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2016 (4) TMI 507 - ITAT PUNE

2016 (4) TMI 507 - ITAT PUNE - TMI - Estimation of income at 17% of gross receipts against the additions made on specific grounds - Held that:- CIT(A) directed the AO to adopt a profit percentage of 17% which will take care of the shortage of cash in the cash book and the disallowance u/s.14A. It will also take care of the various other shortcomings in maintenance of books of account. We do not find any infirmity in the order of the CIT(A) on this issue. Admittedly, there are certain defects in .....

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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 - Dated:- 4-3-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM F .....

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s receipts against the additions made on specific grounds. 3. Facts of the case, in brief, are that the assessee is an individual engaged in the business of plastic moulded furnitures, job work and construction. He filed his return of income on 15-10-2010 declaring total income at ₹ 49,76,110/- and agricultural income of ₹ 20,000/-. During the course of assessment proceedings, the AO noted that assessee is conducting business in individual status under name and style of:< .....

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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 .....

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peak deficit comes to ₹ 23,34,760/-. The AO made addition of the above amount by holding that the set off of addition u/s.69 cannot be given to the assessee for the period because the assessee s expenditure has been worked out by its Engineer and the same has been accepted in toto and there is no cash available to the assessee. 5.1 The AO similarly examined the labour payments and noted that as against the total receipt of ₹ 1,78,16,222/- the labour charges paid for the fi .....

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t of ₹ 1,22,14,391/- being the difference between the two as excess labour charge. 5.2 Similarly, the AO analysed consumption of various materials such as steel, cement, murum, sand etc. and noted that as against the total gross receipt 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 &# .....

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termined the income of the assessee at ₹ 3,91,11,910/- as against ₹ 1,54,29,150/- declared by him. 6. Before CIT(A) the assessee made elaborate submissions. It was submitted that although various details such as purchase bills/vouchers of bricks, sand, khadi, murum etc. were produced for verification, however, the AO has not properly verified the same. It was submitted that these expenses were not recorded in the books of account on the date on which goods were received bu .....

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bourers had changed their places. However, when the return of such notices was brought to the notice of the assessee by the AO the assessee had contacted those labourer/contractors and filed their confirmations and account extracts by speed post. The various disallowances made by the AO were challenged and it was submitted that if the assessment done by the AO is accepted it will give a profit rate of 64.46% which is just not possible in construction business. It was submitted that since there w .....

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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 out any defects. It was accordingly argued that the book results declared by the assessee should be accepted. 8. Based on the arguments advanced by the assessee, the Ld.CIT(A) directed the AO to adopt the profit rate of 17% of .....

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t since the assessee is executing civil contract for Emco Ltd., Jalgaon which will properly supervise and check the quality of the work and the said company will not compromise on the quality of the end product, therefore, the addition of such huge amount by the AO is not justified. He accordingly held that the estimate at 7% of the gross receipt will meet the ends of justice. 9. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 10. The Ld. Departm .....

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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. .....

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g work for private parties and therefore percentage of profit cannot be high unlike Government contracts. He submitted that the CIT(A) by following various decisions has estimated the profit at 17%. Therefore, the revenue should not be aggrieved. He accordingly submitted that the grounds raised by the revenue should be dismissed. 12. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assesse .....

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ssessee has executed some contract work during 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 duri .....

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