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2018 (1) TMI 1049

Rejection of gross profit claimed by the revision petitioner - Whether the adoption of 10% notional Gross Profit on the purchases effected, while arriving deemed sale turnover by the Assessing Officer is correct or not? - Held that: - It is the duty of the respondent dealer to furnish the value of materials used in the execution works contract with appropriate inclusion of gross profit relatable to those materials. In practice it is not humanly possible to cull out each and every item trans .....

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he Tribunal correct in giving a judgment entirely based on perverse assertions that had no relation to either the established facts or the accounts maintained by the petitioners in the normal course of their business, audited and certified by a Chartered Accountant? - Held that: - Though, learned counsel for the revision petitioner urged that the certificate issued by the Chartered Accountant, for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and 31.03.2009 .....

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ered the submissions of the learned counsel, perused the relevant documents, stated supra, and passed a well considered orders in STA Nos.109 & 110 of 2015 and 200 & 201 of 2014 dated 25.06.2015, and that the same do not call for any interference. - Tax revision dismissed. - Tax Case (Revision) Nos. 31 to 34 of 2017 and CMP Nos. 14472 to 14475 of 2017 - Dated:- 10-1-2018 - S. Manikumar And V. Bhavani Subbaroyan, JJ. For the Petitioner : Mr. Adithya Reddy in all cases for Mr. S. P. Asokan For .....

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al gross profit of 10% and arrived at the corresponding deemed sales turn over under Section 5 of the Tamil Nadu Value Added Tax Act, 2006. The assessing officer also assessed sale of assets and reversed certain ineligible ITC. The Assessing Officer also levied penalty under Section 27 of the Tamil Nadu Value Added Tax Act, 2006. 4. Being aggrieved, the assessee / revision petitioner, filed appeals in A.P.Nos.101, 102, 4 and 5 of 2013 to the appellate authority viz., the Appellate Deputy Commiss .....

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Profit for such calculation when not even a single purchase or other turnover omission has been pointed out in the accounts maintained by the petitioners? (2) Was the Tribunal correct in giving a judgment entirely based on perverse assertions that had no relation to either the established facts or the accounts maintained by the petitioners in the normal course of their business, audited and certified by a Chartered Accountant?" 7. Supporting the substantial questions of law, learned counse .....

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to its professional capabilities, but it is mostly decided by a complex interplay of competing factors dominating the market. 10. Learned counsel for the petitioner further submitted that neither the assessing officer nor the appellate authority, has recorded any factual finding to the effect that the petitioners did not maintain proper accounts as stipulated under rule 8(5) of the TNVAT Rules, 2007. The Tribunal did not call for and examine the accounts maintained by the petitioners, and in suc .....

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ded transport charges, loading and unloading charges, on the purchase of goods incorporated, into works contract. 12. Learned Additional Government Pleader (Taxes) also pointed out that the assessing officer has considered that the dealer had simply computed the total purchases for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and 31.03.2009 & 01.04.2009 to 31.03.2010 of the Assessment years 2006-07, 2007-08, 2008-09 and 2009-10, respectively, without ad .....

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urn over) ₹ 303,68,66,798/- and lastly, for the assessment year 2009-10, the gross profit was ₹ 6,82,36,765/- (3.50%) on the contract receipt of (turn over) ₹ 194,96,21,865/-. 14. Learned counsel for the petitioner further submitted that when certificates of the Chartered Accountant, debiting the trading account of the assessee (extracted from the annual reports in respect of the purchases for the period from 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and .....

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d Tax Rules, 2007. Dealer has not produced any accounts for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and 31.03.2009 & 01.04.2009 to 31.03.2010 of the Assessment years 2006-07, 2007-08, 2008-09 and 2009-10, respectively, to arrive at the taxable turn over under Section 5 of the Tamil Nadu Value Added Tax Act, 2006. Learned Additional Government Pleader (Taxes) submitted that on surmises, the dealer has chosen to adopt 5% Gross Profit to arrive at the .....

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6-07, 2007-08, 2008-09 and 2009-10, does not call for any interference. 18. On the contention that a conventional method of 10% of gross profit is being adopted and liability worked out, learned counsel for the revisions petitioner submitted that, at no point of time, the department had informed the petitioners of the said practice, and placing reliance on the judgment of Kerala High Court in Income Tax Referred Case No.67 of 1966 dated 06.09.1967, in the matter of Joseph Thomas & Bros Vs. C .....

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llowing two points for consideration. "1. Whether the adoption of 10% notional Gross Profit on the purchases effected, while arriving deemed sale turnover by the Assessing Officer is correct or not? 2. Whether the order of the Appellate Deputy Commissioner (CT) is sustainable or not?" 23. The tribunal, discussed and answered the issue, in favour of the revenue, as hereunder. "The adoption of 10% notional Gross Profit: The one and only dispute is whether liability on the deemed sal .....

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n, shall be entitled to input tax credit on goods specified in the First Schedule purchased by him in this State." It is the duty of the respondent dealer to furnish the value of materials used in the execution works contract with appropriate inclusion of gross profit relatable to those materials. In practice it is not humanly possible to cull out each and every item transferred along with related Gross Profit. Thus the liability on the part of the dealer have to be arrived notionally be ca .....

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ould present no difficulty. Unlike other components, the profit element in the value of the goods may necessitate estimation in cases where the books of accounts are not maintained annually, but project-wise. Estimation of profit would then be a matter for determination by the assessing authority after taking into consideration all relevant factors including the profits which are, ordinarily, made in similar works executed by other contractors; profits earned by the contractor-dealer in works co .....

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ve been dealt with and, in some of the cases, the percentage of profits estimated at 15 per cent has been accepted as being reasonable. We may not be understood to have held that in all cases 15 per cent should invariably be accepted as the norm. We have merely indicated broadly the factors which the assessing authority should bear in mind while estimating the profit percentage in the facts and circumstances of the case before him. The Hon'ble Supreme Court in the case of Gannon Dunkerley .....

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eliver the goods to the situs of the works wherein they are incorporated - costs of establishment relatable to supply of material involved in the execution of the works contract - other charges borne by the contractor dealer in relation to these goods till its incorporation in the works and - also the profits relatable to the value of such goods. - Thus it is necessary to find out the correct Gross Profit involved in the course of execution of the works contract as evident from the books of acco .....

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ping in view of the nature of projects executed the Gross Profit of 5% is far below that the appreciable percentage." 24. From the material on record, it could be deduced that while doing so, the tribunal has also verified the audited Profit & Loss statement and Balance Sheet of the assessee / revision petitioner, for the relevant years. 25. Ultimately, the tribunal held as follows: " The Appellate Deputy Commissioner (CT) has erred in relying on the above all India Balance Sheet, .....

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etc for use in the execution of Industrial Civil Works Projects. These inputs are used for execution of Mega commercial projects such as Sea Port Terminals, Roads for National Highways Authority of India and other civil structures." 27. After considering the audited profit and loss statement, balance sheet, certificates issued by the chartered accountant, for the relevant years, the tribunal ordered, as hereunder. "The respondent dealer have not maintained the proper accounts as stipul .....

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timation of Gross Profit at 5% is definitely at lower side. The adoption of 10% value addition towards Gross Profit and other expenses relatable to the purchases by the Assessing Officer is fairly in order. The Assessing Officer thus rightly levied VAT liability by adding 10% gross profit on the above purchase turnover reported under 4% and 12.5% commodities respectively. Thus the following difference of deemed sale turnover resulted due to difference of Gross Profit between 10% & 5% (i) for .....

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doption of notional 10% Gross Profit on the purchase value to arrive the deemed sales turnover under section 5 of the TNVAT Act 2006 by the Assessing Officer is correct and therefore upheld. The order of the Appellate Deputy Commissioner (CT) is set-aside in respect of assessment of difference of deemed sales turnover, accordingly and order of the Assessing Officer dated 31.01.2012 for the year 2006-2007 under TNVAT Act, 2006 is upheld and restored. (ii) In STA No.110 of 2015 "In view of th .....

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the Assessing Officer is correct and therefore upheld. The order of the Appellate Deputy Commissioner (CT) is set-aside accordingly." 29. Though, learned counsel for the revision petitioner urged that the certificate issued by the Chartered Accountant, for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and 31.03.2009 & 01.04.2009 to 31.03.2010 of the Assessment years 2006-07, 2007-08, 2008-09 and 2009-10, respectively, corroborated the accounts and .....

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% to 3.56%, held that the approximation of the dealer at, 5% profit was merely on surmises, not supported by any proper accounts, for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and 31.03.2009 & 01.04.2009 to 31.03.2010 of the Assessment years 2006-07, 2007-08, 2008-09 and 2009-10, respectively, and thus, the tribunal has accepted the case of the department, by adopting the conventional method of deducting the gross profit at 10%. 30. At this juncture, .....

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vl.Sreerosh Properties (P) Ltd., are dealers in Flat promotors doing business in Building construction at No.10/A/23 Sreejivanthi, Lakshmi St., Chennai - 10. Their place of business was inspected surprisingly on 10.3.2013 by the Enforcement wing (Central), Chennai - 6. During the course of inspection, they have noticed certain defects and a proposal has been received in the reference cited. Based on the proposal, a notice was issued for the assessment year 2009-10, in the reference cited as foll .....

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ation of the principles of natural justice, and in that context, relied on a decision of the Kerala High Court in Income Tax Referred Case No.67 of 1966 dated 06.09.1967 in the matter of Joseph Thomas & Bros Vs. Commssioner of Income Tax, Kerala [reported in [1968] 68 ITR 796 (Ker)], this Court is not inclined to accept the said contentions, for the reason that in the reported case, the question referred was whether, on the facts of the said case, there was, non compliance of the provisions .....

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ner, has no reliance to the facts of this case. First of all, adoption of 10% of gross profit and working out liability, in respect of works contract in vogue, ever since the introduction of Section 3B of the Tamil Nadu General Sales Tax Act, 1959 and stated to be continued, even for the liabilities relating to Section 5 of Tamil Nadu Value Added Tax Act, 2006, is not a material gathered on the basis of any enquiry. Further, no provision has been pointed out by the assessee, to this Court, regar .....

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