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2016 (9) TMI 1068 - ITAT JAIPUR

2016 (9) TMI 1068 - ITAT JAIPUR - TMI - Net profit computation - rejection of books of accounts - the work in progress included closing stock, which was shown on estimated basis, details regarding use of material at various sites were missing and cash vouchers for miscellaneous expenses were self made, which could not justify the connection of the same for the business purposes - Held that:- The business income of the assessee from the contract work of erection and fabrication has to be calculat .....

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is more than the income calculated above at ₹ 2,26,83,539.67. We are, therefore, of the view that the net profit shown by the assessee at ₹ 2,49,82,620.84 to be accepted as total income of the assessee for assessment year 2010-11. Accordingly, the addition sustained by the ld CIT(A) is deleted and appeal of the assessee is allowed. - ITA No. 979/JP/2013, ITA No. 996/JP/2013 - Dated:- 8-7-2016 - Shri Kul Bharat, JM And Shri Manish Borad, AM Assessee by : Shri Anil Sharma ( CA ) Reven .....

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d fabrication. Return of income for A.Y. 2010-11 was e-filed on 09/02/2012 declaring income of ₹ 2,50,48,510/-. The assessee s case was picked up for scrutiny assessment under CASS and notices U/s 143(2) of the Act dated 24/8/2011 was issued and served to the assessee. Thereafter notice U/s 142(1) of the Act seeking various information/documents and clarifications were issued. In the course of assessment proceedings, the ld Assessing Officer observed that the work in progress included clos .....

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ssed the interest income on FDR at ₹ 92,62,914/- as income from other sources. Income of the assessee was assessed at ₹ 4,68,64,020/- by calculating business income at ₹ 3,76,01,102/- (@ 8% on total contractual receipts of ₹ 47,00,13,786/-) and interest income on FDR at ₹ 92,62,914/- assessed as income from other sources. 3. Aggrieved the assessee went in appeal before the ld CIT(A) but did not press the ground relating to treatment of FDR interest of ₹ 92,62, .....

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observing as under:- 4. I have considered submissions of the appellant and have also gone through the assessment order. It is seen that the AO has rejected the books of account of the appellant on the ground that closing stock shown in the P&L a/c and balance sheet included work-in-progress on estimate basis and since the actual bills were issued only after completion of work, the correct and actual work-in-progress was not reflected. Moreover, the bills raised by the sub-contractors did not .....

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the NP rate of 8%. 4.1 A perusal of the appellant s submission on this issue shows that no specific rebuttal to the points raised by the AO has been given. The appellant himself has accepted that the defects mentioned by the AO in the assessment order were unavoidable in nature, meaning thereby that the defects noted by the AO were correct. No specific grounds have been given to show that the AO s action in rejecting the books of account was not correct. The action of the AO in rejecting the boo .....

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n the preceding year i.e., A.Y. 2008-09. It is further noted that in the year under consideration the appellant has declared NP @ 3.36% on the gross receipts, after depreciation, interest and partners remuneration, which is extremely low. Considering the submissions of the appellant and overall facts & circumstances of the case, it would be appropriate to apply NP rate of 4.75% on the gross contractual receipts of ₹ 47,00,13,786/- which results in the net profit of ₹ 2,23,25,654/ .....

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he NP rate of 4.75% of total contract receipts, considering the same to be after allowing depreciation, interest and partners remuneration and thereby in confirming the addition of ₹ 66,04,948/-. 5. The ld AR of the assessee has made following submissions:- 1. The AO rejecting the books of accounts of the assessee u/s 145(3) of IT Act 1961 estimated Net Profit by applying NP rate of 8% on total contract receipts of ₹ 470013786/- without allowing any further deduction of Depreciation, .....

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ation, Bank Interest, and partners remuneration has been allowed out of the net profit estimated by application of NP rate of 8% by the Id. CIT(A) himself/herself and the same has been upheld by Hon ble ITAT Jaipur. Therefore the depreciation of ₹ 7611318/-, bank interest of ₹ 16089158/- and partners remuneration of ₹ 480000/-(Total of ₹ 24180476/-) as appearing in the audited books of accounts and relevant profit and loss account, is allowable out of the Net profit estim .....

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; 18377672/- has been deleted. 4. The assessee has preferred this appeal against the application of NP rate of 4.75% applied by ld. CIT(A), considering the same after allowing depreciation, bank interest and partners remuneration instead of actual allowance of the same out of Net profit estimated by application of NP are of 8%. Whereas the department has preferred appeal against the reduction of NP rate to 4.75% against that of 8% applied by the AO. 5. This Hon ble Bench vide order dated 15.01.2 .....

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15.01.2014 has upheld the NP rate of 8% subject to further allowance of Depreciation, Interest and partners remuneration and this Hon ble Bench vide order dated 18.11.2015 in ITA No.631/JP/2014 has sustained the order of ld. CIT(A). 7. The facts of the case are identical to that of preceding A.Y. 2006-07, 2007-08, 2008-09 and 2009-10 and succeeding A.Y.2011-12 and squarely covered with in the earlier orders passed by this Hon ble Bench where the claim of depreciation, bank interest and partners .....

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assessed for ₹ 37601102/- and after allowing depreciation of ₹ 7611318/-, bank interest of ₹ 16089158/- and partners remuneration of ₹ 480000/- (Total ₹ 24180476/-) the above said net profit comes to ₹ 13420626/-. The assessee has already declared business profit of ₹ 15720706/- as computed by the AO (Net profit declared ₹ 24982620/- less interest income of ₹ 9261914/- assessed separately). 10. Therefore, Id. CIT(A) is not justified in estima .....

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. CIT(A) may kindly be deleted and departmental appeal may kindly be dismissed. 6. On the other hand, the ld Sr. DR has supported the order of the ld Assessing Officer. 7. We have heard the rival contentions of both the parties, perused the material available on the record and gone through the orders passed by the Coordinate Bench, Jaipur relied on by the ld AR. Solitary grievance raised by the assessee in this appeal is against the action of the ld CIT(A) sustaining the addition by calculating .....

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n it has been consistently held that the income of the assessee is to be calculated by applying 8% of the gross contract receipts, which will be further subject to deduction of depreciation, interest and remuneration paid to the partners. 7.2 We observe that in the decision of the Coordinate Bench in ITA No. 949/JP/2009 for A.Y. 2006-07, which has been followed in the consecutive years, the Coordinate Bench has observed as under:- 15. In the present case as stated above, one of the partners agre .....

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pecifically these expenses because they are not administrative expenses but are allowable otherwise. For these reasons, we can say that ld. CIT (A) was justified in directing the AO to allow these expenses separately. Accordingly, we hold that ld. CIT (A) was justified in directing the AO to allow deduction of depreciation, interest and salary to partners, therefore, we confirm the order of ld. CIT (A). 7.3 We further observed that the Coordinate Bench in ITA No. 699 & 647/JP/2012 for the im .....

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sessee's paper book. We have gone through the tribunal orders. The Tribunal has confirmed the application of net profit rate at 8%, further subject to depreciation, interest to bank and remuneration paid to partners. Therefore, by respectfully following the view of this Bench and for the sake of consistency we hold a net profit rate of 8% further subject to depreciation, interest paid to partners and remuneration paid to partners. The ld. CIT(A) has taken the same view, which deserves to be .....

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ion of the assessee is that consecutively in assessment years as discussed above, year after the year, a net profit rate of 8% further subject to depreciation, interest and remuneration paid to partners have been held to be justified in assessee's own case and by adopting net profit rate only and not mentioning further deduction on account of depreciation, interest and remuneration paid to partners. It is likely to set a wrong precedent in assessee's own case which may lead to complexiti .....

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ng and to keep the findings in the same manner we hold that net profit rate of 8% further subject to depreciation, interest and remuneration paid to partner could be final finding. Accordingly, we hold as above and allow the appeal of the assessee to that extent. 7.4 Respectfully following the decision of the Coordinate Bench, we are of the considered view that the business income of the assessee from the contract work of erection and fabrication has to be calculated by first applying 8% of the .....

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