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TMI Blog2010 (12) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... and on facts in confirming the disallowance out of Staff salary and Material testing Expenses to the tune of Rs.3,62,492/- 5) It is, therefore, prayed that all the above detailed additions/disallowances confirmed by the learned Commissioner of Income Tax (Appeal) may please be deleted and action of Assessing Officer of rejecting the book results be quashed. 6) The Appellant prays for granting such other relief as may be deemed just and proper by your Honours considering the factual and legal aspects of the case of the appellant." 2. The facts of the case are that the AO rejected the books of accounts and made addition of Rs.8,30,600/- by making estimation of GP at 10% and also made addition of Rs.21,69,079/- on account of addition to the closing stock of work in progress of raw material. The AO telescoped the GP addition with the addition on account of work in progress. The AO in the assessment order stated that the assessee is a civil contractor and has shown total receipts of Rs.5.7 Crores and a G. P. rate of 8.54% and N. P. rate of 2.53%. This is the first year of business. During the assessment proceedings the assessee submitted that the books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation and stated that the theory of destruction of records in the flood is not believable also because in the return for AY 2007-08 pertaining to the period of flood the assessee has not claimed any expenses under the head repairs. This shows that there was a minimum destruction to the building in the flood. The AO however, stated that even otherwise since the books of account, bills and vouchers are not available, the book result stand rejected u/s 145(3) and he therefore, went ahead for estimating the income. The A. O. pointed out that the replies received in response to notice u/s 133(6) shows discrepancies which are not reconciled by the assessee in respect of the following four parties: (i) Unipave Engg. Products Rs.4,298/- (ii) Shreeji Earth Moving Spares Rs.27,180/- (iii) Shree Patel Stone Quarry Rs.8,424/- (iv) Hariom Agency Rs.1,88,929/- The AO, therefore, stated that normally a similar government organization like CPWD provides 10% of G. P. margin for civil contractors. Another basis can be Section 44AD of the I. T. Act which provides for 8% estimation of net profit in cases where no books of account are maintained. Since this is the first year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in reproduced. The assessee filed a copy of the certificate from Surat Municipal Corporation that the flood water reached up to 13 to 14 feet near Rushabh Char Rasta, Suryapur Society. The assessee further stated that in respect of four parties mentioned in the assessment order in respect of whom there were difference in the balances. The assessee stated that the balances were reconciled in the letter dated 14-12-2007 of the assessee. With respect to the difference in respect of Hariom Agency, the assessee stated that this difference was not pointed out to the assessee as is clear from the reply of the assessee dated 14-12-2007 reproduced by the AO on page 4 of the assessment order where the name of Hariom Agency was missing. The assessee further stated that the assessee had submitted reconciliation statement of contract income reported in the audited accounts with TDS certificates. The assessee's books are audited by the Chartered Accountant and hence the book result should not be been rejected. The assessee further stated that contracts are awarded to the parties which give lowest tender and hence the GP rate of 5.8% should be accepted. The assessee further argued that as per cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount were unverifiable. The A. O. was therefore absolutely right in rejecting the book result in the absence of books of account, bills and vouchers. Having said that, the income has to be estimated by following some basis as per the settled principle of law The appellant has failed on the following counts:- (i) It says that TDS certificates are prepared a on 31.03.2005 but the TDS certificates show that the payment was made or credited as on 31.03.2005 which means that the bill would have been submitted at least 10 to 15 days earlier, because the appellant himself quotes clause 10 of the agreement which says that if the bill is submitted then the claims so far as it is admissible shall be adjusted if possible within 10 days from the presentation of the bill. Even in the case when the Engineer in-charge is making the bills the time for processing and payment will definitely be 10 to 15 days. Hence the argument of the appellant that the bills were prepared upto 31.03.2005 is patently wrong. (ii) The appellant's claim that there was no closing stock of raw material or WIP a on 31.03.2005 is also totally unbelievable because in the road construction business or in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 7.91% was declared and in part of the period of assessment year 2005-06 in the case of individual GP rate was declared at 9.05%. He has, therefore, submitted that addition on account of GP rate made by the authorities below is excessive and unreasonable. He has further submitted that addition of work in progress is without any basis and once GP rate is applied there is no need to make further addition. He has further submitted that if the addition of work in progress is considered as GP addition, it would enhance the GP rate as against estimate made by the AO at 10%. On the other hand, the learned DR relied upon the orders of the authorities below. 6. We have considered the rival submissions and the materials available on record. It is not in dispute that the books of accounts/bills and vouchers were not produced at the assessment proceedings. The claim made in trading and profit and loss account thus could not be verified. In the absence of books of accounts and details available on record for verification, the authorities below were justified in rejecting the book results of the assessee and were justified in estimating the profit of the assessee. The assessee claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee company has declared GP rate of 7.91%. In the case of the individual, in part of the assessment year 2005-06 GP rate of 9.05% has been declared. These facts would strengthen the findings of the AO that the estimate of GP rate at 10% in all would be proper and reasonable for the purpose of making GP addition of Rs.8,30,600/-. The AO was, therefore, justified in making addition of GP in a sum of Rs.8,30,600/-. Finding of facts recorded by the authorities below to that extent are confirmed. However, we may note that there is no need to make further addition on account of work in progress or closing stock at the end of the year. If separate addition is made, it would enhance the GP rate of the assessee as against 10% estimated by the AO which would not be according to the previous history of the assessee as well as of circumstances and would show that the income computed by the AO would be unreasonable. Moreover, there is no basis to compute the addition on account of work in progress which has no basis at all. The separate addition made on account of work in progress/closing stock is accordingly deleted. Considering the above discussions, we confirm the orders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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