TMI Blog2016 (9) TMI 1325X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant case for A.Y. 2003-04, which is not appropriate. The profit rate applied by the authorities below is not based on correct appreciation of facts or any rational. In order to justify the best judgment assessment, support could be derived from the previous history of the assessee and the comparable cases of the same line of business. We deem it expedient in the interest of justice to restore the matter to the file of AO for deciding the issue afresh in view of the observations made in the body of this order. Accordingly, the appeal of the assessee deserves to be allowed for statistical purposes. - ITA No. 2029/Del./2009, And 1651/Del./2012 - - - Dated:- 16-9-2016 - SHRI I . C . SUDHIR, JUDICIAL MEMBER, AND SHRI L . P . SAHU, ACCOUNTANT MEMBER For The Appellant : Sh . Yogesh K . Jagia, Advocate For The Respondent : Sh . B . Ramanjaneyula, Sr . DR ORDER Per L . P . Sahu, Accountant Member : Both these appeals by the assessee are directed against the orders dated 17.02.2009 20.01.2012 of ld. CIT(A), Ghaziabad for the assessment year 2003-04, challenging the sustenance of addition made in quantum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained that the operating profit without considering bad debt, provision for doubtful debt and provision for tax including deferred tax, in the current year comes to 16% of the turnover as against 12% in the last year. There is 68.10% increase in the turnover and 60.95% in project expenses resulting GP of 29% as against 30% in the last year. It was also explained that depreciation and exceptional items have been increased in the current year as compared to the last year. On perusal of profit and loss account, the AO noticed that the assessee had claimed the wages expenses of ₹ 1,16,41,903/- besides the sub-contractors cost of ₹ 1,44,61,444/-. The material consumption has been shown at ₹ 1,66,44,053/- as against ₹ 64,71,601/- of the last year. The assessee was asked to justify the payments made to sub-contractors and wages. In response the assessee submitted the list of the sub-contractor/petty contractors and payments made to them along with their addresses. In order to verify, the payments to sub-contractors, notices u/s. 133(6) were issued to 11 parties through whom excavation work etc. was shown to have been made, were issued to test check the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 2,10250/- in cash] and Sri Tulcha Ram ₹ 10,65,336/-. No other confirmations were received. To further verify the genuineness of the transaction, the summon u/s 131 was issued on 3.1.2006 to Sri K.P. Singh signatory of confirmation letter of M/s Infozip Systems and Translines, Ghaziabad, which was duly served through Inspector, but Sri K.P. Singh did not respond. Accordingly, show cause notice dated 24.1.2006 was issued to the assessee requiring him to justify the cash portion of the payments in the cases where confirmations were received and the total payments with respect to the five parties mentioned herein below : 1) Sri Suresh Babu Sharma, Vidhya Nagar, Bagarpur, Auraiya ₹ 3,83,762/- for excavation and concrete. 2) Shri S. Soman, SS Sadanam, Muthalakullam, P.O. Kollam, Kerala. ₹ 5,02,594/- Survey Work. 3) Sri K. Girisham Pillai, Kizakkepalavilla, PO Nedunagolam, Distt Kollam, Kerala Rs,68,600/- excavation and concrete. 4) M/s R.K. Constructions, Paltoo, Rawatsar, distt Hanuman Garh, Rajasthan ₹ 4,37,903/- excavation and concrete. 5) Jai Maruti Constructions, Ram Nagar, Mangalpuri, Kankarkhera, Meerut. ₹ 3,86,926/-excavation and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Winner Constructions Pvt. Ltd. (ITA No. 796/2011 dated 03.05.12)(Delhi High Court. (vi). Continental Carbon India Ltd. vs. ITO, ITAT, Delhi dated 31.10.2011 (ITA No. 5269 to 5271/Del./2010) He, therefore, urged for deletion of impugned addition. 5. The ld. DR, on the other hand, relied on the orders of the authorities below and submitted that since the impugned expenditure debited in P L account were not found open for verification during the investigation made by AO, the authorities below were justified to reject the books of account and to apply the net profit rate of 8% on the gross receipts, as the entries in the books of account of assessee were found not deducing the correct profit. It was submitted that since the recipients of the amounts did not confirm the payments allegedly made to them, the ld. Authorities were justified to discard the nominal net profit shown by the assessee on huge contract receipts. 7. Since we have restored the matter of addition involved in the quantum appeal to the file6. We have heard the rival submissions and have gone through the entire material available on record. The only question to be adjudicated in this appeal is with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct business. The AO, therefore, could resort to make an assessment to the best of his judgment by invoking the provisions of section 144 of the Act. However, while making the best judgment assessment the AO has to take into account all relevant material. It is well settled that even in case of best judgment assessment estimate of profit or addition should be on a rational basis and it should not be based upon the whims and fancies of the AO. In the instant case, the authorities below have applied the net profit rate of 8% on gross receipts as per section 44AD of the Act, which section does not apply to the present case, as the assessee is not a civil contractor but is engaged in the business of electro-mechanical and civil engineering contractor and carried out the erection of Extra High Voltage Overhead transmission lines, installation of underground EHV power cables, Microbe and telecom towers, repair and maintenance of EHV transmission and distribution equipments for electrification. It is also an admitted fact that the turnover of the present assessee exceeds the sum of ₹ 40 lacs which bars the application of section 44AD or the profit rate prescribed therein. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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