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2012 (12) TMI 718 - ITAT HYDERABADJurisdiction u/s 263 - assessee engaged in Civil Contract work u/s 44AD – directing AO to estimate the profit @ 8% on gross receipts as against the net receipts in the assessment – Held that:- Though the sub-contract agreement provides for recovery of materials and consumables, but the claim of such recovery has to be supported by necessary evidence and it was incumbent on the part of the AO to verify the claim of the assessee by enquiring the same. As the assessee has shown gross receipt of Rs.5,00,14,972 in Profit & Loss A/c the assessment order does not reveal that the AO has made any such enquiry before accepting the claim of the assessee. As the assessment order is very cryptic and there is nothing in it to show that the AO has verified the correctness of the claim of the assessee towards the recoveries made by the principal contractor or for supply of materials or other recoveries from gross receipts the CIT was correct in exercising his jurisdiction u/s 263 in setting aside the order of assessment CIT was not correct in directing the AO to estimate profit at 8% on the gross receipts simply on the view that the assessee is a sub-contractor to the main contractor and supply of materials or recoveries are not properly verifiable and therefore, an element of profit cannot be ruled out. When no enquiry has been made by the AO regarding the claim of the assessee, the CIT was not justified in coming to a conclusion that the supply of materials, consumables are not properly verifiable. When the sub-contract agreement expressly provides for deduction from the gross amount towards materials and consumables and other recoveries, it cannot be said that such income has accrued to the assessee without bringing sufficient material on record to that extent - direct the AO to make proper enquiry regarding the claim of the assessee - partly in favour of assessee.
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