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Facts
The assessee, a civil contractor, filed his return of income declaring Rs. 32,43,690. The Assessing Officer (AO) treated the case as ex-parte due to non-compliance and estimated net profit at 8% of gross receipts, also adding unsecured loans and capital entries. The CIT(A) deleted the unsecured loan and capital additions but restricted the net profit addition to 6.5%.
Held
The Tribunal held that the assessee failed to present credible evidence and support their grounds of appeal despite multiple opportunities. The CIT(A) had taken a liberal view by restricting the addition to 6.5% based on past history and available material, which the Tribunal found justified.
Key Issues
Whether the addition sustained by the CIT(A) at 6.5% of net profit on estimated basis is justified in the absence of books of accounts and non-compliance by the assessee.
Sections Cited
143(2), 143(3)
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Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
Assessment Year: 2014-15 Shri Ramesh Singh Rana v. DCIT Range-4 3-B, Talkatora Road, Rajaji 5-Ashok Marg, Aaykar Puram, Lucknow-226017. Bhawan, Lucknow- 226001. PAN:AGGPR0749B अपीलाथ�/(Appellant) ��यथ�/(Respondent) अपीलाथ� �क और से/Appellant by: None ��यथ� �क और से /Respondent by: Shri Manu Chaurasia, CIT(DR) सुनवाई �क तार�ख / Date of hearing: 07 04 2025 घोषणा �क तार�ख/ Date of 09 04 2025 pronouncement: आदेश / O R D E R PER KUL BHARAT, VICE PRESIDENT.: This appeal, by the assessee, is directed against the order of the Learned Commissioner of Income-tax (Appeals)-2, Lucknow dated 28.11.2019, pertaining to the assessment year 2014-15. The assessee has raised the following grounds of appeal: - “1. Because the Ld. CIT(A)-2, has failed to know about the facts and circumstances of the case, and applied 6.5% of NP rate, therefore is bad in law and liable to deleted.
2. Because the Ld. CIT(A)-2, has failed to follow historical history of N.P. of the firm and applied 6.5%., therefore is bad in law and liable to deleted.
3. Because, the assessee reserve the right to add, delete, alter or amend any grounds of appeal as per your permission your honor.”
2. Ground Nos. 1 & 2 are against sustaining the addition made by applying 6.5% of net profit (NP).
The facts giving rise to the present appeal are that in this case, the assessee filed his return of income through electronically mode on 28.09.2014, declaring total income at Rs.32,43,690/-. The case was taken up for scrutiny and notice u/s 143(2) of the Income Tax Act, 1961 (“the Act”, for short) was issued and duly served upon the assessee. In response to the statutory notice, the Ld. Authorized Representative (AR) of the assessee attended the assessment proceedings and filed his power of attorney. Thereafter, various notices along with questionnaire were issued but there was no compliance by the assessee. Therefore, the Assessing Officer proceeded ex-parte to the assessee. The Assessing Officer noticed that the assessee is proprietor of M/s. Kamla Infrastructure and Engineering Company who is engaged in the Civil Contractor business. The gross receipts of the assessee was disclosed at Rs.5,86,34,477/- and net profit declared on such receipt was Rs.29,85,855/- which works out to 5.08% of the total receipts. The Assessing Officer in the absence of any explanation on behalf of the assessee treated the case of the assessee as being of Civil Contractor who does not maintain the books of accounts and thus estimated net profit @ 8% of the gross receipts. The same was taken as the net profit of the business. Further, the Assessing Officer noticed that the assessee had taken unsecured loan from M/s. Kamla Infrate Pvt Ltd and M/s. Milk Active respectively amounting to Rs.91,89,800/-. In the absence of any explanation and credible evidence in support of such unsecured loan, the Assessing Officer made addition of the entire amount of Rs.91,89,800/-. Further, the Assessing Officer made an addition of Rs.3,98,322/- being the capital of the assessee treating the Page 3 of 6 same as unsecured credit entry. Hence, the Assessing Officer assessed income at Rs.1,48,93,730/-. Aggrieved against this, the assessee preferred an appeal before the Ld. CIT(A), who partly allowed the appeal of the assessee. Thereby, he deleted the unsecured loan and capital credit entry of Rs.3,98,322/-. However, in respect of the business receipts, the Ld. CIT(A) restricted the addition to the extent of 6.5% of the net profit. Aggrieved against this, the assessee is in appeal before this Tribunal.
At the time of hearing, no one attended the proceedings on behalf of the assessee. It is seen from the records that the Ld. Authorized Representative of the assessee attended the proceedings on 16.02.2022 and sought adjournment. Thereafter, the hearing was adjourned multiple times from 01.05.2023, 02.05.2023 and 19.08.2024, the assessee had sought adjournment on one ground or the other. Thereafter, the matter was adjourned to 30.08.2024 on that date no one attended the proceedings, the matter was adjourned to 21.11.2024. The Ld. Counsel for the assessee attended the proceedings on this date and sought adjournment. Again hearing was adjourned to 26.11.2024 on that date also the adjournment was sought by the Ld. Counsel for the assessee. The hearing was adjourned to 09.01.2025. A notice was issued to the assessee through Registered Post with Acknowledgment Due (RPAD) and the matter was fixed for 18.02.2025. Thereafter, the matter was adjourned to 25.02.2025. Lastly, the matter was adjourned to 07.04.2025. It is noteworthy that on the previous date of hearing, Ld. Counsel for the assessee i.e. 24.03.2025, sought adjournment but on the date fixed there is no representation on behalf of the assessee. Looking to the conduct of the assessee and having given sufficient opportunities to the assessee to
Apropos to the grounds of appeal, the Ld. Departmental Representative (DR) vehemently opposed the grounds of appeal and submitted that the substantial relief has already been granted to the assessee. He also pointed out that the assessee grossly failed to support his contention by filing the books of accounts before the lower authorities. Further, the Ld. CIT(A) has taken very liberal view by restricting the addition to the extent of 6.5%. He supported the assessment order and contended that the appeal of the assessee deserves to be dismissed.
Heard, the Ld. Departmental Representative and perused the material available on record. The only effective ground in this appeal is against the adoption of the net profit @ 6.5%. The assessee is engaged in the business of Civil Contractor. The assessee has not placed before us any books of accounts so was the case before the Assessing Officer. This Tribunal having considered the submission had taken a liberal view, thereby granted multiple opportunities to the assessee to present his case and support the grounds of appeal by way of credible evidence. The assessee has grossly failed to do so. In the absence of any material which could contradict the finding of the lower authorities. We do not see any reason to interfere with the finding of the Ld. CIT(A). We find that the Ld. CIT(A) has taken a liberal view, thereby the substantial relief is granted. The relevant contents of the Ld. CIT(A) are reproduced as under: - “(i) It will appear clear what has been said above that the authority making a best judgment assessment must make an honest and fair estimate of the income of the assessee and though arbitrariness cannot be Page 5 of 6 avoided in such estimate the same must not be capricious but should have a reasonable nexus to the available material and the circumstances of the case. I am of the opinion that the even though the profits have to be estimated, the estimation should have some nexus to the final accounts submitted by the assessee along with its return of income. I find that the assessment proceedings for assessment year 2012-13 in the case of the appellant have been completed by the same Assessing Officer on 29.03.2015 vide order under section 143(3) of the Act by estimating the profit @ 5% of the receipts. However, the gross receipts of AY 2012-13 were much higher than receipts shown in the present AY (as outlined in para 8.2 of this order). It is a fact that as the gross receipts increase the NP rate decreases and vice-versa. Accordingly, I find it reasonable to adopt the NP rate of 5% on consolidated receipts for the impugned assessment year 2014-15 for the purpose of estimating the profits of the appellant. In view of above the estimated NP @ 6.5% of the gross receipts of Rs.5,86,34,447/- will work out to Rs.38,11,239/-. The AO is therefore directed to recompute the income of the appellant by taking profits at Rs.38,11,239/- as against Rs.46,90,756/- worked out by applying NP rate @ 8%. The appellant gets a relief of Rs.8,79,516/- out of the addition made of Rs.129,61,625/-. The grounds of appeal
no. 2 and 3 are partly allowed.”
8. The above finding on facts by the Ld. CIT(A) is not rebutted by the assessee by filing any contrary material on record. Therefore, the action of the Ld. CIT(A) is justified for restricting the addition @ 6.5% of the net profit. As he has also considered the past history and also the reason as to why the net profit was estimated at 5%. It is pointed out that gross business receipts were high in that year comparing to the year under appeal. The assessee did not point out any infirmity in adopting such rate by filing credible evidence. The grounds raised in this appeal of the assessee lack merit, hence dismissed.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on 09/04/2025.