimated. Ultimately the various loans and become non performing Even at present the company is negotiating for settlement of dues. There was loss of Rs. 31,30,33,272/ during the year In the computation of total income the assessee had already made disallowance of Rs. 37,56,32,712/- out of expenses u/s 40(ia), which is almost 8.76% of the revenue. Any further addition to the total income would not be ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing revenues from operations: 1 Contract Revenue 4,28,36,27,201 2 Sale of Aggregate - 3 Sale of Scrapes 19,78,14,626 4 Sales of Trees 69,09,258 Total 4,48,83,51,085 23. Thus, the total revenue receipts from operations during the year was Rs. 448.83 crores. However, the assessee had other income of Rs. 1.13 crores which is non-operating income. After giving credit of operating expenditure, there remains gross profit of Rs. 131.34 crores. So far as the gross profit is concerned, the assessee had shown much better than grossprofit rate of 20.20% during the year under consideration as compared to the gross profit rate of 27.87% shown in the immediatepreceding young Now coming to the assessee's claim of indirect expenses with regard to employees' benefit expenses which have been claimed at Rs. 28 21 croves, financial cost interest expenses of Rs. 70 96 crores and administrative and other expenses of Rs. 40.47 crores. 24. Since we consider the gross profit shown by the assessee is 24. reasonable, now question arises regarding claim of other indirect expenses in the form of employees benefit expenses, administrative and other expenses. The assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; x x Since, order of Ld ITAT and decision of the High Court were not available with the AO at the time of passing the Order, the merit of additions made in the Order is to be seen in the light of aforesaid order of Ld. ITAT. In the Order, the AO applied net profit rate of 10.32%, the basis of which was Ld CIT (A) order for AY 2016-17 since by the time the Order was passed, order of Ld ITAT and decision of Hon'ble High Court were not available. Ld ITAT in its order for AY 2016-17 ordered for computing net profit/total income at Rs. 50 lakhs, In that year, contract and other receipts of the appellant were Rs. 4,48,83,51,085/- The net profit rate thus comes at 11% (50,00,000/4,48,83,51,085) As regard exclusion of claims of Rs. 172,77,91,273/- from contract receipts - which is raised in SoF and not in GoA, it is noticed from P/L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt declared gross profit rate of 29.29% which was higher in comparison to that for AY 2015-16 which was 27.87%. Ld ITAT, therefore, picked gross profit rate of 29.29%. In present AY, the gross profit comes at Rs. 1,03,37,47,371/- as per following calculation - Contract receipts and other operating income excluding Claims- Rs. 2,75,16,99,154/- 1. Contract revenue Rs. 2,73,93,10,472/- 2. Other operating income Rs. 1,23,88,682/- Total Rs. 2,75,16,99,154/- (Since it has been held in foregoing paragraph that Claims are just notional income and they are neither income nor give arise to any profit) Less- Operating expenditure Rs. 3,77,30,57,843/- 1. Change in inventory Rs. 1,07,16,52,251/- 2. Operating expenditure Rs. 2,70,14,05,592/- Gross profit Rs. 1,02,13,58,689/- Gross profit % (-)37.11% This year there is gross loss @ 37.11% as against gross profit @ 29.29% for AY 2016-17. Since books of account are defective and, therefore, have been rejected, gross profit rate for AY 2016-17 is applied and gross profit comes at Rs. 80,59,72,682/- ( Rs. 2,75,16,99,154/-x29.29%). In AY 2016-17, Ld ITAT disallowed 20% of employees' benefit expenses and administrativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erations which comprises of contract revenue (Rs. 2,46,73,49,728), sale of scraps (Rs. 26,15,34,005/-) and sale of trees (Rs. 1,04,26.739/-) is shown at Rs. 2,73,93,10,472/- and other income which comprises of other non-operating income and excluding other claims (unilateral and disputed claim on which no TDS was neither applicable nor made and hence not liable to be declared in 26AS) is shown at Rs. 1,23,88,682/ -. Besides, interest receipts are also shown in Form 26AS. In the case of contract receipts alone, there is difference of Rs. 46,66,14,822/- as is evident from chart given at para 20 on page 10 of the Order. In this chart, total contract receipts as per Form 26AS are given at Rs. 2,90, 15,36,171/- and against this figure, amount of Rs. 2,46,73,49,728/- is declared in the P/L account. The reason for difference between the figure as appearing in Form 26AS and figure shown in P/L account is explained to be on account of advance payment on which no TDS was made and since this advance was not part of turnover, it was not shown in the P/L account. The appellant has given justification for this difference in his reply. The appellant has argued that this is a regular feature in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was on higher side - SI. No. SI. no. of the chart Name of deductor Amount as per Form 26AS Amount booked in books of account Excess Receipts shown in books 1. 8. Garrisson Engineer Air Force 2,31,30,000 4,71,00,000 2,39,70,000 2. 11. National Highways Authority Of India 18,66,60,712 21,54,31,096 2,87,70,384 3. 15. Shiv Kumar Bansal 41,00,000 42,99,190 1,99,190 4. 24. Punjab National Bank, MGH Road, Jodhpur 6,77,311 7,54,464 77,153 5. 31. ICICI Bank Ltd 7,20,270 8,91,368 1,71,098 6. 34. Kotak Mahindra Bank Ltd 22,94,931 26,30,489 3,35,558 7. 35. Axis Bank Ltd 44,23,936 44,30,601 6,665 While in some cases, amount booked in accounts was on lower side, in some it was on higher side and in some cases both the amounts matched with each other, as per Form 26AS and books of account. Though the explanation was offered by the appellant during assessment proceedings, mismatch was explained, the AO rejected the explanation of the appellant During appellate proceedings also, the appellant filed copy of Form 26AS and copies of account of the parties concerned. The amount of difference has been once again explained in the reply. It is seen th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r following details - Interest on- Rupee term loan Rs. 69,63,668/- Rs. 33,52,81,299/- Foreign currency loans Rs. 17,70,033/- Buyers' credit Working capital loan Rs. 28,18,84,837/- Other finance charges Rs. 10,89,23,556/- Total Rs. 73,48,23,394/- Less-Interest income Rs. 2,51,33,962/- Amount booked as Finance cost Rs. 70,96,89,432/- 8.6.2. Apart from that, the interest income is received on margin money and security deposit which are made being necessary in the nature of business carried out by the appellant. Since these margin money and security deposit were made during the course of business, interest income is derived from the business of the appellant and taxable as business income. The appellant could have shown this interest as income either in credit side of P/L account or deducted it from the interest expenses paid. The appellant has chosen the latter practice. Since this interest income was derived from business of appellant, it is his business income and is assessable under the head income from business' and not under the head 'income from other sources'. Ld ITAT in its order for AY 2016-17 has included this income as business incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d vehemently argued that three is no basis given by the ld. CIT(A) adopting the profit estimation. The addition made u/s. 40(a)(ia) should be in addition to the profit estimation and it is disallowance. Every year is separate year and ld. AO has made various addition based on the detailed finding given in his order against that the ld. CIT(A) has accepted the GP without considering the basis of the making addition by the ld. AO. 8. Per contra, ld. AR of the assessee supported the finding recorded in the order of the ld. CIT(A) and relied upon the written submission so made before the ld. CIT(A). Ld. AR of the assessee also vehemently argued that in the past year the issue was accepted and the matter become finally accepted by the revenue as per the judgment of the Jurisdictional Hon'ble Rajasthan High Court and the ld. CIT(A) has based on the that finding given relief to the assessee in the year under consideration. Ld. AR of the assessee also relied upon the written submission made before the ld. CIT(A). Since that written submission is already forming part of the order of the ld. CIT(A) the same are not repeated to avoid the duplication. 9. We have heard the rival contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately preceding year, the balance under that head was Rs. "Nil". Further, the amount of Rs. 1,72,77,91,273/- so claimed as "Claims" in the audited financials, has also been shown in the ITR under the head "Other Income". On being asked to explain the amount of Rs 1,72,77,91,273/- shown as "Claims", the assessee vide its reply filed on 08.10.2019 stated that the increase in loans and advances is on account of Claims which is of Rs. 1,72,77,91,273/- and on account of TDS deducted at source and old pending refunds of earlier year. Later, vide reply filed on 11.12.2019, the assessee submitted the "Claim" shown in the audited financials are related to claim filed against the parties for loss incurred also. Thus, vide notice u/s 142(1) dated 18.12.2109, the assessee was again requested to explain the claim of Rs. 1,72,71,91,273/- shown under the head long term loans and advances with supportive documents. It was also requested as to how and why claims of Rs. 1,72,71,91,273/- has been transferred /shown in the ITR under the head "other income as other claims". In response to this specific query the assessee filed a reply vide letter e-filed on 21.12.2019. In support of contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the assessee simply filed branch wise details of items and their value. In the details of opening and closing stock, the assessee has shown stock of Cement, Steel, Aggregate, Diesel, Pannel, Emulsion, RCC Pipes, Tyres etc. The assessee did not file any documents in support of valuation of each item shown as opening and closing stock supported with bill. Even the assessee failed to give quantitative details of items available at the beginning of the year and left at the end of the year. This shows that the assessee has valued the opening and closing stock of various items dealt in by it on an estimation basis and the slight change in the value of opening and closing stock can change the trading results of the company. Ld. AO also noted that few expense like miscellaneous expenses (Rs. 19,20,379/-), camp messing expenses (Rs. 1,19,30,751/-), site expenses (Rs. 15,09,108/-), guest entertainment expenses (Rs. 27,45,595/-), travelling and conveyance (Rs. 1,33,23,009/-) it was found that most of the expenses were incurred in cash for which proper details have not been either maintained or filed during the course of the assessment proceedings. The assessee had also not maintained the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised to the assessee to all related bills and vouchers. But, the assessee failed to substantiate additions made in the fixed assets with relevant bills and vouchers. Hence, the depreciation of Rs. 1,64,006/- was not considered as allowable. Furthermore, income shown in Form 26AS and in ITR, the assessee was requested to furnish a reconciliation chart. In response to the query, the assessee filed a copy of Form 26AS with reconciliation chart of income reconciling the figures as shown in 26AS and as declared in the ITR. Ld. AO on examination of each individual entry under specific head of income shown in the Form 26AS vis-a-vis, income as declared by the assessee in the ITR, it is found that work contract receipt of Rs. 57,56,57,561/-has been less shown by the assessee in the ITR. Finally, having considered to reject the books of accounts of the assessee, ld. AO consider it just and fair to apply a net profit rate of 10.32% on the work receipts declared in the ITR, claims of Rs. 1,72,77,91,273/- shown as other income and contract receipts of Rs.57,56,57,561/- not disclosed by the assessee in the ITR. Accordingly, profit of Rs.52,02,48,754/- was considered the income of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a)(ia) of the Act. The bench noted that while deciding this issue the ld. CIT(A) has considered the submission of the assessee that disallowance of Rs. 13,87,72,635/- already made u/s 40a(ia) by the assessee- appellant as the TDS amount was deposited delayed and based on the provisions of law, the same would have to be disallowed while making the computation of income and would be claimed only in the year of payment. Since the said amount stands already included in the income while making the computation of income there is hardly any need to make any comment on the same and to draw any adverse inference on the basis of the same. If the books of accounts are rejected, and net profit is estimated by application of net profit rate, there cannot be again addition on account of any disallowance based on the same set of books of accounts. Here we note that the books of accounts were rejected, and net profit rate was applied. Thus, having accepted the fact of rejection of book results making separate addition from the same set of books is incorrect. The issue raised in this year also prevailed in the earlier year wherein no separate addition were made in relation to payments for default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GoA, it is noticed from P/L account and Note 3.20 of financials that the appellant had himself included this amount in 'Other income and computed taxable income after considering it as part of receipts. This argument is, therefore, dismissed. There is an another limb of this ground which is inclusion of this amount in contract receipts for the purpose of applying net profit rate on this amount. The appellant has argued that this claim was in respect of two parties who did not accept this claim and, therefore, it is a disputed claim. During the assessment proceedings, the appellant filed details in the shape of copy of suit and letter copy of letter from one of the parties. Relevant discussion in this regard has been made in para 6-9 of the Order. The discussion made in the Order shows that there was no dispute with regard to nature of claim in as much as its nature is concerned. There is no doubt that this was an unilateral claim which was made on the part of the appellant and which was not accepted by the parties concerned. Now the questions that arises is whether such claim gives rise to any income and is it taxable. Courts have held that such claim gives rise to only noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rohtak- Bawal Section of NH-71 from KM 363.300 (Design KM 363,300) to KM 450.800 (Design KM 445.853) under NHDP III in the state of Haryana on Design, Build, Finance, Operate and Transfer (DBFOT) Basis Notice by the concessionaire for payment of compensation on account of delay events, additional works/change of scope and breach of contract by the authority. The entry so passed is merely to support the claim made by the assessee in court of law and the income has never realised, reached or accured in the hands of the assessee. Thus, when the book results were rejected while estimating the profit only the real income be taxed and not the notional income. While deciding this issue the ld. CIT(A) has considered the issue that there is no finality about the income and the estimated income is accrued at once subject to correction when the amount is agreed upon. If the amount is litigated, however, even though liability is admitted it has been held that income does not accrue until the litigation is finally terminated. But if liability is not admitted income does not arise from mere accrual of a cause of action. The income may not be accrued until a settlement is made or if the claim i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Form 26AS Amount booked in books of account Excess Receipts shown in books 1. 8. Garrisson Engineer Air Force 2,31,30,000 4,71,00,000 2,39,70,000 2. 11. National Highways Authority Of India 18,66,60,712 21,54,31,096 2,87,70,384 3. 15. Shiv Kumar Bansal 41,00,000 42,99,190 1,99,190 4. 24. Punjab National Bank, MGH Road, Jodhpur 6,77,311 7,54,464 77,153 5. 31. ICICI Bank Ltd 7,20,270 8,91,368 1,71,098 6. 34. Kotak Mahindra Bank Ltd 22,94,931 26,30,489 3,35,558 7. 35. Axis Bank Ltd 44,23,936 44,30,601 6,665 While in some cases, amount booked in accounts was on lower side, in some it was on higher side and in some cases both the amounts matched with each other, as per Form 26AS and books of account. Though the explanation was offered by the appellant during assessment proceedings, mismatch was explained, the AO rejected the explanation of the appellant During appellate proceedings also, the appellant filed copy of Form 26AS and copies of account of the parties concerned. The amount of difference has been once again explained in the reply. It is seen that this practice of receiving advance causes difference between figures of receipts as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; XXX XXX XXX Now when action of AO regarding rejection of books of account has been upheld, the basis of computing total income of the appellant is to be taken in the light of order of Ld ITAT for AY 2016-17. As is gathered from the order of Ld ITAT (para 23), in AY 2016-17, the appellant declared gross profit rate of 29.29% which was higher in comparison to that for AY 2015-16 which was 27.87%. Ld ITAT, therefore, picked gross profit rate of 29.29%. In present AY, the gross profit comes at Rs. 1,03,37,47,371/- as per following calculation - Contract receipts and other operating income excluding Claims- Rs. 2,75,16,99,154/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
