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Income Tax Appellate Tribunal, HYDERABAD ‘ A ‘ BENCH, HYDERABAD.
Before: SHRI S.S. GODARA & SHRI LAXMI PRASAD SAHU
O R D E R Per Shri S.S. Godara, J.M. : This assessee’s appeal for the Asst. Year 2014-15 arises from the Commissioner of Income Tax (Appeals)-2, Hyderabad’s order dt.13.12.2017 passed in the case of Appeal
No.0013/CIT(A)-2/Hyd/2016-17 in the proceedings under Section 143(3) of Income Tax Act, 1961 (‘the Act’).
Heard both the parties. Case file perused.
The assessee has raised the following substantive grounds in the instant appeal :
“ 1. The order of the learned Commissioner of Income Tax (Appeals) is against the law, weight of evidence and probabilities of case.
2. The learned Commissioner erred in confirming the order of the Assessing Officer, wherein, income was estimated at Rs.5,17,89,991/- being 8% of the gross receipts of Rs.5,50,92,786/-.
The learned Commissioner ought to have appreciated ought to have appreciated that the assessee has allotted most of the work to the subcontractors, therefore, there is no scope of earning income at 8% of gross receipts.
The learned Commissioner ought to have appreciated in the earlier years which are accepted by the Department, the profit rate never touched the rate of 8%, therefore, the same rate should have been accepted as accepted in the earlier years.
The learned Commissioner erred in not following the rationale of the jurisdictional ITAT decision in the case of M/s. Teja Constructions Vs ACIT, 129 TTJ 0057 (Hyd-Trib).
6. The learned Commissioner in not allowing the depreciation as claimed by the assessee at Rs.67,89,938/- which is allowable even when the profit is estimated as per the Board Circular No.29D dt: 31.08.1965.
7. The appellant craves leave to add to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if it is considered necessary.”
3. Coming to the former issue of estimation of assessee's profit @ 8% qua gross receipts of Rs.64.73 Crores in civil construction businesses, the CIT(Appeals) lower appellate discussion confirming the A.O’s action to this effect read as under :
“ 2. The appellant company is engaged in the business of executing civil contract works from the State Government (primarily of modernization of canals and related irrigation works). The appellant declared total income of Rs. 3.30 crores in the return of income filed on a turnover of Rs. 64.73 crores. During the course of assessment proceedings, the AO sought various details including the production of books of accounts, bills and vouchers, etc. Since the appellant failed to produce the …Space left intentionally……..
8% of the receipts (including allowance of depreciation) is therefore upheld and the grounds of appeal are dismissed.”
4. Learned counsel’s first argument is that both the lower authorities have erred in law and on facts in assessing the assessee's sub-contract receipts at uniform rate of 8% alike contractual rates having very high profit rate and therefore, the same is not liable to be upheld as per the Tribunal decision in M/s. Teja Construction (supra).
5. Learned counsel next invited our attention to the assessee's detailed paper book in pages 49 to 75 inter alia containing the details of bills received and work allotted to the sub-contractor, percentage of commission, copies of the corresponding ledger accounts and statement showing party- wise sub-contracts; respectively. Learned department representative failed to dispute that all these clinching aspects have nowhere been considered either in the assessment or in the CIT(Appeals) detailed discussion. We, therefore, uphold the learned lower authorities’ action to the limited extent of assessment of 8% of assessee's receipts from civil construction
contracts and remit the remaining sub-contract component receipts as per factual verification to be followed by 5% estimation thereupon in consequential proceedings to the Assessing Officer. It is made clear that the assessee or its authorized representative shall appear before the Assessing Officer on or before 1.9.2021 with all the relevant details of its sub-contracts to be followed by three effective opportunities of hearing at its own risk and responsibility. The assessee's first to fifth substantive grounds are partly allowed for statistical purposes in above terms.
The assessee's sixth substantive ground seeks to raise depreciation of Rs.67,89,938 allegedly declined in the course of assessment for the reason that the same does not apply in the case of rejection of books followed by estimation of profits. We, prima facie, notice in this factual backdrop that CBDT Circular No.29D dt.31.08.1965 has already issued necessary directions to the field authorities in taxpayer’s favour qua the same. We therefore direct the Assessing Officer to consider the assessee's instant latter issue afresh as per law in the light of foregoing CBDT’s circular. The assessee's sixth substantive ground is accepted for statistical purposes.
This assessee's appeal is partly allowed for statistical purposes in above terms. Order pronounced in the open court on 3rd May, 2021.