DCIT, CIRCLE-3, DARBHANGA vs. M/S BHAWANI CONSTRUCTION & CO., MADHUBANI

The Revenue has taken twelve grounds of appeal. However, its grievances revolve around two issues, namely ld. CIT(Appeals) has erred in entertaining fresh evidence in violation to Rule 46A and thereafter directing the ld. Assessing Officer to determine the taxable income of the assessee @ 6% of the total turnover.

Brief facts of the case are that the assessee is a Civil Contractor. It has filed return electronically on 31.03.2015 declaring total income at Rs.25,91,280/-. It has claimed refund of Rs.12,70,620/- against TDS of Rs.18,96,224/-. The ld. Assessing Officer has examined various issues. He has recorded a finding that the assessee has gross contract receipts of Rs.8,70,56,410/-. Thereafter he made reference to the TDS details and other amounts. Thereafter ld. Assessing Officer has noticed various figures from the books of account of the assessee, which do not exhibit any reconciliation with each other and made an addition of Rs.2,38,29,800/-. This addition has been worked out by making disallowance out of various expenses.

On appeal, ld. CIT(Appeals) has recorded a finding that it is not practically possible to deduce the true income Assessment Year: 2014-2015 M/s. Bhawani Construction & Co. of the assessee on the basis books of account produced by the assessee. Therefore, ld. CIT(Appeals) has rejected the book result and held that income of the assessee is to be estimated by taking a profit rate at 6% of the total turnover.

The Revenue is aggrieved with this action of ld. CIT(Appeals) and filed the present appeal.

With the assistance of ld. Representatives, we have gone through the record carefully. A perusal of the assessment order would reveal that reference to various figures, namely royalty, work extension and others, security deposit, purchase of raw material, labour expenses, do not exhibit a coherence between each other. It is also pertinent to note that it is highly improbable that out of gross contract receipt of Rs.8,70,56,410/-, an assessee could earn profit of Rs.2.38 crores, which has been worked out by the ld. Assessing Officer by making reference to various figures. In such a situation, the only possible way to determine the true income of the assessee is to estimate the profit element in the alleged gross turnover. The ld. CIT(Appeals) has made reference to the decision of the Hon’ble Patna High Court in the case of Prasad Construction & Co. -vs.- CIT reported in (2017) 388 ITR 579 before adopting the profit ratio at 6% of the gross turnover. Therefore, we are of the view that the ld. 1st Assessment Year: 2014-2015 M/s. Bhawani Construction & Co. Appellate Authority has taken plausible view, which do not call for any interference at the end of the second appellate authority.