TMI Blog2011 (5) TMI 1006X X X X Extracts X X X X X X X X Extracts X X X X ..... r estimated the income of the assessee at 12% of the gross receipts. On appeal, the learned CIT(A) directed the Assessing Officer to estimate the income at 8% in the case of main contract receipts and at 6% on the sub-contract receipts. Aggrieved, the assessee is in appeal before this Tribunal. 4. The learned counsel for the assessee relied on the judgement of the Bombay High Court in the case of CIT vs. Smt. Sushila Chaturvedi, in Income-tax Appeal No. 1076 of 2007 dated 18.3.2009. The learned DR relied on the order of the CIT(A). 5. We have heard both the parties and considered the material on record. In the case of Shri K. Ramakrishna Contractor (P) Ltd., Hyderabad in I.T.A. No. 461/Hyd/2006, the Tribunal vide its order dated 4.12.2009 held as follows: 4. We have heard both the parties and perused the material on record. The issue of rejection of books of account by the assessing officer was not challenged by the assessee. Once it is found that books of account does not reflect the true profit of the assessee, in such cases the provisions of the proviso to Sec. 145(1) becomes applicable and it becomes duty of the taxing authority to determine the true and correct profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to adduce and file such evidence so as to satisfy the assessing officer that the claim of erection of temporary sheds to the tune of ₹ 10,20,401/- same is correct and allowable. We order and direct accordingly. 6.2 Later the learned Accountant Member dissented above findings of the Judicial Member and he recorded the findings in Para 16 to 22 as follows: With due respect to my learned brother, I am inclined to disagree with the order of my learned brother in paras 10 and 11 above, in so far as it related to estimation of the profit of the assessee at 12% as against 12.5% adopted by the assessing officer and 10% adopted by the first appellate authority. My reasons for disagreement and decision in that behalf are discussed below: Assessee, admittedly, is a firm carrying on business in civil contract works. Assessee s net contract receipts for the ay 1991-92 were ₹ 9,10,18,512/- whereas the same for the ay 1992-93 were ₹ 8,37,19,315/-. In the cases of similar assessees, viz. civil contractors, the Tribunal Benches at Hyderabad, have been consistently approving estimation of profit at 12.5% of the net contract receipts. In assessee s own case for the ay 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of profit. This very reasoning holds good even In the context of weight age that has to be given to the bank Interest payments, bank charges and commission payments and financial charges Incurred by the assessee as per those very financial statements. Further, I find much merit In the contention of the ld. DR that the assessee has gone In for substantial addition to plant and machinery from 2,07,14,420/- to ₹ 3,46,35,514/- which Is evident from the depreciation statement for the assessment year 1991-92 and as such there Is corresponding reduction In the revenue expenditure and having gone In for massive capital Investments and contracted for more outlay towards bank Interest payments, financial charges etc. Assessee cannot claim It to be exceptional circumstance warranting estimation of Income at a rate lower than the normal one. This Is all the more so, since the Interest commitments to bank etc. Undertaken by the assessee, on additions to plant and machinery etc. Would have their Impact for quite a few years to come, and It bank charges and Interest commitments are accepted as a exceptional circumstances warranting adoption of lower rate of estimation of the profit tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the light of the above discussion, I am of the considered opinion that the estimation of profit of the assessee at 12.5% of the net contract receipts by the assessing officer for both these years Is not only In accordance with the rate adopted In assessee s own cases for earlier years, but also In accordance with the rate normally approved by the Tribunal In similar cases. The circumstances of Incurrence of larger expenditure on account of bank Interest, bank charges and commissions, financial charges, etc. In my view cannot be accepted as an exceptional one warranting adoption of any lower rate. I accordingly set aside the orders of the CIT(A) on this aspect for both these years and restore the assessments made by the assessing officer, estimating the profit of the assessee at 12.5%. Before parting with the subject, I may point out that though It may appear that the differences between the rate of 12% adopted by my learned brother and the rate of 12.5% approved by me Is a mere 5% of the said difference of 0.5% Is applied to the net contract receipts disclosed by the assessee, It would work out to ₹ 4,55,092/- In considering these large amounts Involved In these tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntracts and 5% in case of sub contracts after allowing the depreciation. Hence, the ratio of order of the Tribunal for the assessment year 2003-04 cannot be applied directly because the assessee claimed depreciation also in the assessment year under consideration. However, if the assessee give up the claim of depreciation in the assessment year under consideration, then the ratio laid down by the Tribunal in its own case for the ay 2003-04 could be applied. Alternatively, the decision of this Tribunal in the case of M/s Krishna Mohan Construction Company cited supra to be followed. Now, the assessee got two options to determine his taxable income for the year under consideration. Hence, we hold that the assessee can opt either one of the above. In the case of sub contracts, the assessee cannot expect the same ratio of profit, as in the contract carried out by the assessee by himself. Accordingly, in the case of sub contract, we direct the assessing officer to consider the net profit at 5%. According this ground of the assessee is partly allowed. 6. Respectfully following the above order of the Tribunal in the case of Shri K. Ramakrishna Contractor (P) Ltd., cited supra, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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