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DCIT, Circle-2 (1) , Vijayawada Versus Sri Vallabaneni

Rejection of books of accounts - A.O. estimated net profit of 12.5% on main contracts - Held that:- It is an admitted fact that estimation of net profit from civil contract receipts is consistently followed by the department on various rates depending upon the facts and circumstances of the each case. The ITAT, also upheld the estimation of net profit ranging from 8 to 12.5% on main contracts. It is an admitted fact that the profit ratio cannot be a constant factor for each and every contractor .....

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details and also taken into account the ratio of the jurisdictional ITAT, in the case of M/s. Srinivasa Lakshmi Constructions (2011 (1) TMI 1437 - ITAT HYDERABAD) has scaled down the estimation of net profit to 9% on main contract works net of all deductions including deduction towards depreciation. We do not see any error or infirmity in the order of CIT(A). Hence, we inclined to upheld the order of the CIT(A) and dismiss the appeal filed by the revenue. - Decided in favour of assessee - I.T.A. .....

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f works contract filed his return of income for the assessment year 2009-10 on 30.9.2009 declaring total income of ₹ 2,38,16,223/-. The return was processed u/s 143(1) of the Income-Tax Act, 1961 (hereinafter called as the Act ) on 17.1.2011. Subsequently, the case has been selected for scrutiny and accordingly, notice u/s 143(2) of the Act dated 19.8.2010 was issued. In response to the notice, the authorized representative of the assessee appeared from time to time and furnished books of .....

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of the genuineness of the expenditure or the reasonableness of the quantum of expenditure with reference to the extent of work done. In the light of the above deficiencies and also considering the low net profit admitted by the assessee, the A.O. issued a show cause notice and asked to explain why the books of accounts shall not be rejected under the provisions of section 145 of the Act and income from the business shall not be estimated. In response to show cause notice, the assessee submitted .....

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payments on weekly basis to labourers, therefore, the net profit admitted by him should be accepted. The A.O. after considering the explanations furnished by the assessee held that the books of accounts maintained by the assessee are not susceptible for verification. The A.O. further observed that the assessee has not supported any expenditure with proper bills & vouchers. All the expenditure claimed are supported by self made vouchers. With these observations rejected the books of accounts .....

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ances and also business expediency. The assessee further submitted that most of the expenditure are supported by proper bills & vouchers, however, in respect of labour and other like charges, the expenditure is supported by self made vouchers. Therefore, the A.O. was not correct in rejection of books of accounts and estimation of net profit of 12.5% on main contract works and 8% on sub contract works. The CIT(A) after considering the explanations furnished by the assessee held that the point .....

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n under similar circumstances ITAT, upheld the estimation of net profit of 8%. Considering the overall facts and circumstances of the case, the CIT(A) scaled down the estimation of net profit on main contract works to 9% as against the 12.5% adopted by the A.O., however upheld the action of A.O. for estimation net profit in case of sub contract receipts and royalty on sub contract works given to others. Aggrieved by the CIT(A) order, the revenue is in appeal before us. 4. The Ld. D.R. submitted .....

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it of 12.5% on gross contract receipts, therefore, the assessment order should be upheld. 5. On the other hand, the Ld. A.R. for the assessee strongly supported the order of the CIT(A). The A.R. further submitted that the CIT(A) has scaled down the estimation of net profit to 9% after considering explanation furnished by the assessee, therefore, CIT(A) order should be upheld. 6. We have heard both the parties and perused the materials available on record. The A.O. estimated net profit of 12.5% o .....

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that he had executed works contract in different places and procured the material locally depending upon the business expediency and facts and circumstances of the work. The assessee further contended that most of the expenditure are supported by proper bills & vouchers, however in respect of labour and other like charges, the expenditure is supported by self made vouchers. Therefore, the A.O. was not correct in rejection of books of accounts and estimation of net profit of 12.5% on main co .....

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