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TMI Blog2016 (10) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... the sustenance of addition of Rs. 1,18,342/- which the ld. CIT(A) has sustained on account of non-deduction of TDS u/s 40(a)(ia) of the Act. 4. The brief facts, as noted in the assessment order are that the assessee is a civil contractor. During the assessment year under consideration, the gross receipts of the assessee amounted to Rs. 12,58,30,195/- against which the assessee had declared net profits of Rs. 69,34,742/-. During the assessment proceedings, the AO observed that the major components of expenses of the assessee were on account of purchases and labour expenses, which amounted to Rs. 6,85,25,610/- and Rs. 3,80,36,142/- respectively. Therefore, the assessee was directed to produce bills/vouchers in respect of purchases and labour expenses which the assessee did not produce but produced photocopies of certain bills. The AO required the assessee to furnish original bills/vouchers, but the assessee did not produce complete original bills/vouchers. However, the assessee did produce cash book and ledger but did not produce complete vouchers of purchases, labour and muster rolls of labour. The assessee was also not able to produce the bills of bajri and other material etc. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased. It was submitted that the assessee was in the same line of business for so many years and incomes offered by the assessee in earlier years were accepted and therefore, the ld. CIT(A) should have considered the past results of the assessee. It was submitted that the case of the assessee is squarely covered in favour of the assessee by various orders of the ITAT, Amritsar Bench, wherein the rate of 5% has been accepted to be fair net profit rate in the case of civil contractor. The ld. AR relied on the following case laws: i) ITAT, Amritsar Bench, in the case of Sh. Mohan Singh Contractor vs. ITO, in ITA No.59/Asr/2012, dated 05.06.2012 relating to A.Y. 2008-09. ii) ITAT, Amritsar Bench, in the case of ITO vs. M/s. Surinder Pal Nayyar, in ITA No.366/Asr/201, dated 30.04.2012 relating to A.Y. 2006-07. iii) ITAT, Amritsar Bench, in the case of Sh. Abdul Salam Mir vs. DCIT, in ITA No.115/Asr/2013, dated 06.08.2014 relating to A.Y. 2009-10. iv) ITAT, Amritsar Bench, in the case of M/s. Mattewal Cooperative L/C Society Ltd. vs. ACIT, Circle V, Amritsar, dated 27.12.2012 in ITA No.450/Asr/2012, relating to A.Y. 2008- 09. v) ITAT, Amritsar Bench, in the case of ACIT, Cir.VI, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case. 9. As regards the disallowance of Rs. 1,18,342/- under section 40a(ia) of the Act, the ld. AR submitted that once the profits of the assessee were assessed on the basis of estimation, no further disallowance was warranted. To support his contention, the ld. AR placed reliance on the order of the ITAT, Amritsar Bench in the case of J.S. Grover Construction, where similar disallowance has been deleted by following various judgments of various High Courts. 10. Further, it was argued that since payee had included interest income in its profit & loss account, therefore, also addition was not warranted. 11. The ld. DR, on the other hand, submitted that the ld. CIT(A) had wrongly allowed relief to the assessee by reducing net profit rate from 10% to 8%, as the assessee was not able to produce bills of purchases and labour. The onus was on the assessee to prove that the books of account were correct. As regards disallowance u/s 40a(ia) of the Act, the ld. DR submitted that the disallowance is a mandatory disallowance for non deduction of TDS, therefore, the ld. CIT(A) has rightly confirmed the same. 12. The ld. DR further submitted that his arguments relating to redu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that the past history of the assessee indicates that the assessee had been earning net profit rate in the range of 5.21% to 5.34%, whereas in the present year, the assessee declared net profit rate at 5.51%. Therefore, the present rate of net profit declared by the assessee is in line with the earlier years. We further find that the earlier years returns has been accepted by the department and therefore, there is no reason why the similar rather increased rate of net profit should not have been accepted by the Authorities below, especially keeping in view the fact that the assessee is engaged in same kind of activities as was in the earlier year. The ld. counsel has relied upon a number of case laws noted above in this order, wherein the Tribunal had held the net profit rate of 5% to be reasonable keeping in view the past history of the assessee. For the sake of convenience, the finding of the Tribunal in ITA No.58/Asr/2012 in the case of Mohan Singh Contractor are reproduced below: "5.1. As regards the estimation of income, the AO has applied Net Profit rate of 8% and has relied upon the decision of the Hon'ble Punjab & Haryana High Court, in the case of CIT, Hissar vs. Prab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and interest to the partners of assessee's turnover as against 8% applied by the AO, it is a matter of fact that the AO has not given any reasonable explanation while applying 8% net profit rate on the assessee's gross receipts for the assessment year under reference. The income assessed in the assessment year 2001-02 in assessee's case was apparently 3.6% of its net receipts. But in the present assessment year, the AO has pointed out various defects in the assessment order. The Ld. CIT(A) considering all the defects pointed out by the AO and finally, validly and reasonably determined the net profit rate at 5% after allowing depreciation and interest to the partners on the assessee's turnover. Keeping in view the facts and circumstances of the present case, we are of the considered opinion that the ld. first appellate authority has rightly applied net profit rate of 5% after allowing depreciation and interest to the partners on assessee's turn over as against 8% applied by the A.O. We uphold the impugned order by dismissing the appeal filed by the Department as well as C.O. filed by the assessee." 16. The Tribunal vide its order dated 21.01.2016, in ITA No.483/Asr/2013, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng net profit rate of 6.51% on the gross receipts. 18. As regards the grievance of the Revenue that the depreciation should not have been allowed, we find that the department vide Circular No. 29D, dated 31.08.1965 (placed at APB 34) has directed that where the books of the account are rejected and profits are estimated, depreciation allowance should be given. For the sake of convenience, para-2 of said Circular is reproduced as under: "2. The Board consider that where it is proposed to estimate the profit and the prescribed particulars have been furnished by the assessee, the depreciation allowance should be separately worked out. In all such cases the gross profit should be estimated and the deductions and allowances including the depreciation allowance should be separately deducted from the gross profit. If it is considered that the net profit should be estimated it should be estimated subject to the allowance for depreciation and the depreciation allowance should be deducted therefrom." 19. We further find that the Hon'ble Punjab & Haryana High Court in the case of Lali Construction Co. (supra) has held that where the assessee gives information required under section 32 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rover Constructions, in ITA No.63/Asr/2016, vide order dated 26.08.2016, as under: "9.1 In third ground of appeal the department has relied upon the decision of Supreme Court of India in the case of Kachawala Junks vs JCIT reported in 288 ITR 10. A copy of the judgment is placed at Page No. 98 to 100 of the paper-book which supports the case of the assessee rather the case of the department. Thus this ground of appeal may also be dismissed. As far as the fourth ground of appeal is concerned, it is also liable to be rejected once the rate of profit is applied no further disallowance or addition can be made. This view finds support from the following judgments:- i) Decision of Jharkhand High Court in the case of Amitabh Construction (P) Ltd vs. Addl. CIT reported in 335 ITR 523. (Refer page no 101 to 104 of paper book). ii) Decision of Kerala High Court in the case of Samurai Techno Trading Co Ltd vs. CIT reported in 197 Taxman 144. (Refer page no 105 to 109 of paper book) iii) Decision of Andhra Pradesh High Court in the case of Maddi Sudarsanam Oils Mills vs CIT reported in 37 ITR 369 which was followed in the case of Indwell Constructions vs CIT reported in 232 ITR 776. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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