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2017 (1) TMI 254 - AT - Income TaxAddition u/s.69A - CIT(A) while upholding the addition made by the Assessing Officer on this account has rejected the submission of the assessee that in subsequent years some of the payments have been made by cheque to these creditors - AO rejected book results u/s.145(3) and went for addition on account of sundry creditors - Held that:- There is no evidence on record that the payments made subsequently to the sundry creditors has come back to the assessee by someway or the other. It is also an admitted fact that the assessee has deducted TDS on the labour charges and the TDS returns have been duly filed, a fact stated before CIT(A) and not controverted by the revenue. At the same time, the assessee also failed to produce the creditors on account of outstanding labour charges or sundry creditors for supply of materials before the Assessing Officer when the summons issued to them were returned back and the assessee was given opportunity by the Assessing Officer to produce those creditors. Under these circumstances and considering the totality of the facts of the case, we are of the considered opinion that adoption of profit rate of 20% on the turnover of ₹ 11,56,59,762/- before depreciation, salary and interest to partners will meet the ends of justice. This amounts to an addition of ₹ 22,55,365/-, i.e. addition of additional income @ 1.95% (i.e. 20% - 18.05%) on turnover of ₹ 11,56,59,762/- We hold and direct accordingly. Disallowance invoking the provisions of section 40(a)(ia) - Non deduction of TDS on payment of interest - Held that:- The Hon’ble Andhra Pradesh High Court in the case of Indwell Constructions (1998 (3) TMI 121 - ANDHRA PRADESH High Court ) has held that separate addition in respect of items falling u/s.40(b) cannot be made to the income estimated u/s.145 after rejecting books of account as all the deductions including disallowance u/s.40(b) which are referred to in section 29 are deemed to have been taken into account while making estimate. Since in the instant case we have already directed the Assessing Officer go for estimation of profit from contract work, therefore, further disallowance u/s.40(a)(ia) in the instant case is not called for. We, therefore, set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition invoking the provisions of section 40(a)(ia) Addition u/s.40A(3) - Held that:- As we have already held that no separate disallowance on account of section 40(a)(ia) or 40A(3) is called for once the profit is estimated. Since we have already held that the profit of the assessee in the instant case has to be estimated, therefore, there is no justification for any addition on account of violation of section 40A(3). Accordingly, the order of the CIT(A) is set aside and the ground raised by the assessee has been allowed. GP estimation - material supplied by the Government Department - Held that:- We find as against the total contract receipt of ₹ 18,02,57,518/- the Government has supplied materials to the tune of ₹ 2,01,75,901/- to the assessee. It is the settled proposition of law that when the material is supplied by the Government Department for utilisation in the construction work, then the profit has to be estimated on the gross contract receipt as reduced by the cost of materials so supplied by the Government Department as the assessee is not expected to make any profit out of it. Under these circumstances the gross profit has to be computed after reducing the cost of materials supplied from the gross contract receipts which the CIT(A) in the instant case has done. Percentage of depreciation @10% on WDV of Civil work worked out by AO on windmill - Held that:- We find the CIT(A) upheld the action of the Assessing Officer in confirming depreciation @10% on the civil construction of the windmill. In the case of Sonai Engineering Pvt. Ltd. (2014 (9) TMI 279 - ITAT PUNE) we have upheld the order of the CIT(A) in holding that cost of work including foundation work is a part of the new windmill and eligible for depreciation at higher rate. We therefore set aside the order of the CIT(A) and direct the Assessing Officer to compute the depreciation @80% or the rate which is applicable to the windmill since such civil construction is an integral part of the cost of windmill erection GP rate determination - Held that:- Difference between the average rate of past years and the rate of GP for the current year was 4.34% out of which the Assessing Officer has already gave margin of 1.50% on account of exceptional circumstances and thereby made GP addition of only 2.84%. We further find during the year there is also no supply of material by the Government Department whereas such supply of material was there in the preceding year to the tune of ₹ 2.20 crores. The assessee has not substantially proved how the work is more material intensive and heavy interference by the local political leaders. Under these circumstances, we fail to understand as to how the order of the CIT(A) is erroneous while confirming the order of the Assessing Officer. The Ld. Counsel for the assessee could not bring any cogent evidence so as to take a contrary view than the view taken by the CIT(A). Accordingly, we uphold the order of the order of CIT(A) on this issue. Grounds of appeal No.1 to 3 by the assessee are dismissed.
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