GRA ENGINEERS AMD CONTRACTORS PRIVATE LIMITED,NAVI MUMBAI vs. ITO15(1)(1) MUMBAI, MUMBAI

Briefly the facts of the case are that the assessment in this case was completed u/s. 147 r.w.s. 144 of the Income Tax Act, 1961 („the Act‟) vide order dt.30-03-2022, wherein the AO brought to tax a sum of Rs.36,52,242/- being 8% of the turnover of the assessee amounting to 2 Rs.4,56,53,030/-, which on appeal, has been sustained by the Ld.CIT(A) and against the said finding, the assessee is in appeal before us.

During the course of hearing, the Ld.AR submitted that the assessee- company has submitted during the course of assessment proceedings that it has received labour charges amounting to Rs. 4,56,53,030/- and it has worked out its income at Rs. 27,39,182/- being 6% of the total labour charges. However, the AO has not accepted the same and has estimated the net profit @8% and has determined the income at Rs. 36,52,242/-. It was submitted that the AO has placed reliance on the provisions of section 44AD of the Act for estimating the net profit @8%. It was also submitted that though the said provisions are strictly not applicable in the case of the assessee, the fact that the same has been placed reliance on the order passed by the AO, the assessee also wishes to place reliance on the said provisions, which also provides that where the gross receipts have been received through banking channels, the estimation of income should be done @6% instead of 8%. It was submitted that the assessee has taken the said ground before the Ld.CIT(A). However, the Ld.CIT(A) without disputing the said claim has held that the assessee is not eligible for the provisions of section 44AD of the Act and, therefore, the findings of the AO have been confirmed. It was submitted that it is not the claim of the assessee that the provisions of section 44AD of the Act are made applicable in the case of the assessee, at the same time, given the fact that the AO has placed reliance on the said provisions for estimating the income in the hands of the assessee @8%, the assessee in turn also wishes to place reliance on the said provisions, which provides that the net profit would be determined @6% where the gross receipts have been received through proper banking channels. It was accordingly submitted that the net profit may be estimated @ 6% of the gross receipts and necessary relief be provided to the assessee.

Per contra, the Ld. DR is heard, who has relied on the orders passed by the lower authorities.

We have heard the rival contentions and perused the material available on record. The assessee in its submissions before the AO has reported net profit @ 6% on turnover of Rs. 4,56,53,030/- towards labour charges. The labour charges so reported are reflected in Form 26AS along with name of the parties, gross receipts and corresponding TDS @ 2%. The nature and quantum of gross receipts being labour charges are thus not in dispute. The limited issue under consideration relates to determination of net profits on reported turnover in the hands of the assessee. The AO has determined the net profit @ 8% as against 6% reported by the assessee. For the purposes, the AO has placed reliance on the provisions of section 44AD. The AO has stated that though the said provisions are strictly not applicable in case of the assessee given that the reported turnover is more than the prescribed threshold, at the same time, given the nature of activities and corresponding gross receipts, being in the 4 nature of contractual receipts, to which such provisions have been made applicable, there is a statutory determination of rate of profit on such kind of activities in absence of books of accounts and it would be appropriate to estimate net profit @ 8% on the reported gross receipts in the hands of the assessee. In such a situation, where the assessee wishes to placed reliance on the said provisions which equally provides that the net profit would be determined @ 6% where the gross receipts have been received through proper banking channels which are not in dispute in the instant case, we see a reasonable basis for such a claim and the same deserve to be accepted. In light of the same, we direct the AO to adopt net profit rate of 6% on reported turnover of Rs 4,56,53,030/-. Further, it is evident from Form 26AS, TDS on such turnover of Rs 4,56,53,030/- has been reflected as Rs 9,13,061/-. The AO is also directed to give credit of TDS of Rs 9,13,061/-as reflected in Form 26AS in the hands of the assessee.

In light of above, other grounds of appeal have become infructous and the same are dismissed.

In the result, the appeal of the assessee is partly allowed.