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2014 (12) TMI 479 - HC - Income TaxApplicability of section 44AD - Assessee’s turnover in excess of ₹ 40 lacs and justification of addition made u/s 40A(3) - Whether the addition to declared income is adequate or a higher addition would be justified – Held that:- The AO did not conduct any inquiry and ascertain the net profit rate of other comparable contractors and disallowed expenditure resulting in abnormal gross profit rate of 59.60%, which should not be accepted - The effect thereof was that 70% of the expenditure on account of purchases worth ₹ 10.61 crores out of total purchases of ₹ 14 crores was disallowed - as the books of accounts had not been produced and were not regularly maintained, the book results should be rejected - as far as total turnover is concerned, the appellate authorities are right in holding that the figure of ₹ 18.43 crores cannot be disputed as the assessee was only doing development work for the Greater Noida Authority - The total turnover is also supported by the tax at source certificate - The quantum of turnover was not adversely commented upon by the AO - counsel for the assessee had earlier produced a copy of the assessment order relating to AY 2010-11, wherein the AO himself had applied net profit rate of 8% on contractual receipt of ₹ 6.66 crores and net profit rate of 3% on supply receipts of ₹ 7.21 crores - revenue has not been able to point out or state that the other contractors have a higher profit rate, than the net profit rate of 8% as held by the appellate authorities – thus, the order of the Tribunal is upheld – Decided against revenue.
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