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2016 (9) TMI 1325 - AT - Income TaxRejection of account books u/s. 145(3) - computing the net profit from contract business by applying net profit rate of 8% on the gross receipts as contemplated u/s. 44AD - Held that:- In the instant case, the authorities below have applied the net profit rate of 8% on gross receipts as per section 44AD which section does not apply to the present case, as the assessee is not a civil contractor but is engaged in the business of electro-mechanical and civil engineering contractor and carried out the erection of Extra High Voltage Overhead transmission lines, installation of underground EHV power cables, Microbe and telecom towers, repair and maintenance of EHV transmission and distribution equipments for electrification. The turnover of the present assessee exceeds the sum of ₹ 40 lacs which bars the application of section 44AD or the profit rate prescribed therein. Therefore, the conclusion reached by AO to apply the profit rate as contemplated u/s. 44AD cannot be supported. CIT(A) has justified the profit rate of 8% after considering the results of assessment year 2006-07 in the instant case for A.Y. 2003-04, which is not appropriate. The profit rate applied by the authorities below is not based on correct appreciation of facts or any rational. In order to justify the best judgment assessment, support could be derived from the previous history of the assessee and the comparable cases of the same line of business. We deem it expedient in the interest of justice to restore the matter to the file of AO for deciding the issue afresh in view of the observations made in the body of this order. Accordingly, the appeal of the assessee deserves to be allowed for statistical purposes.
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