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2017 (5) TMI 117 - AT - Income TaxEscapement of income - understatement of closing work in progress - Since, the assessee has failed to substantiate the expenses claimed with proper supporting evidences and also most of the expenditure were supported by selfmade vouchers, the A.O. rejected books of accounts u/s 145(3) of the Act and estimated income and adopted net profit rate of 12.5% on main contract works, 8% on sub contract works and 4% on sub contract works given to third parties, subject to further deductions towards interest on capital and remuneration to partners u/s 40(b) of the Act - Held that: - There is no straight jacket formula for estimation of net profit. Before estimation of net profit, facts and circumstances of each case should be considered. In the present case on hand, on perusal of the facts available on record, we find that the assessee is a large contractor having a turnover of more than ₹ 90 crores. Therefore, keeping in view of the facts and circumstances of the case and also considering the assessee’s own case for the earlier period, to meet the ends of justice, we direct the A.O. to estimate net profit of 10% on main contract works and 7% on sub contract works, net of all expenditure including depreciation, but subject to further deductions towards interest on capital and remuneration to partners u/s 40(b) of the Act - ground raised by the revenue is partly allowed. Validity of re-assessment proceedings - A.O. has re-opened the assessment merely on ‘change of opinion’ without there being any new material or information which suggests escapement of income within the meaning of section 147 of the Act - Held that: - Since, we have directed the A.O. to estimate net profit by following the assessee’s own case for the assessment year 2011-12, subject to a modification in respect of net profit on sub contract works, we dismiss ground raised by the assessee challenging the validity of re-assessment proceedings as not pressed. Estimation of net profit on contract works given to others - Held that: - the assessee has failed to advance any reasons for estimation of 3% net profit on sub contract works given to others. We further observed that the A.O. has adopted net profit of 4% which is quite reasonable when compared to the nature of business of the assessee. Therefore, we uphold the net profit estimated by the A.O. and reject ground raised by the assessee. Appeal disposed off - decided partly in favor of assessee.
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