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TMI Blog2011 (5) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... of closing stock. 3. Grounds raised in cross objection of assessee are as under :- 1) That, the learned C.I.T.(A) has wrongly confirmed the addition of unexplained purchase/sub contract expenses of ₹ 4,40,047/- 4. Grounds raised in appeal and cross-objection are based on identical set of facts. Both the ld. representative of parties made their submissions on all grounds of appeal together, therefore, for the sake of convenience we noted brief facts of all additions made by the A.O., thereafter noted contention of ld. representative of parties and issues of grounds are decided accordingly. The brief facts are that the assessee is a civil contractor constructing building and industrial structures and ware-houses. The assessee filed its return of income declaring total income of ₹ 45,19,703/- During the assessment year, the A.O. noticed that the assessee has shown contract of ₹ 12,34,68,750/-. The A.O. further noticed that the assessee has shown outstanding balance of ₹ 2,72,00,142/- as sundry creditors. The A.O. called information by issuing notice u/s.133(6) of the Act. In compliance of the notice u/s.133(6) of the Act, some of the notices received back f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it was clear that the assessee had not considered the work executed till 31.03.2005 for valuation of the work in progress. The assessee has also not provided any documentary evidence to establish that the relevant work was executed in the first two months of subsequent financial year. The assessee could have discharged the onus that lay on it by providing copies of bills raised i.e. whether RA-1 or RA-5. If the running bill is first (RA-1), then work in progress would be there in preceding 1 or 2 months. The necessary certificate from Engineer certifying the quantum of work completed, has also not been furnished. Under the circumstances, the 15% of the billed amount is considered as work in progress as on 31.03.2005. The addition of ₹ 25,86,256/- (15% of ₹ 1,72,41,713/-) is made for undervaluation of work in progress". 7. The A.O. further noticed that the assessee has shown purchases of diesel and other construction material for ₹ 24,16,936/-. However, the assessee has shown closing stock only ₹ 1,56,192/-. It is also noticed by the A.O. that the assessee has incurred transportation charges ₹ 3,78,752/- on 31st March,2005 which shows that relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copy of Account Copy of Bills Copy of Confirmation. The appellant has purchased "rati" and stones from the said party. The details about the supply and also vehicle no. through which such supply was made also furnished. The details of dates, on which the goods were received, were also given. 6. Manji Meghji Vaghamshi. 8,67,975/- The address village Shinai, Dist. Gandhidham, Kutch 370205. Copy of Account Copy of Bills Copy of Confirmation. The supplier carried out block masonry work and other similar job work.. 9. The C.I.T.(A) notices that the assessee has purchased raw-materials in the nature of "rati", bricks etc. which were normally manufactured and supplied by unorganized sector. It is not the case of the A.O. that no corresponding income was received by the assessee. The C.I.T.(A) accepted the assessee's contention that the contract was carried out for longer period and all these suppliers were regular ones and therefore, there was continuous business transactions with these parties and some of the amounts were outstanding with these accounts. It is also noted by the C.I.T.(A) that the assess has prove the genuineness of acceptance by producing names and detailed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidences and valid reasons. The A.O. has simply estimated 25% of the gross receipts for the month of April, 2005 and May, 2005 as closing work in progress without any basis or supporting evidences. It has also been observed by C.I.T.(A) that he has considered the case of the assessee from the theory of net profit rate for estimation and estimated the net profit by applying 4% which covers the lapses in maintenance of books of account. Therefore, no separate disallowance on account of work in progress is called for. 13. The C.I.T.(A) also deleted addition of ₹ 12,95,251/- made by the A.O. on account of undervaluation of the closing stock. Accepting the assessee's contention that diesel, bricks and other materials were received in earlier periods and they were replaced. That all transportation charges were incurred regularly, only bills were claimed on monthly basis. The material were accounted for in the month of March as the same were incurred to earn income and income was also accounted for. Therefore, even on the basis of matching principle, the income and expenses should be accounted for for the same period. The C.I.T.(A) noted that this fact was not appreciated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haran Bhaskaran Tax Appeal No. 989 of 2008 dated 20/1/2009 (Guj.), 3. Anis Ahmed & Sons Vs. C.I.T. 297 ITR 441 (SC), 4. Omkar Engineering Co.,ITA 569/RJT/2007 dated 29/8/2008, Ambika Engineering Co., ITA No.106/RJT/2008 dated 15/12/2008 and 5.Sriram Jhanwrlal Vs.CTO 98 TTJ (Jd) 639. 16. The ld. A.R further submitted that the assessee has complied with all notices received u/s.133(6) except some of the notices. The assessee produced all the relevant documents, bills etc. which have been considered by the C.I.T.(A) in his order and noted in his order party-wise. 17. In rejoinder, the ld. D.R. submitted that the A.O. did not reject the books of account whereas, the C.I.T.(A) applied the net profit rate rejecting books of account. Therefore, C.I.T.(A) is not correct in applying the net profit rate. 18. We heard the learned representatives of the parties, record perused. Some admitted facts of the case are that the assessee is a civil contractor. The A.O. made addition of ₹ 79,93,638/- on account of unexplained purchases and sub-contract expenses, ₹ 25,86,256/- on account of undervaluation of work in progress and ₹ 12,95,251/- on account of undervaluation of c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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