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2016 (8) TMI 1078 - ITAT JAIPUR

2016 (8) TMI 1078 - ITAT JAIPUR - TMI - N.P. determination - Held that:- CIT (A) has examined in detail the material placed before him and also considered the average rate of net profit rate shown for the assessment years 2005- 06, 06-07, 07-08, 08-09 and 09-10. The ld. CIT (A) has considered the past history of the assessee as well as considering the material placed before him adopted the rate of 5% which appears to be reasonable looking to the facts and circumstances of the case. - Decided aga .....

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terms of the ultimate results declared by the appellant. Accordingly, no reason in making an addition to the turnover of the appellant - Decided against revenue - Separate liablility for tax on interest income and other income apart from the trading addition sustained - Held that:- We find force in the contention of the ld. Counsel for the assessee that when the interest paid and earned in the course of business in that event deduction on payment of interest is required to be allowed. Accord .....

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4 - Dated:- 20-7-2016 - SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM For The Revenue : Shri R.A. Verma (Addl.CIT) For The Assessee : Shri P.C. Parwal (CA) ORDER PER SHRI KUL BHARAT, JM. The revenue and the assessee has challenged the order of ld. CIT (A), Alwar dated 17.02.2014 by filing the appeal and cross objection respectively. First, we take up revenue s appeal in ITA No. 331/JP/2014 wherein the revenue has taken the following grounds of appeal :- 1. That the Commissioner of Income .....

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of ₹ 2,15,15,138/- made by AO on account of less receipts shown by the assessee from various projects in the books. 2. Briefly stated the facts are that the case of the assessee was picked up for scrutiny assessment and the assessment under section 143(3) of the I.T. Act, 1961 (hereinafter referred to as the Act) was framed vide order dated 4th March, 2013. While framing the assessment, the AO made addition of ₹ 96,27,290/- on account of profit addition by adopting the net profit @ .....

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The first ground of the revenue is with regard to the adoption of net profit @ 5% in place of 8% as adopted by the AO. 3.1. The ld. D/R vehemently argued that ld. CIT (A) was not justified in reducing the profit. The ld. D/R submitted that under the facts and circumstances of the case, the ld. CIT (A) ought to have confirmed the addition as made by the AO. The ld. D/R further submitted that the AO has enumerated the discrepancies in the books of account. The AO has observed that the whole recei .....

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wrongly observed that assessee has shown net profit @ 3.79% on net receipts. Since service tax is allowed to be claimed as expenditure, therefore, net profit percentage ought to be calculated on gross contract receipts and not on net contract receipts. Ld. Counsel submitted that assessee has actually earned profit of ₹ 49.77 lacs only from construction business. Thus, if actual construction profit is considered, then net profit rate is only 3.09% as against 3.79% shown by the assessee. Acc .....

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The ld. Counsel further submitted that wages paid to own labourers at ₹ 6,36,865/-. This amount represents monthly wages paid to workers after deducting ESI and PF. Proper records and register has been made available by the assessee. He further submitted that the AO observed that the receipts as per Form 26AS were higher than the contract receipts shown by the assessee in its books by ₹ 2,15,15,138/-. He submitted that the total receipts declared by the assessee are ₹ 16.10 cr .....

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on which the party has deducted tax at source but the same is shown as stock in process. The ld. CIT (A) after considering the reconciliation of the amount shown in the books and that as per Form 26AS accepted the receipt declared by the assessee. The ld. Counsel further submitted that in subsequent years i.e. 12-13 and 13-14 the AO has assessed the income of the assessee by passing order under section 143(3). The net profit rate declared by the assessee as well as books of accounts has been acc .....

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u/s 44AB of the IT Act. Complete books of accounts along with purchase bills, contract receipts bills, vouchers and other registers maintained by the assessee were produced before the AO in the course of assessment proceedings. The appellant is not maintaining project wise details since it is very expensive and by looking at the size of the business it is not feasible. It is also stated that the appellant is complying with the requirements of accounting standard AS-7 and the books of accounts a .....

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to justify the book results declared for the period under consideration. Thus, I hold that AO was justified in invoking the provisions of section 145(3) of the IT Act. 4.20. Having considered the material available on record, now the issue arises is what should be the rate of profit which needs to be applied in the facts and circumstances of the present case. A number of judicial decisions have been quoted by the appellant and in certain other decisions it has been held that in the case of a be .....

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assessed the income @ 4.00% as against 3.66% shown by the assessee. 2009-10 Rs.9397250/- Rs.9897250/- The AO made lump sum additions of ₹ 500000/- to cover up the leakage of revenue, to meet the end of justice. (NP shown by the assessee was @ 3.73%). The assessee preferred an appeal and respected CIT (A) further restricted the additions at ₹ 300000/-. 4.21. Thus, considering the past history of the appellant with regard to the percentage of net profit declared and assessed by the AO .....

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Accordingly, a trading addition of ₹ 30,74,814/- made by the AO would be confirmed and the appellant would get a relief of ₹ 65,52,476/- under this head. Besides this, the appellant would be liable to tax on the interest income of ₹ 3,16,339/- and other income of ₹ 7,03,275/- declared in the return of income filed. The ld. CIT (A) has examined in detail the material placed before him and also considered the average rate of net profit rate shown for the assessment years 2 .....

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The ld. D/R supported the order of the AO and submitted that the ld. CIT (A) was not justified in deleting the receipts. He submitted that the ld. CIT (A) has excluded these receipts. 4.2. On the contrary, the ld. Counsel for the assessee reiterated the submissions as made in the written brief. The ld. Counsel submitted that the assessee has duly reconciled the variation in receipts. Therefore, the ld. CIT (A) was justified in deleting the receipts. 4.3. We have heard rival contentions and peru .....

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s not given credit of the excess receipts which has already been accounted for in the books but not shown in Form 26AS. The chart showing reconciliation of job work as per books of accounts and as per Form 26AS is at page 79 of paper book. In considering the receipt, AO has not considered the increase in stock in progress of ₹ 1,65,61,100/- (2,20,26,000 - 56,98,900) on which the party has deducted tax at source but the same is shown as stock in process. The CIT (A) after considering the re .....

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ill was passed for payment on 21.10.2010. In fact assessee got the contract and starts the work in FY 08-09 and completed in AY 09-10. The total work done was ₹ 8,07,39,082/- which is declared in the books of accounts as under:- Year Amount 2008-09 Rs.1,17,52,102/- 2009-10 Rs.6,09,56,543/- (complete work was done and last bill amounting to ₹ 80,30,437/- was raised during the year but bill was passed by the party on 21.10.2012, i.e after getting our accounts audited and deducted the t .....

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0,30,437/-, the tax was deducted by NBBC during the year but this amount was shown in the closing work in process by the assessee on 31.03.2010 and receipt in FY 2010-11. After considering the same, there does not remain any difference in the receipt declared by the assessee and that reflected in Form 26AS. (b) M/s Shimizu Corporation:- AO observed that the receipts as per Form 26AS were shown for ₹ 15,22,668/- whereas receipts as per books were shown for ₹ 10,61,570/- resulting in l .....

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ain shown in the year under consideration only because the party has deducted the TDS on this amount in the current FY. In support of its claim the assessee has furnished the ledger account for the FY 2008-09. (c) M/s Surya Roshni:- The receipts as per Form 26AS were shown for ₹ 3 lacs whereas receipts in books were shown at Rs. Nil. Assessee submitted that the sum was received as mobilization advance against Noida project. No work was done in the relevant FY and thus the assessee did not .....

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- includes ₹ 16 lacs advance and ₹ 64,85,653/- being passing of old bills. Certificate from the party in this regard was filed during the course of appellate proceedings. Thus, difference of ₹ 50,33,924/- is due to TDS deducted on advance and old bills passed during this year. Further, assessee has included this amount in the closing WIP and thus it cannot be said that there is no receipts booked by the assessee. (e) M/s Omaxe Construction:- The receipts as per Form 26AS were s .....

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that shown in the books is ₹ 4,61,131/-. The difference is due to Work Contract Tax. The party has deducted tax on gross amount whereas the assessee has booked receipts net of taxes because WCT has been considered as liability. (g) M/s Radnik Exports:- The difference of ₹ 1,15,056/- in book receipts and Form 26AS was only due to bills of earlier years passed this year by the party. Since the receipt was considered in earlier year there was no need to include it again in current year. .....

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pts were already booked in the previous year, there is no requirement to consider the same again in the current financial year. The remaining amount of ₹ 35,832/- (Rs.30,06,140 - ₹ 29,70,308) has been considered as receipt by the assessee and included in Miscellaneous Receipts of ₹ 1,50,93,895/-. (i) Ashok Leyland Ltd.:- The difference of ₹ 28,04,944/- in book receipts and Form 26AS was only due to bills of earlier years passed this year by the party. In AY 09-10, assesse .....

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and Ltd shown job work in A.Y. 2009-2010 vide TDS certificate 2804944 3 Add- Grasim Kotputly considered closing stock 5033924 4 Add- RMCC Job worked booked a.y. 09-10 3006140 5 Add:- NBBC considered closing Stock. 8798546 6 Add:- Omax Ltd. Considered Closing stock 534299 7 Less:- Onix Project Party not issued TDS certificate -200000 8 Less Orange SPA Party considered A.Y. 08-09 -1928481 9 Add:- Radnik Export job work booked a.y. 09-10 115056 10 Less:- Restoflux Party not issued tds certificate - .....

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from which the income of the assessee is properly deducible. Even the CIT(A) accepts the same but only for the reason that certain confirmations could not be produced, he upheld the application of section 145(3). This cannot be a basis for rejection of books of accounts. The ld. CIT (A) on the basis of submissions made has given the finding of fact in para 4.9 of his order as under :- 4.9. Further, considering the explanations given for the other parties as well, it is seen that receipts amounti .....

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cluded in the turnover for this year, the same amount has either to be excluded from the turnover declared in the preceding year or of the turnover declared in the succeeding year. In either case, it is not going to matter much in terms of the ultimate results declared by the appellant. Accordingly, I do not find any reason in making an addition of ₹ 2.15 crores to the turnover of the appellant. Thus, the turnover declared by the appellant at ₹ 16,10,42,167/- as per the books of acco .....

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see submitted that the defects as pointed out by the AO are factually incorrect. He submitted that the defects are not such that it would impact in deducing the profit. He submitted that the assessee has given all relevant material in support of its claim. He further submitted that in subsequent years also the facts are identical. The assessment has been framed under section 143(43) and the net profit @ 8% has been adopted. The ld. Counsel submitted that there was no reason to reject the books o .....

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sel of the assessee that the defects so pointed out by the AO are not such that it would impact on the profit. The assessee is required to keep such books of accounts and the vouchers and quantitative tally of stocks. The contention of the assessee is that project-wise details cannot be maintained. In order to prove the expenditure, the assessee should keep vouchers and other supporting evidences for scrutiny of the AO. In the case in hand, both the authorities below have pointed out certain def .....

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construction, the Hon ble Jurisdictional High Court has affirmed the estimation of net profit @ 12.5%. Since the estimation of profit depends on facts of each case, in the case in hand, in our considered view, the ld. CIT (A) has rightly applied the rate of 5% as the both assessee and revenue have not placed any material suggesting that the net profit could have been earned higher or lower than estimated by the ld. CIT (A). Accordingly this ground of the assessee is rejected. 7. Ground no. 2 of .....

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