TMI Blog2016 (4) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... r verification. At the same time, if the approach adopted by the AO is accepted, then the construction business gives a profit percentage of more than 64% which is not possible in this line of business especially when the assessee has undertaken construction work for private parties. The Various Benches of the Tribunal are considering profit rate of 8% to 15% in construction business as reasonable. Since the Ld.CIT(A) in the instant case has directed the AO to adopt profit percentage of 17%, therefore, in our opinion, such profit percentage under the facts and circumstances of the case is reasonable and does not call for any interference. We accordingly uphold the order of the CIT(A) - Decided against revenue - ITA No.624/PN/2014 - - - Dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. V.J. Enterprises wherein no business has been conducted during the year. 4. On examination of the books of account, the AO noted that for the business of M/s. Siddhant Builders and Developers the assessee could not produce any party in person nor the purchase vouchers of bricks, sand, Khadi, Murum etc. He further noted that the purchase of material and various items required for contract work were not appearing during the period 01-04-2009 to 28-10-2009. He, therefore, estimated the quantity and value of the same as prepared by the Engineer and made addition of ₹ 12,50,182/-. While doing so, he observed that since the construction work has been carried out and the material has not been debited in the books of account, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of ₹ 1,78,16,222/-, the expenditure on account of material is ₹ 12,50,182/- which comes to 7.01%. Applying the same ratio for the second period, the AO computed consumption of material at ₹ 32,16,961/- on the gross receipt of ₹ 5,48,44,592/-. He thus made addition of ₹ 1,52,96,323/- being excess consumption of material. Applying the similar principles the AO disallowed an amount of ₹ 24,64,218/- on account of excess consumption of cement and steel. In effect, the AO made addition of ₹ 2,99,74,932/- on account of excess expenditure claimed in the contract business. The AO further made disallowance of ₹ 1,22,881/- by applying the provisions of section 14A r.w. Rule 8D. Accordingly, the AO det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efects due to non maintenance of subsidiary books such as Inward Register, Delivery Register and Muster Roll, Consumption Register, Stock Register etc., the provisions of section 145(3) are attracted and the AO has also invoked the provisions of section 145(3). However, in respect of estimating the income on percentage basis to the gross receipts the AO had made specific additions by estimating the expenditure incurred by determining the percentage of expenditure in respect of work done. Relying on various decisions it was submitted that the approach adopted by the AO is not justified. It was further submitted that the assessee has maintained books of account for each business and those books were audited and the auditors have not pointed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been made applicable, however, the AO has clearly worked out the specific additions on the basis of material available on record and on the basis of working given by the assessee s Engineer. He accordingly submitted that the order of the CIT(A) be reversed and that of the AO be restored. 11. The Ld. Authorised Representative on the other hand heavily relied on the order of the CIT(A). He submitted that during A.Y. 2009-10 the assessee has declared a profit percentage of 10.8% and the return was accepted u/s.143(1). During the impugned assessment year the net profit shown by the assessee from contract business comes to 11.61% which has been enhanced by the CIT(A) to 17% without giving any reason. Although the assessee has not challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the first period, however, he has not debited certain expenses which are vital for such construction activity. He accordingly made addition of ₹ 12,50,182/- u/s.69 of the I.T. Act. Further, there is shortage of cash in the books of account during a particular period for which the AO made addition of ₹ 23,34,760/- being the peak deficit. It is also the allegation of the AO that if the ratio of consumption of material to gross receipt during the first period is applied to the construction expenses and gross receipts for the second period, then there is excess consumption of material during the second period for which he made disallowance on account of excess labour charges and excess consumption of material to the tune of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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