Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

M/s S.P. Constructions Versus ITO

2015 (3) TMI 1179 - ITAT CHANDIGARH

Rejection of books of accounts - estimation of net profit - Held that:- As already noted that assessee did not file even the return unless the same was detected during search made in the case of M/s Talwar Group. Anyway the most relevant factor in the case before us was that assessee is engaged in the business of construction of house for private parties. It is a common knowledge that rate of profit in construction of a private houses is much higher than in comparison to the mass construction co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

has estimated the rate of profit in the case of construction firms at 8%. But considering the above facts, we are of the opinion that estimate of profit at the rate of 9% would meet the ends of justice in this case and, therefore, we set aside the order of Ld. CIT(A) and estimate the net profit at 9%. - ITA Nos. 244 & 245/Chd/2015 - Dated:- 31-3-2015 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER For the Petitioner : Shri Parikshit Aggarwal For the Respondent : Shri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Worthy CIT(A) has erred in confirming the action of Ld. AO of applying net profit rate of 10% on turnover of the appellant even when books were not rejected by Ld. AO but the CIT(A) held that the books have been rejected and on considering the totality of facts, the books were not liable to be rejected and thereby the application of net profit rate was totally misconceived. 3. That on facts, circumstances of the case and in law, the Worthy C1T(A) has erred in confirming the action of Ld. AO of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rm was engaged in the business of civil construction and contract business and it mostly constructed private houses. The turnover of the firm was more than ₹ 40 lakhs for the last 5 - 6 years but the firm never got its accounts audited and did not file any return. From the examination of bank account, it was found that assessee received more than ₹ 5 crores but no return has been filed, therefore, notice u/s 148 was issued and served. In response to this notice the assessee filed ret .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ked to file copies of the bank account of the partners which was never filed despite various opportunities. iii) The Assessing Officer asked the assessee to furnish the details of purchases in the following manner:- Name And address of seller Nature of Item purchased Total Quantity purchased during the year Amount of Purchases made during the year Total Payment made during the year Total Payment made in cash Amount Outstanding as on 21.02.2011 but the above details were not filed. It was noticed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nce in the current year the assessee is in the process of producing the account confirmation of parties whose balance exceeds ₹ 1,00,000/- and this shall be submitted shortly. The assessee was also asked to file details of sundry debtor which was ₹ 1,83,30,016/- and confirmation whether debts exceeded ₹ 1 lakh. In response to this, the assessee replied as under:- list of sundry debtors have already been given to your goodself along with balance account confirmation in a desired .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

From the above, it was concluded that that in respect of ₹ 1,66,00,000/- the assessee was not knowing even the names of the parties from whom the amounts were outstanding. 5. The assessee had also shown salary and wages of ₹ 95,87,609/- but no muster roll or details of these expenses were filed and theses expenses were claimed to have been paid in cash. The details of opening and closing inventories were also filed. 6. In view of the above the Assessing Officer was of the opinion th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d various details and supporting vouchers for various expenses. The Assessing Officer has applied the net profit rate which clearly shows that he was not satisfied with the result, therefore, the contention that net profit has been applied without rejecting the books was rejected. The Ld. CIT(A) has discussed various case laws relied on by the Ld. counsel before him and also referred to the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v Prabhat Kumar 323 ITR 675 (P& .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h is not justified. He referred to the decision of Hon'ble Punjab & Haryana High Court in the case of Telelinks v CIT in ITA No. 269 of 2014 (dated 20.11.2014) wherein it is clearly observed that only reasonable rate of profit can be applied and the estimation has to be on judicious basis. On an enquiry by the Bench he admitted that assessee had not filed any return before the issue of notice u/s 148 and it was engaged in the business of construction of private houses. 10. On the other h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ince this issue is not before us we are not going into the details. Further, it is also admitted fact that assessee did not file any return despite having taxable income. This fact becomes clear because assessee has itself filed the return declaring income of ₹ 3,19,865/- in response to notice u/s 148. We have already discussed the affairs of the assessee and failure to file e many details while discussing the facts of the case at the outset of this order. To summarize the defects again, t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iving their payments. The assessee also did not file the details of purchases in the format given by the Assessing Officer. The assessee was having sundry creditors of ₹ 75,69,505/- and did not file any confirmation even in cases where sundry creditors exceeds ₹ 1 lakh. Even regarding sundry debtors no confirmation was filed and as noted by the Assessing Officer even in the balance sheet the names of the sundry debtors to the extent of ₹ 1,66,00,000/- were not shown. No details .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

version shown by the assessee cannot be relied upon. I therefore, apply net profit rate of 10% on the gross receipts of ₹ 5,42,83,935/-, which will mean that assessee s income would worked out at ₹ 54,28,393/-. From this interest paid to partners at ₹ 6,28,455/- is to be deducted and the balance would be income of the at ₹ 47,99,938/-. 12. The above clearly shows that since Assessing Officer could not verify various details i.e why he has estimated the profits. This clear .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

was observed as under:- The first question relates to the nature of the power exercised while determining a net profit rate. The question must necessarily be answered by holding that where books of accounts are rejected or not produced, the Assessing Officer would be well within the limits of his jurisdiction to access income by applying a fictional net profit rate. The power so conferred is quasi-judicial and , therefore, no unbridled as it must be guided by reason and though it may involve a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

come Tax and Income Tax Appellate Tribunal have applied different rates of net profit, the discretion to determine an adequate net profit rate undoubtedly vests with authorities under the Act by the discretion so vested is neither unbridled nor unguided as it must be guided by reason i.e should be preceded by reasons which, in turn, should be preceded by a perceptible process of reasoning based upon due consideration of all relevant facts. However, authorities under the Act appear to construe th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

available, assessment order that may have been passed and accepted by the department, the nature of the assessee s business, an appraisal of the value of the contract, prevailing economic conditions vis-à-vis the assessee s business, the price of raw material, labour etc. the rise in price index as notified by the Central Government from time to time if applicable and if the Assessing Officer proceeds to rely upon assessments of other aseessees engaged in similar business to do so only af .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e wages which may call for addition to income, but not to the extent assessed by the Commissioner of Income-tax (Appeals). Applying net profit rate on the basis of best judgment assessment in a given situation will be a question of fact unless such an assessment is shown to be arbitrary or perverse. In the present case, it cannot be held that any substantial question of law arises. Assessment of 12 per cent. of net profit rate of contract receipt is not shown to be arbitrary or perverse. Thus, w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version