YENUBOTHULA VENKAT RAMANA,MYSORE vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1), MYSORE

The assessee has raised the following grounds of appeal: -

The Brief facts of the case are that the assessee is engaged in the business of civil construction contracts. The assessee filed his return of income for the AY 2017-18 on 31/12/2017 by declaring total income of Rs.1,26,90,530/-. The said return was processed u/s. 143(1) of the Act by accepting the returned income. Thereafter, the case of the assessee was manually selected for complete scrutiny and accordingly statutory notices u/s. 143(2) and 142(1) of the Act were issued & duly served. As per the details submitted by the assessee, it was seen that as per Form No.26AS, the assessee had received Rs.26,94,89,541/- towards the contract payments. Further, it was seen that the assessee had arrived at the income from business on presumptive basis. Thereafter, a proposal was sent to the assessee to estimate the income chargeable under “Profits and Gains from Business” @ 10% of the gross receipts u/s 44AD of the Act amounting to Rs.2,69,78,954/- and hence the difference amount of Rs.1,39,14,614/- was proposed to be added to the total income of the assessee. Further, the AO also proposed to add back Rs.8,61,398/- under the head “Income from other sources” as there was a difference of interest received from bank amounting to Rs.8,62,590/- as reflecting in Form No.26AS and as declared by the assessee amounting to Rs.1,192/-. Further, in the absence of the proof in support of the claim of Rs.2,00,000/- towards the loss from the house property, it was also proposed to be disallowed and added back. Lastly, also in the absence of proof in support of the claim of deduction under Chapter-VIA amounting to Rs.1,75,000/-, it is proposed to disallowed and added back the same to the income of the assessee.

Aggrieved by the assessment completed u/s. 143(3) of the Act dated 28/12/2019, the assessee preferred an appeal before the ld. CIT(A)/NFAC.

The ld. CIT (A)/NFAC dismissed the appeal of the assessee by holding that the assessee is not interested to pursue his appeal and the assessee has nothing to say in defense of the grounds of appeal taken as despite issuing 8 nos. of notices the assessee did not bother to comply with any of the notices issued. Further, the ld. CIT(A)/NFAC held that if the assessee is not availing opportunities given, the assessee thereafter cannot allege contravention of principles of natural justice. Lastly, the ld. CIT(A)/NFAC also dismissed the appeal on merits of the case on the basis of material available on record.

Again, aggrieved by the order of the ld. CIT(A)/NFAC dated 24/06/2025, the assessee has filed the present appeal before this Tribunal. The assessee has also filed a paper book comprising 20 pages containing therein the copy of ITR-V along with the financials for the AY 2017-18, copy of Form No.26AS along with the case law relied upon by the assessee. During the course of proceeding before us, the assessee had also produced the details of GP ratio, NP ratio and stock in trade turnover ratio for 8 AY to substantiate his claim that the profit taken by the AO @ 10% are quite high as compared to actually earned by the assessee.

Before us, the ld. A.R. of the assessee vehemently submitted that the assessee is into the business of Civil contracts works and the books of accounts are regularly audited by a chartered accountant. During the course of assessment proceedings, as the assessee himself found discrepancies in the books of accounts and also could not file any documents before the AO, requested to estimate the income @ 8% of the total turnover of the assessee.

The ld. D.R. on the other hand supported the order of the Authorities below and vehemently submitted that despite providing 8 nos. of opportunities by the ld. CIT(A)/NFAC, the assessee did not respond at all. Further, the ld. D.R. submitted that during the course of assessment proceedings, the assessee himself requested the AO to reject the books of accounts and the income may be estimated on contract work receipts on presumptive basis.

We have heard the rival submissions and perused the material available on record. On perusal of the assessment order, we observed that the assessee himself requested the AO to estimate the income of the assessee @ 8% of the gross receipts without allowing deduction towards depreciation and bank interest and in the alternate estimate the income @ 10% of gross receipts allowing deduction towards depreciation and bank interest. The reason for such request by the assessee was due to the fact that certain blatant mistakes were found in the financial statements and in the opinion of the assessee, the books of accounts based on which the tax audit report has been filed will not reflect the correct financial results of his contract business. We also observed that the AO instead of 8% of the gross receipts offered by the assessee had adopted 10% of the gross receipts as income from business and accordingly the difference amount of Rs.1,38,84,614/- was added back to the total income of the assessee. Before us, the ld. A.R. of the assessee also contended that the actual contract receipts for the year under consideration was only Rs.24,49,40,778/- whereas in Page 8 of 10 the financial account the turnover has been declared at Rs.26,14,48,362/- resulting in adopting excess receipts by Rs.1,65,07,584/- and accordingly prayed that the AO is not justified in adopting the gross receipts as per Form No.26AS. This being so, in the interest of justice, equity and fair play, we deem it fit and proper to remit all these issues to the file of AO as per the following directions: -

In the result, the appeal filed by the assessee is partly allowed for statistical purposes.

The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file