TMI Blog2020 (2) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... modifying the assessment order and directing the AO to add the entire undisclosed receipts as income of the assessee? - HELD THAT:- We are compelled to hold that in view of the proposition rendered by Hon ble M.P. High Court in the case of Balchand Ajit Kumar [ 2003 (4) TMI 76 - MADHYA PRADESH HIGH COURT] the entire amount of contract receipts cannot be taxed in the hands of the assessee, only the profit embedded therein can be taxed in the hands of the assessee. Since, in the earlier part of this order, we have confirmed the action of the Ld Pr. CIT to estimate net profit @ 8% of the total contract receipts, but this percentage cannot be completely applied for estimation of net profit embedded in the unaccounted contract receipts. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit @ 8% on the disclosed contract receipts instead of income returned by the assessee. 4. Ld counsel for the assessee further submitted that in the main ground, the assessee has challenged the invocation of provisions of section 263 of the Act by ld Pr. CIT and the assessee does not want to press those legal grounds and also additional Ground Nos.6 7 agitated in the application of additional grounds. Ld counsel further submitted that the assessee wants to challenge the modification in his order by Pr. CIT on merits. Therefore, additional Ground No.5 is very relevant and necessary for adjudication. Therefore, same may kindly be admitted for adjudication. Ld counsel also submitted that the additional ground sought to be raised by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reasonable in view of earlier and subsequent assessment years results. Therefore, ld counsel for the assessee prayed that the modification order of ld Pr. CIT in directing the AO to estimate net profit at 8% on contractual receipts is very high and same should be reduced to the returned income. 8. Replying to above, ld CIT DR submitted that from the chart submitted by the assessee, it is clearly discernible that in assessment years 2014-15, 2015-16, 2018-19 and 2019-2020, the net profit shown by the assessee before allowing salary and interest on capital to the partners is ranging between 7-8% and the net profit after allowing salary and interest on capital to the partners is ranging between 4-6%. Therefore, the returned income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT, 126 TTJ (CTK) 240 and submitted that the entire addition of undisclosed receipts or contractual receipts cannot be taxed but only the net profit embedded in the contractual receipts can be taxed. 12. Replying to above, ld CIT DR submitted that it is not a case of the assessee that the assessee has not claimed or adopted the entire expenses incurred by it while performing contractual work against which undisclosed contract receipts were received. Therefore, the entire amount of contractual receipts should be taxed in the hands of the assessee deeming that the assessee has already claimed entire expenses incurred by it for completion of contractual work assigned to it and against which he received contractual payments by the respecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , only the profit embedded therein can be taxed in the hands of the assessee. Since, in the earlier part of this order, we have confirmed the action of the Ld Pr. CIT to estimate net profit @ 8% of the total contract receipts, but this percentage cannot be completely applied for estimation of net profit embedded in the unaccounted contract receipts. Therefore, keeping in view the entire facts and circumstances of the case, the explanation of the assessee and the modification order of ld. Pr. CIT, to cover the possible leakage of revenue, we direct the AO to estimate the net profit @ 16% of unaccounted contractual receipts, which would meet the ends of justice. Accordingly, appeal of the assessee is partly allowed. 15. In the result, app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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