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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” : HYDERABAD
Before: SMT. P.MADHAVI DEVI & SHRI D.S.SUNDER SINGH
O R D E R PER D.S. SUNDER SINGH, A.M. :
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax(Appeals)-7, Hyderabad, dated 24-01-2018.
All ground raised in this appeal are related to the estimation of income made by the Assessing Officer (AO), which was confirmed by the Ld.CIT(A).
Brief facts of the case are that, the assessee is engaged in the business of execution of civil contracts and filed his return of income, declaring total income of Rs.91,35,460/- on 26-09- 2015.
During the course of assessment proceedings, the assessee failed to submit the ledger extracts, bills and vouchers pertaining to expenses, debited to the Profit & Loss A/c. In the absence of bills and vouchers to support the expenditure claimed by the assessee, the AO rejected the books of account and estimated the income of the assessee @8.5% of the gross bills and accordingly determined the total income at Rs.1,15,47,492/- on main contract works executed by the assessee.
Against the said assessment, the assessee was in appeal before the CIT(A). The Ld.CIT(A) confirmed the order of the AO and dismissed the appeal of the assessee. Against which, the assessee is in appeal before us.
The case is taken up for hearing on 10-09-2020 through video conferencing and both the parties were heard.
During the appeal hearing, Ld.AR submitted that the assessee is a civil contractor and the books of account of the assessee were duly audited, thus the assessee could able to compile the Profit & Loss A/c and Balance Sheet. All the bills are reported in Form 26AS and the transactions through bank accounts. During the year under consideration, the assessee has shifted the home, therefore mis-placed the books of account, bills and vouchers. Hence, he was unable to produce the ledger extracts, bills and vouchers in support of the expenses claimed. The assessee has declared the turnover of Rs.13,58,52,841/- and argued that the estimation of income @8.5% done by the AO is unreasonable and unjustified. Ld.AR also argued that the earning of profit of @8.5% is not possible for any civil contractor. Therefore, Ld.AR requested for reasonable estimation of income.
On the other hand, Ld.DR supported the orders of the lower authorities.
We have considered the rival submissions and gone through the material placed on record along with the orders passed by the lower authorities. In this case, the assessee filed return of income, admitting total income of Rs.91,35,460/- and the turnover of the assessee was Rs.13.58 Crores and the income admitted by the assessee works out to 6.72%. The assessee submitted the gross bills, bank account statements, Profit & Loss A/c and Balance Sheet before the AO. The gross bills received by the assessee are in synch with Form 26AS statement. There was no dispute in this regard. Though the AO made the estimation of income @8.5%, no comparable case has been brought on record by the AO. During the appeal hearing also Ld.DR did not bring any comparable case for reasonable estimation of the income. Before the CIT(A) the assessee brought out the following case law, in support of his contentions: i. B.Banamber& Co., Vs. ITO (2016) [48 ITR (Trib.) 41 (Ctk)];
ii. NishikantT.Patne Vs. ACIT, Circle-3 (2013) [60 SOT 146/36 taxmann.com 540 (Pune-Trib.); iii. CIT-II, Amritsar Vs. Earth Tech Engineers (2014) [224 taxman 358/46 taxmann.com 287 (Punjab & Haryana)]; 9.1. The gist of the case law relied upon by the assessee as per the statement of facts reads as under: a) In the case of B. Banamber& Co. v. ITO [2016] 48 ITR (Trib.) 41 (Ctk.), where the income was estimated at 10% by the Assessing Officer on the ground of unverifiable nature of account against the net profit of the assessee at 6.3%, the Hon'ble Tribunal came to the conclusion that the net profit at 8% would be reasonable. b) In the case of Nishikant T. Patne v. Assistant Commissioner of Income-tax, Circle-3 [2013] 60 SOT 146/36 taxmann.com 540 (Pune - Trib), the Hon'ble Tribunal estimated the income of civil contractor at 8% of gross receipts holding that section 44AD of the Act, 1961, which incorporates 8% being presumptive rate as the legislative intent, against income determined at 15% of gross receipts by the Assessing Officer. c) In the case of Commissioner of Income-tax II, Amritsar v. Earth Tech Engineers [2014] 224 TAXMAN 358/46 taxmann.com 287 (Punjab & Haryana) the Hon'ble High Court held that the gross receipts to which net profit rate is to be applied shall be determined after giving allowance on account of depreciation. It was further held there arose no question of Law from the order of Tribunal which had confirmed the order of the CIT(A) scaling down the net profit to 8% on the gross receipts as against 12% applied by the Assessing Officer at the time of assessment”.
9.2. As per the submissions made before the CIT(A), the estimation of income @8% is reasonable. Even though the assessee had the turnover over and above the limit of Section 44AD, the Special Bench of ITAT, Indore in the case of Arihant Builders Developers Vs. ACIT, [291 ITR 49] (Indore) held that – estimation of income taking the cue from Section 44AD is reasonable though the limit exceeds. Therefore, taking into consideration of the submissions of the assessee and the lead from the order orders relied up on by the assessee, we hold that the estimation of income @8% meets the needs of justice. Accordingly, we set aside the order of the CIT(A) and direct the AO to estimate the income of the assessee @8%.
In the result, the appeal of assessee is partly allowed.
Order pronounced in the open court on 11th September,2020