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2015 (6) TMI 490 - ITAT HYDERABAD

2015 (6) TMI 490 - ITAT HYDERABAD - TMI - Revision u/s 263 - CIT has considered the assessment order to be erroneous and prejudicial to the interests of revenue appears to be the rate of profit adopted by AO, which according to ld. CIT, should have been 12.5% on main contract and 8% on sub-contract works as against 10% and 7% respectively by AO - Held that:- When AO is of the opinion that books of account are unreliable, the discretion is with him to reject the books of account and estimate the .....

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e individual items of expenditures or other issues as pointed out by ld. CIT since estimation of profit usually takes care of such deficiencies in the books. In the aforesaid circumstances, ld. CIT cannot hold the assessment order to be either erroneous and prejudicial to the interests of revenue so as to revise the same u/s 263 of the Act. Accordingly, we set aside the impugned order of ld. CIT and restore the assessment order. - Decided in favour of assessee. - ITA No. 919/Hyd/2014 - Dated:- 2 .....

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on 30/09/09 declaring total income of ₹ 4,14,180. During the assessment proceeding, on verifying the books of account and other informations available on record, AO found that during the year assessee has undertaken work of supply of labour for civil, mechanical and man power supply to BGR Energy Systems, DC Industrial Services, Indure Pvt. Ld. and Macawber Beekay. Further, assessee has also obtained contract directly from KTPS and NTPS. AO also found that while receipts from execution of .....

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ouchers only. As the expenditures incurred were not totally verifiable, AO was of the view that books of account have to be rejected and income has to be estimated by applying a reasonable rate. On verifying the P&L A/c, AO noticed that assessee has shown net profit of ₹ 12,26,224 before deduction u/s 40(b) on gross contract receipts of ₹ 1,97,42,368, which works out to 6%. However, AO was of the view that the rate of profit in case of main contract business has to be adopted at .....

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s and prejudicial to the interests of revenue due to the following reasons: "1. The agreement copies of the assessee with various contracts, obtained by the AP, depicted that the assessee was entitled to certain percentage of payments on completion of certain level of work at certain stage. The assessee, claimed to have maintained bank accounts, submitted audit reports & claimed huge expenditure towards various heads, and had shown the opening & closing stock also. However, the AO h .....

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differences between the figures in the P&L account and the e-filed return. Further, the record did not indicate examination of any major expenses vis-a-vis projects for which the assessee filed agreement copies. 4. The bank statements also show huge number of withdrawals by way of self-cheques and the AO has not verified them with reference to the applicability of provisions of section 40A(3). Further, he has also not examined the adequacy of drawings, etc. of the partners as is shown in the .....

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s of assessee, however, observed that while completing assessment, AO has estimated the profit at 10% on main contract and 7% on the subcontracts without obtaining relevant material and examining them and also without adducing reasons for adopting the respective percentage of net profit. He further observed that, though, the statement of bank account indicate huge withdrawals by way of self-cheques, but, AO has not verified such transactions and found out whether the net profit percentage adopte .....

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dicial to the interests of revenue, set aside the same with the following observations: "7. If we apply the above ratio and explanation to this case, it is clear that the order passed by the AO is erroneous in so far as it is a prejudicial to the interests of revenue for the purpose of section 263 of the Act as the AO has neither the material nor indicated the basis for the % of estimate made by him but also failed to make enquiry which on the facts and circumstances indicated in above was .....

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and proceeded to estimate the profit, ld. CIT cannot hold the assessment order to be erroneous and prejudicial to the interests of revenue either on the allegation of insufficient enquiry or the rate of profit adopted by AO, as it will amount to substitution of opinion of ld. CIT as against the opinion of AO. In this context, he relied upon the following decisions: 1. M/s Sree Satya Sai Transport Vs. ITO, ITA No. 996/H/14, dtd. 08/04/15. 2. M/s Shanti Transport Vs. ITO, ITA No. 995/H/14, dt. 10/ .....

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y of labour. The contract executed by assessee as a main contractor is almost negligible compared to contract executed as sub-contractor. It is also evident that major part of the expenditure, which is incurred in cash, claimed by assessee is on account of labour charges, supply of metal and sand and fabrication. It is also not disputed that these expenses were not supported by any authentic bills/vouchers, but, were only supported through self-made vouchers. Therefore, since the expenditure cla .....

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