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TMI Blog2022 (1) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... more than the gross receipts shown in the income tax return. 3. During the course of assessment proceedings, the A.O. noticed that the assessee has not maintained books of accounts for civil contract business. It was noticed that the assessee has estimated income before depreciation and interest at Rs. 90,89,254/- and deducted expenditure towards depreciation and interest aggregating to Rs. 23.64 lakhs. The assessee submitted that the income has been estimated around 8% taking guidance from the provisions of section 44AD of the Act (though the said provision is not applicable to him) and depreciation and interest expenditure was deducted therefrom. In support of this exercise, the assessee relied on the decision of Hon'ble Kerala High Court rendered in the case of Sammurai Techno Trading Company Ltd. Vs. CIT (2010) 37 DTR 386. 4. The A.O. did not accept the income declared by the assessee. He expressed the view that the onus of proving income declared by the assessee as correct lies upon the assessee. Accordingly, the A.O. proceeded to estimate the income of the assessee @ 10% of the gross contract receipts and deducted therefrom depreciation and interest expenditure claimed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessing officer has duly examined the income declared by the assessee from civil contract works by raising queries. After considering the replies given by the assessee, the A.O. has taken a conscious decision to estimate the income @ 10% of gross receipts as against 8% estimated by the assessee and allow deduction of depreciation and interest. In support of this submission, the Ld. A.R. took us through the queries raised by the A.O. and the replies given by the assessee. From the income so estimated, the A.O. has allowed deduction of depreciation and interest expenditure. Accordingly, the Ld. A.R. submitted that the assessing officer has taken a plausible view on the matter and hence the Ld. PCIT was not justified in initiating the revision proceedings. He further submitted that it is an admitted fact that the assessee did not maintain books of accounts and hence the income from civil contract works can only be estimated. Accordingly he submitted that, even if the matter is restored to the file of A.O., there is no option but to estimate the income. The Ld A.R placed his reliance on the decision rendered by Hon'ble High Court of Karnataka in the case of CIT Vs. P. Sudhakar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... figure of Rs. 91,85,254/- which means that you have deliberately undistated the turnover by Rs. 10,44,30,420/-. For the purpose of this assessment, the turnover as per 26AS of Rs. 11,36,15,674/- is proposed to be adopted as a starting point. In your letter referred above, you have not explained how you arrived at income of Rs. 90,89,254/- before deducting depreciation and interest on over draft. You are required to explain in detail the basis for arriving at income of Rs. 90,89,254/- (before depreciation & interest) giving the breakup of various direct and indirect expenses deducted and supporting evidences thereof." We notice that the assessee furnished a reply dated 27.8.2018 contending that the CBDT has not prescribed books of accounts required to be maintained for the purpose of section 44AA read with Rule 6F(1) for civil contract works. The assessee also placed reliance on the decision rendered by Hon'ble Kerala High Court in the case of Sammurai Techno Trading Company Pvt. Ltd. (supra), wherein it was held that even where books of accounts are not maintained, section 44AD percentage of 8 can be guideline for estimation of income from civil works though the section 44AD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 85,60,730/-. The said income with reference to the contract receipts of Rs. 13.37 crores works out to 6.4%. Therefore, the contention that it works out to 0.12% is erroneous. 8. Even in respect of the main contract, in respect of civil contracts 8% is taken normally as the income earned out of such contracts. When such a contractor gives the work to a sub contractor normally about 5% is taken as the income of the contractor. In the instant case it works out to 6.4%. The tenor of the order of the Commissioner under Section 263 of the Act discloses that, because the net profit shown in the Profit and Loss Account was only Rs. 4.63 lakhs which works out to 0.12% the proceedings are initiated. Factually it is incorrect. In those circumstances, in the absence of any other material which was before the Commissioner he was not justified in recording a finding that the assessing authority has not applied its mind, not verified the expenses, not verified the receipts and looked into the book and, therefore, a case for interference under Section 263 is made out cannot be accepted. The Tribunal by a considered order rightly set aside the order passed by the Commissioner relying on severa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law." The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282." In the instant case, there are two views possible with regard to estimation of income from civil contract works and the assessing officer has taken a plausible view. Accordingly, we are of the view that the revision order passed by Ld. PCIT on this issue cannot be sustained. Accordingly, we set aside his order in directing the A.O. to do de-novo assessment. 15. With regard to the observation of Ld. PCIT that the dropping of penalty u/s 271A of the Act was on wrong ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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