GEETHANJALI,MANNARGUDI vs. ASSISTANT COMMISSIONER, TRICHIRAPPALLI

At the outset, it is noticed that the appeals filed by assessee are barred by limitation by 3 days. The assessee has filed condonation petition along with affidavit stating that the orders of CIT(A) dated 21.12.2021, were received by assessee through email but the appeals were filed electronically on 19.02.2022 and the hard copy of the appeal papers were filed through Registered post and delivered to this office only on 22.02.2022 due to Covid-19 pandemic. It means that there is a delay of 3 days. The ld.DR before us stated that this delay is due to pandemic period of Covid 19 and subsequent events and the Hon’ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. Since the Hon’ble Supreme Court has condoned the delay during the said period, respectfully following the same we condone the delay and admit the appeals.

The only common issue in this two appeals of assessee is as regards to the order of CIT(A) confirming the action of the AO in : 119 & 120/Chny/2022 - 3 - assessing gross undisclosed contract receipts and not allowing any expenditure despite the fact that the assessee has revised return of income and offered profit u/s. 44AD of the Act. For this issue, in both the years assessee has raised argumentative grounds which need not to be reproduced. The facts and circumstances are exactly identical in both the years and hence, we take the facts from AY 2015-16 in .

Brief facts are that the assessee is a contractor and filed her original return of income on 22.11.2014. Subsequently, the AO issued notice u/s. 148 of the Act and in response to notice u/s. 148, the assessee file her return of income on 30.05.2019. Subsequently, notice u/s. 143(2) of the Act was issued and served on assessee on 30.09.2019. The Assessing Officer issued show cause notice dated 05.12.2019 u/s. 142(1) of the Act and noted that an amount of Rs. 1,55,795/- credited on 15.03.2014 pertains to contract receipts, which has not been disclosed. The assessee replied that the contract receipts of Rs. 1,55,795/- relates to her husband credit account and alternatively she also pleads that only gross profit on this should be assessed to tax. The Assessing Officer added the entire undisclosed contract receipts of Rs. 1,55,795/- and added to the returned income of the assessee. Aggrieved, the assessee preferred appeal before CIT(A). The CIT(A) also : 119 & 120/Chny/2022 - 4 - confirmed the action of the AO. Aggrieved, assessee is in appeal before Tribunal.

We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the assessee has not contested and admitted the fact that these are undisclosed contract receipts of Rs. 1,55,795/- but only claim by assessee is that Assessing Officer has not allowed to expenses against this undisclosed contract receipts and alternatively it was pleaded that the assessee has offered these receipts in the revised return of income and offered profit u/s. 44AD of the Act. This fact has not been contested by Revenue, but Revenue’s only contests is that once the contract receipts are unaccounted, the entire contract receipts should have been added. Now, Ld. Counsel for the assessee before us filed a copy of the order of Hon’ble Madhya Pradesh High Court in the case of CIT vs Balchand Ajit Kumar [2003] 263 ITR 610, “wherein it has held that the total sale could not be regarded as the profit of the assessee. The net profit rate had to be adopted and once it was adopted it could not be said that there was perversity of approach. Whether the rate was low or high would depend upon the facts of each case.”

We noted that even otherwise, the assessee in the revised return has included these unaccounted contract receipts of Rs. 1,55,795/- and : 119 & 120/Chny/2022 - 5 - accordingly drawn profit and loss account. In our view only profit rate has to be applied, reasonable profit rate as declared by assesse should have been applied to this unaccounted contract receipts of Rs. 1,55,795/-. Hence, we direct the AO to assess only the profit rate on this undisclosed contract receipt and accordingly assess the income. Hence, this appeal of the assessee is partly allowed.

Coming to other AY 2015-16 in the facts and circumstances are exactly identical except the quantum of contract receipts undisclosed i.e., Rs. 14,62,935/-. The AO will apply profit rate as we have already taken a view in AY 2014-15. Taking the consistent view, we direct the AO to apply profit rate only as disclosed by assessee.

In the result, both the appeals filed by the assessee are partly allowed. Order pronounced on 3rd August, 2022.