TMI Blog2011 (5) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A), Kolhapur was not justified in confirming the action of the AO of invoking the provisions of section 145(3) and rejecting the books of accounts regularly maintained and holding that the books of accounts were not absolutely reliable. In the absence of any ingredients of this section, the action is vitiated in law and it be held accordingly. 3. On the facts and in the circumstances of the case and in law the ld CIT(A), Kolhapur was not justified in estimating the net profit of ₹ 61.41 lakhs and substituting the same as income of the appellant without any cogent reasons but only on the basis of estimations. The book results of the appellant be accepted accepting the income returned. 3. The relevant facts are that the assessee is a civil contactor executing Government contracts. The Assessing Officer finallised the assessment for the assessment year 2005-06 under section 144 of the Act on the ground that the assessee failed to comply with the various notices issued by the Assessing Officer and the overall attitude of the assessee was not co-operative. According to the Assessing Officer, on all the queries, the assessee had given cryptic replies without any evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 144, the Commissioner of Income-tax (Appeals) observed that a notice under section 142(1) was issued followed by reminders to the assessee, who filed information and as such, the argument of the assessee was not accepted by him. 7. Another issue relates to the application of provisions of section 44AD and estimating net income from contract business at 8% of the total receipts and estimating the profit of roller hire business at 40%. The Assessing Officer stated that perusal of the Profit Loss account revealed that but for income from roller hire charges, total income would have resulted in a loss. In regard to purchases, no stock register was maintained and therefore, it was difficult to verify consumption figures and that the closing stock was on the basis of assessee s own certification. According to the Assessing Officer, assessee had deducted tax on sub-contract payments of ₹ 1,67,24,537/-, whereas total expenses debited to the accounts under the head labour contract, sub-contract and transport contract amounted to ₹ 1,86,62,475/-. For these reasons, the Assessing Officer rejected the book results and estimated the income from contracting business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 144 cannot be made merely because the assessee had failed to explain all the queries raised by the department when the assessee had filed the information called for. The learned Counsel also pointed out in support of Ground No. 2 of the appeal that the lower authorities were not justified in rejecting the book results of the assessee by invoking the provisions of section 145(3) of the Act. In the alternative, in support Ground No. 3 it had been submitted that the Commissioner of Income-tax (Appeals) was not justified in estimating net profit at ₹ 61.41 lakhs, which was quite excessive considering that the assessee had declared a total income of ₹ 45,23,640/-. It is pointed out that the assessee is engaged in civil contracting business, executing Government contracts on which the profit rate is not very high. In this connection, a reference has been invited to the Paper Book wherein is placed copies of allotment of tenders by various agencies to the assessee which clearly show that the work was assigned to the assessee on a very low profit margins and, therefore, the lower authorities have erred in making excessive estimation of profits by applying a profit rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as balance sheet of joint ventures, details of immovable property, personal vehicles, ledger extract along with master roll for payment for labour, purchases of diesel, asphalt, steel, cement etc. The appellant submitted his reply to the questions asked vide letter dt 27.9.07. Replies to all the 19 questions asked was submitted including details of sundry creditors, sundry debtors, provisions, additions to plant and machinery, ledger account for various expenses. The information required vide letter dt 31.10.07 was also furnished. This information included details of capital account, personal balance sheet, list of credit cars, details of various expenses. The ledger account of labour charges paid diesel, oil purchase, purchase of other materials were also submitted. Aft4r considering the above details, a letter was again issued to the appellant on 6.12.2007. In this letter a set of queries were raised based on the examination of the information filed earlier by the appellant. Some of the important queries related to details of closing stock in light of heavy purchases shown in the month of March, in the ledger account, proportionate interest on relatable to dividend income, cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the absence of confirmations. The finding of the Assessing Officer is that none of the expenses claimed in the Profit and Loss account were substantiated in the absence of the requisite details. For all the above reasons, the Assessing Officer rejected the trading results declared and instead estimated income of the assessee by estimating net profit rate at 8% of contract receipts. The infirmities noted by the Assessing Officer, in our view, persisted even before the Commissioner of Income-tax (Appeals) and we find no reasons to depart from the conclusions arrived at by the lower authorities on this aspect, since no credible material has been furnished before us, which would require interference. Therefore, under these circumstances, we find nothing wrong with the action of the Revenue authorities in estimating the income under the facts and circumstances of the case. In so far as the plea of the assessee that income has been estimated excessively, we find that the Commissioner of Income-tax (Appeals) has estimated the income from regular contract business at 8% of the contract receipts. In so far as income from sub-contracting is concerned, the same has been estimated at 4%. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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