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Facts
The assessee challenged the addition of Rs. 36,52,242/- made by the AO, which was sustained by the CIT(A). The AO estimated net profit at 8% on labour charges turnover, whereas the assessee declared 6%. The assessee also claimed full credit for TDS deducted.
Held
The Tribunal directed the AO to adopt a net profit rate of 6% on the reported turnover, accepting the assessee's claim for lower profit estimation based on banking channel receipts. The AO was also directed to give full credit for TDS as reflected in Form 26AS.
Key Issues
Whether the net profit on labour charges turnover should be estimated at 8% or 6%, and whether the assessee is entitled to full credit for TDS.
Sections Cited
147, 144, 44AD
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Income Tax Appellate Tribunal, MUMBAI “J(SMC
Before: SHRI VIKRAM SINGH YADAV & SHRI RAHUL CHAUDHARY
Assessment Year : 2013-14 GRA Engineers & Contractors ITO-15(1)(1), Private Limited, Aayakar Bhavan, Flat No.12, vs. M.K. Road, Churchgate Jaya Mangal, Plot No.14, Mumbai-400020 Sector-19, Nerul, Navi Mumbai-400706. PAN : AAECG3526C (Appellant) (Respondent) For Assessee : Shri Anil Kumar Mishra (Virtually present) For Revenue : Shri Aditya Rai, Sr.DR Date of Hearing : 02-09-2025 Date of Pronouncement : 04-09-2025 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟], dated 04-04-2025, pertaining to Assessment Year (AY) 2013-14, wherein the assessee has challenged the sustenance of addition of Rs. 36,52,242/- made by the Assessing officer.
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 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.
It was further submitted that the AO has not granted credit of full TDS as reflected in Form 26AS. In this connection, our reference was drawn to Form 26AS, which is placed as a part of assessee‟s Paper Book and it was submitted that as evident from the Form 26AS, there is a total TDS deducted on the payments to the assessee to the tune of Rs.9,13,061/- and as against that, the AO has only given credit to the tune of Rs. 3,93,480/-. It was submitted that where the AO is accepting the gross receipts as per Form 26AS amounting to Rs.4,56,53,030/-, there is no basis to dispute the corresponding TDS claim which was made by the assessee amounting to Rs.9,13,061/-. It was accordingly submitted that the AO may be directed to give full credit of TDS as reflected in Form 26AS in the hands of 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 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.