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TMI Blog2016 (1) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... hat of the Assessing Officer be restored. 3. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal during the course of the appellate proceedings before the ITAT." 3. None appeared on behalf of the assessee inspite of specific information of hearing. It is seen from the record that the matter was earlier listed on 13.08.2015, wherein the adjournment was granted at the request of the assessee and the hearing was re-fixed for today i.e. 13.10.2015. Parties were duly informed about the appointed date of hearing in the open Court. Since the assessee has chosen to remain absent inspite of earlier adjournment on behest of the assessee and following the Rule 24/25 of the Income-Tax (Appellate Tribunal) Rules, 1963 the matter was proceeded ex-parte in the absence of the assessee and on the basis of material available on record. 4. The only dispute raised by the Revenue in the present appeal is correctness of relief of Rs. 16,85,093/- granted by the CIT(A) by adopting the profit percentage at the same rate i.e. 5.3% as disclosed by the assessee during the immediately preceding assessment year as against the estimation of income derived @ 8% of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the audit report and supporting evidences to justify the profit and expenses were not produced. The audit report under section 44AB of the Act for the relevant assessment year 2008-09 were, however, produced before the CIT(A). Copies of certain work contracts were also placed before the CIT(A). On behalf of the assessee, it was reiterated before the CIT(A) that due to genuine difficulty, the assessee was prevented from complying with the requirements of the Assessing Officer, namely, filing of the tax audit report and supporting evidences to corroborate profits and expenditure shown in the Profit & Loss Account. On merits, it was submitted on behalf of the assessee before the CIT(A) that inspite of the presence of audited final accounts copies of TDS certificates, purchase register, relevant details of direct, indirect expenses given in Trial Balance, the Assessing Officer has incorrectly invoked the provisions of section 145(3) of the Act and resorted to estimation of income derived @ 8% of the total contract receipts. It was submitted that the audited final accounts proves the correctness of accounting records. Purchases have been made by cheque which is evident from bank b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss has been brought out by the Assessing Officer. Apparently, the Assessing Officer's action is driven by the provisions of sec.44AD which prescribes 8% net profit in case of civil contractors having turnover of less than Rs. 40 lakhs. However, the Assessing Officer is not justified in going by the said provisions merely because the appellant also happens to be a civil contractor. Moreover, the turnover of the appellant is substantially more than Rs. 40 lakhs. For estimating the profit at certain percentage, the Assessing Officer has to necessarily show that the assessee may have actually earned profit to that extent by highlighting positive parameters. As already brought out above, no such exercise has been carried out by the Assessing Officer but he has straight away determined the profit at 8% of the turnover. Even in cases of a firm where provisions of sec.44AD are attracted, the assessee is further entitled to deduct remuneration and interest to partners from the profit so determined. In the present case, such aspects also have not been considered by the Assessing Officer while determining the percentage of profit. Therefore, in my considered opinion, there is no doubt tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere, it will also be pertinent to note that admittedly, the appellant was working on two projects, namely on behalf of Vidya Prathisthan, Baramati and Shree Pandurang Prathisthan, Pandharpur. As per the copy of the work order dated 10/01/2009 given by Shree Pandurang Prathisthan, the work was to be commenced from 15/01/2009 i.e. during the year under consideration and completed by 15/05/2009. However, no WIP in respect of this work is shown in the profit & loss account and the entire sales pertain to the other work i.e. pertaining to Vidya Prathisthan. These discrepancies, coupled with the decline in the percentage of G.P., definitely lead to an inference that the direct expenses may be inflated, thereby putting a question mark over the reasonableness of profit disclosed by the appellant for the year. Therefore, ratio of profit disclosed by the appellant cannot be considered to be the actual or reasonable profit. There are a plethora of court decisions to the effect that profits can be estimated, in the context of rejection of books, based on another person's business of similar kind in the same area or on the assessee's own financial results of the preceding years. 4.2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of was carried out. The tax audit report is also silent about the method adopted by the assessee in determining the value of closing stock/WIP. The CIT(A) also observed that as per para 6 of Annexure to audit report, the Auditor has relied on the information and explanation given by the partners wherever supporting documents are not available. From the audit report, it is not known whether the assessee had maintained any daily stock register for raw material and WIP and even if the same is maintained whether the valuation of the stock was done in accordance with accepted accounting standard and practices is not known. In the backdrop of error of such magnitude as observed by the CIT(A), we hardly find any justification to scale down the estimation made by the Assessing Officer. The statutory provision as per section 44AD of the Act entitles the assessee of relatively smaller size engaged in the eligible business including the impugned business to compute profits and gains of business of presumptive being equal to 8% of the total turnover or gross receipts. This is a provision of beneficial nature which seeks to reduce hardships and tax hassles. It overrides the normal provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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