9911796707
Advanced Search 
TMI Blog2017 (10) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided only accommodation bills. In the course of the re-assessment proceedings the assessee was asked to furnish the details of ledger accounts, copies of bills, invoices, proof of delivery of goods with transportation details rendering of services, bank statements and other documentary evidences to substantiate the genuineness of the transactions. In response the assessee vide letter dated 06.02.2015 submitted ledger accounts bank statements etc., It was also contended before the Assessing Officer by the assessee as under: "(i) The assessee has procured / purchased materials from various sources mainly through suppliers/brokers/agents. The factum of materials purchased and utilization thereof can be conclusively established from the actual inspection of the sites where projects were carried out, the measurement record, the structural drawings and specificities of the project etc. The assessee would not have been able to carry out the project work awarded by the Government / Semi Government Authorities if it would not have purchased the construction material. The factum of execution of work and the material consumption is determinable on the basis of the payment certificates iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Mehta is the proprietor of Mehta Enterprises and the business of this proprietary concern was taken over by the assessee company. The Learned Counsel for the assessee submits that the assessee in this case also a civil contractor undertaking works for Government and Semi Government agencies. The Tribunal restricted the net profit to 6% without depreciation. Learned Counsel for the assessee further submits that assessee is primarily undertaking the contract works from Government and Semi-Government Departments, Local Authorities and Private Parties. Therefore, if the net profit of the assessee is estimated at 6% without depreciation it will be less than the 12.5% adopted by the Ld.CIT(A). Therefore, prays that the percentage adopted by the Ld.CIT(A) at 12.5% may be sustained. 7. Heard rival submissions, perused the orders of the authorities below. The contention of the assessee is that the purchases are genuine has been rejected by the Ld.CIT(A). However, the profit element in such non proven purchases was estimated at 12.5% as reasonable observing as under: - 6.2.9 Conclusion on case laws: The net conclusion that can be arrived at from the above discussion is that where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and executed by the applicant 5% RMC Manufacturing 6% The Hon'ble Settlement Commission accepted the appellant's offer mainly on the grounds that credit has not been challenged and only option left with the revenue is to work out estimated profit on unproved purchases. 6.2.12 Since, the AO has not challenged the credits, and thus, there is no case for the total disallowance of the purchase figure. But, the figure of purchases are certainly exaggerated as held in various judicial scrutiny of cases related to hawala dealers, such purchases do have element of profitability higher than the normal one. Infact, the assessee company itself has taken a ground number 3 that "On the facts and in the circumstances of the case and in law, the AO has not found any infirmity with the books of accounts in terms of purchases or utilization of the materials in different contracts in which the Appellant was engaged. Therefore, the ratio laid down by the Gujarat High Court in the case of CIT vs Simit P Sheth (356 ITR 451) that when the total sales and purchases has been accepted by the AO then it would be reasonable to estimate the profit made on such purchases and that profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other expenses incurred in cash. Considering the peculiar circumstances of the case, AO made a disallowance of Rs. 80 lakhs of expenses in toto. Matter travelled to the first appellate authority. 4. During the proceedings before the first appellate authority, regarding the said two parties i.e., M/s. Bhakti Trading Co and M/s. Sunrise Enterprises, assessee made various submissions furnishing the banking transactions involving these two suppliers and submitted that the payments were made by these parties through account payee cheques, the copies of the invoices were also furnished. Regarding the failure of the parties to attend before the AO, it was submitted that these parties were having transactions with the assessee therefore it is difficult for him to produce them personally as there was a gap of three years. The fact that the genuineness of the transactions not doubted was also explained. CIT (A) appreciated the submissions made by the AO vide the discussion given in para 3.3 of the impugned order and deleted the addition made by the AO. However, after making some discussion with regard to the Net Profit (NP) of the assessee, CIT (A) held that the assessee has declared th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the immediately preceding year, hence there is no justification for assessing the net profit after depreciation 6% ignoring the past results and that too in absence of any specific material discrepancy noted by the AO. Thus, the disallowance of to the extent of Rs. 76,86,406/- on account of purchases made from the two parties out of total disallowance of expenditure of Rs. 80 lakhs, made by the AO cannot be sustained. However, it is noted that substantial portion of the labour expenses are incurred in cash which are not open to verification. Since, the assessee himself had agreed during the assessment proceedings to be taxed at the net income 6% before depreciation as against the declared profit before depreciation @5.94%. Therefore, if the assessee is assessed at income 6% before depreciation, it will cover up the leakage of revenue on account of non-verifiability of cash expenses on labour claimed by the appellant. On the turnover of Rs. 49,80,65,227/- the profit before the depreciation 6% comes to Rs. 2,98,83,913/-. Since, the appellant has disclosed the profit before depreciation at Rs. 2,96,03,576/- only, therefore, the difference in estimated profit before depreciation an ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
