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2016 (6) TMI 781 - ITAT AMRITSAR

2016 (6) TMI 781 - ITAT AMRITSAR - [2016] 48 ITR (Trib) 622 - Estimation of profit at eight per cent. on the assessee's contractual receipts under the provisions of section 44AD - assessee is a civil contractor - Held that:- Commissioner of Income-tax (Appeals) has observed in the impugned order that the books of account produced by the assessee during the assessment proceedings cannot be relied on, as they had been prepared only when the Assessing Officer had detected that the total contract re .....

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pointing out the specific defects therein. This has illegally not been done in the present case. The books produced cannot be disregarded merely on a specious observation that they are not reliable, having been prepared after detection. The undisputed fact remains that these books were duly produced by the assessee before the Assessing Officer in the assessment proceedings and the Assessing Officer did not reject them. It is not a case of levy of concealment penalty, where change of stand after .....

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the learned Commissioner of Income-tax (Appeals) remained in oblivion of this and merely reiterated that the assessee was having land holding of 110 acres and not 75 acres, as had also been wrongly held by the Assessing Officer. The learned Commissioner of Income-tax (Appeals) has fallen in error in upholding the Assessing Officer's action in assessing agricultural income of the assessee at ₹ 34,30,758. This conclusion of the learned Commissioner of Income-tax (Appeals) is found to be a r .....

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l agriculture income of the assessee from his land holding of 75 acres comes to ₹ 27,500 x 75 = ₹ 20,62,500 and not of ₹ 35,34,722, as assessed. Therefore, the amount of ₹ 35,34,722 minus ₹ 20,62,500 = ₹ 14,72,222 is deleted from the addition made and the addition is sustained to the extent of ₹ 20,62,500. - I. T. A. No. 759 (Asr)/2014 - Dated:- 8-1-2016 - A. D. Jain (Judicial Member) For the Petitioner : Y. K. Sud For the Respondent : Ratinder Kaur ORDE .....

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AD of the Income-tax Act. 2. That both the Commissioner of Income-tax (Appeals) and Assessing Officer failed to understand the clear provisions of the law and case law cited that section 44AD provisions cannot be applied to the cases where the contractual receipts are over 40 lakhs. 3. That both the Commissioner of Income-tax (Appeals) and the Assessing Officer failed to appreciate that the books of account produced by the assessee at the time of making assessment should have been examined and i .....

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come at ₹ 35,34,722 while sustaining this addition the Commissioner of Income-tax (Appeals) failed to appreciate and dispose of submissions made by the assessee." 2. The first issue, comprising ground Nos. 1 to 4, is the assessee's challenge to the action of the learned Commissioner of Income-tax (Appeals) in sustaining the estimation of profit at eight per cent. on the assessee's contractual receipts under the provisions of section 44AD of the Income- tax Act, 1961. 3. The as .....

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ract receipts of ₹ 67,43,503 from M/s. Arvind Techno Engineers Pvt. Ltd. (Rs. 44,72,839), U. P. State Bridge Corporation Ltd. (Rs. 21,01,685), deputy project manager, UP State Bridge Corporation Ltd. (Rs. 25,371) and deputy project manager BCU-II (Rs. 1,43,068), whereas the assessee had shown contract receipts in his return only at ₹ 15,42,131 from U. P. State Bridge Corporation Ltd. On further enquiries, the Assessing Officer noticed that the assessee had also received contract rece .....

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cent. on contract receipts of ₹ 70,40,413 and brought it to tax. 4. While upholding the aforesaid action of the Assessing Officer, the learned Commissioner of Income-tax (Appeals) observed that the Assessing Officer had worked out the net profit of the assessee from the contract business by applying a net profit rate of eight per cent. since the assessee had himself declared a net profit rate at eight per cent. on the part of the contract receipts declared in the return ; that the books o .....

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it rate of eight per cent. on the actual contract receipts. 5. Before this Bench, the learned counsel for the assessee has contended that the learned Commissioner of Income-tax (Appeals), while wrongly upholding the Assessing Officer's action in estimating the net profit at eight per cent. on the contract receipts of the assessee under the provisions of section 44AD of the Act, the learned Commissioner of Income-tax (Appeals) failed to appreciate that the books of account produced by the ass .....

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n the light of the material available on record, it is seen that the assessee is a civil sub-contractor, carrying out the work of laying foundations for bridges. Before the Assessing Officer, in the assessment proceedings, the assessee filed his books of account. However, without rejecting the books and without pointing out any defects therein, the Assessing Officer estimated the assessee's income under the provisions of section 44AD of the Act even though the assessee's income was admit .....

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ar under consideration have been placed at APB 29-30. These are also filed before the Assessing Officer, who neither rejected the assessee's books of account, nor pointed out any defect therein, nor took them into consideration. 8. The learned Commissioner of Income-tax (Appeals) has observed in the impugned order that the books of account produced by the assessee during the assessment proceedings cannot be relied on, as they had been prepared only when the Assessing Officer had detected tha .....

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of a reasoned order by pointing out the specific defects therein. This has illegally not been done in the present case. The books produced cannot be disregarded merely on a specious observation that they are not reliable, having been prepared after detection. The undisputed fact remains that these books were duly produced by the assessee before the Assessing Officer in the assessment proceedings and the Assessing Officer did not reject them. It is not a case of levy of concealment penalty, wher .....

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upholding the Assessing Officer's action in estimating the agricultural income of the assessee at ₹ 35,34,722 without disposing of the submissions made by the assessee. 11. As per the Assessing Officer, it was found that the assessee was in receipt of agricultural income amounting to ₹ 34,30,758 during the year, which was not shown by the assessee in his return of income. The Assessing Officer held that this agricultural income had been earned by the assessee during the year and .....

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, should have been allowed. The assessee requested that the agricultural income be estimated, at the most, at 40 per cent. of the amount of ₹ 34,30,758, i.e., the total sale of agricultural produce. 13. The learned Commissioner of Income-tax (Appeals) remitted the aforesaid written submissions of the assessee to the Assessing Officer, for his comments. The Assessing Officer, vide remand report dated September 25, 2014, stated that during the assessment proceedings, the assessee had neither .....

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me-tax (Appeals) asked the assessee for his counter comments on the remand report of the Assessing Officer. The assessee, in response, vide letter dated October 4, 2014, stated that the Assessing Officer had relied on the letter annexed at Sl. No. 152 for computing the agricultural income on 110 acres of land by applying ₹ 27,500 as income per acre, failing to appreciate the contents of the said letter, wherein, the assessee had clearly stated that he and his family were doing agriculture .....

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ed to ₹ 20,62,500, i.e., 27,500 x 75 and not ₹ 35,34,722, as assessed by the Assessing Officer and that the total sale proceeds of the crops as per the J forms could never be the income of the assessee, since agriculture expenses had to be set off against the same. 14. The learned Commissioner of Income-tax (Appeals), however, upheld the Assessing Officer's action in assessing the assessee's agricultural income at ₹ 34,30,758. For doing so, he observed that the assessee .....

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should have been ₹ 75,62,500 (Rs. 68,750 x 110) and not ₹ 35,34,722, in respect of which, J forms had been submitted ; and that thus, it was very clear that the assessee had not submitted all the J-forms during the assessment proceedings. 15. In this regard, the learned counsel for the assessee has submitted that the learned Commissioner of Income-tax (Appeals) has clearly erred in upholding the action of the Assessing Officer since the specific written submissions filed before the l .....

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deed, the specific stand taken by the assessee before both the authorities below, as also before this Bench, has been that the land holding of the assessee was that of 75 acres and not of 110 acres, which was the total land holding of the assessee and his family. It is seen that in the aforementioned letter APB-27 (addressed to the Assessing Officer), the assessee stated as follows : "1. With respect to your query regarding total agriculture land ploughed by the assessee, it is respectfully .....

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rther, even in response to the Assessing Officer's remand report, wherein he had reiterated his observations/findings that the land holding of the assessee was of 110 acres, the assessee filed his counter comments, which have been reproduced by the learned Commissioner of Income-tax (Appeals) in paragraph 6.3 of the order under appeal. The assessee has stated therein, as follows : "The Assessing Officer has relied on the letter at S. No. 152 for computing the agriculture income on 110 a .....

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8377; 35,34,722 even if we go by the formula of the Assessing Officer of estimating agriculture income at ₹ 27,500 per acre the total agriculture income amounts to ₹ 20,62,500, i.e., 27,500 x 75 and not ₹ 35,34,722 assessed by the Assessing Officer. The total sale proceeds of crop as per J Forms can never be the income of the assessee since expenses have not been set-off against the same." 20. Thus, though the assessee had duly apprised the learned Commissioner of Income-t .....

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