DCIT, CIRCLE - 3 (1), TRICHY vs. SHRI SRINIVASAN DEVENDRAN, TRICHY

The appeal filed by the Revenue is delayed by three days in filing the appeal before the Tribunal, for which, the DCIT Circle 3(1), Trichy has filed a petition for condonation of the delay, to which; the ld. Counsel for the assessee has not raised any serious objection. Consequently, since the Revenue was prevented by sufficient cause, the delay of three days in filing of the appeal stands condoned and the appeal is admitted for adjudication.

Facts are, in brief, that the assessee is a civil contractor who is working for state P.W.D. departments, especially in road construction and is said to be procuring work through tender process in a competitive environment. All the payments are from various state government departments and receipts of assessee are hence available in 26AS and TDS has been deducted by the payer government departments. However, the assessee did not get his accounts audited and has furnished income of ₹.2,30,21,400/- [at 3% on turnover], based on estimates as per practice followed since last many years. However, as the assessee did not maintain accounts and income has been determined only on estimate basis, as has been done in the last few years, and that the assessee should have made and kept accounting records, as required, the Assessing Officer determined income on an estimate at 8% under section 44AD of the Act. As a result of estimation of income from 3.5% to 8% on the ground turnover of ₹.74,53,84,939/- (i.e., ₹.5,96,30,795), the income of the assessee was assessed at ₹.6,02,90,646 as against returned income of ₹.2,30,21,400/-.

On appeal, by considering earlier years, the ld. CIT(A) restricted the net profit margin at 6% with depreciation or 4% without depreciation as against 3% declared by the assessee.

Aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR strongly supported the order passed by the Assessing Officer and submitted that the assessee being a civil contractor and no books are maintained and the presumptive rate of net profit of 8% reflects the legislative approved rate of net profit, which the ld. CIT(A) should have considered as fair and reasonable to estimate income from civil contract business.

On the other hand, the ld. Counsel for the assessee has strongly supported the order passed by the ld. CIT(A).

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. During the course of assessment proceedings, the assessee has justified for adopting 3% of receipts from civil contract as net profit by stating that his volume of work was more and due to heavy competitions, he could not get more profit in these kind of contract. In support of his contention, before the Assessing Officer, the assessee gave the details of the previous years’ assessment completed which are as follows: S. No. A.Y. Total turnover Profit percentage Income Profit of the assessee (%) declared by declared by the determined the assessee assessee u/s. 143(3) 1. 2015-16 41,81,21,750 3% 1,25,43,653 3% 2. 2014-15 22,63,98,010 3% 67,91,940 3.50% 3. 2013-14 14,07,09,573 4% 56,28,383 4. 2012-13 13,71,29,706 4% 54,85,188 8. The assessment year under consideration is 2016-17. In the assessment year 2015-16, the assessee has estimated the net profit at 3% and the same was accepted by the Assessing Officer under section 143(3) of the Act. In the assessment year 2014-15, the assessee has estimated the net profit at 3% and the Assessing Officer determined the net profit at 3.50% under section 143(3) of the Act. In the assessment year under consideration, the assessee has declared the net profit at 3% and the Assessing Officer has estimated the net profit at 8%. On appeal, the ld. CIT(A) scale it down to 4% without depreciation. We find that by referring to various case law and after considering earlier assessment years’ estimation of the Assessing Officer, the ld. CIT(A) has reduced the net profit to 4%. Thus, we find no infirmity in the order passed by the ld. CIT(A). Thus, the ground raised by the Revenue is dismissed.

In the result, the appeal filed by the Revenue is dismissed. Order pronounced on the 12th October, 2022 at Chennai.