P.K. BUILDERS,GHAZIABAD vs. DCIT, GHAZIABAD

This appeal by the assessee is directed against the order dated 10th May, 2016 of the CIT(A)-Ghaziabad, relating to assessment year 2012-13.

Determination of profit at 8% of the contract receipt thereby confirming the addition of Rs.32,32,491/- by the CIT(A) is the only issue raised by the assessee in the grounds of appeal.

This appeal was earlier dismissed for non-appearance. Subsequently, the Tribunal vide order dated 27th April, 2018 in MA No.117/Del/2018 recalled its earlier order. Hence, this is a recalled matter.

The facts of the case, in brief, are that the assessee is an individual and is engaged in the business of civil construction in the name of P.K. Builders, a proprietorship concern. He filed his return of income on 29th September, 2012 declaring total income of Rs.78,20,670/-. The Assessing Officer, during the course of assessment proceedings, observed from the various details furnished by the assessee that entire payments under the head water charges, vehicle running, telephone, mobile, staff welfare, electricity, etc. has been incurred in cash. Further, the assessee did not produce the complete set of books of account such as cash book, ledger, journal, stock register, valuation of work-in-progress and the detailed bifurcation of material consumed along with original purchase invoices. Similarly, the assessee also did not produce muster roll, labour registers maintained at work sites, mode of payments etc. The Assessing Officer, therefore, rejected the books results and estimated the profit @ 8% of the contract receipt at Rs.13,91,87,130/-. Accordingly, the Assessing Officer determined the total income at Rs.1,10,55,161/- as against Rs.78,22,670/- declared by the assessee in the return.

In appeal, the ld.CIT(A) upheld the action of the Assessing Officer on the ground that the books of account were found to be incomplete and no cash book and complete set of ledger were furnished and no stock register was maintained. Despite opportunity granted by the Assessing Officer during the course of assessment proceedings, the requisite details as called for were not produced, therefore, the profit estimated by the Assessing Officer at 8% of the contract receipt is reasonable.

Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal.

The ld. counsel for the assessee, at the outset, filed the following comparative chart of gross profit and net profit for the assessment years between 2010-11 to 2015- 16:-

Referring to the above table, he submitted that during assessment year 2015-16, the Assessing Officer himself in the order passed u/s 143(3) has accepted the net profit of 5.87% from contract receipt. Similarly, from assessment year 2010-11 to 2014-15, the net profit rate varied from 5.21% to 5.79%. He accordingly submitted that a reasonable rate of net profit may be adopted.

The ld. DR, on the other hand, heavily relied on the order of the CIT(A). He submitted that when the assessee admittedly did not produce the requisite details including the cash book and various other details, therefore, the adoption of net profit rate of 8% under the facts and circumstances of the case is justified.

We have heard the rival submissions and perused the orders of the authorities below. It is an admitted fact that the assessee is engaged in the business of civil construction and despite opportunities granted by the Assessing Officer during the course of assessment proceedings, the assessee did not produce the requisite details as called for by the Assessing Officer. Therefore, under the facts and circumstances of the case, rejection of book results and thereby estimation of profit is fully justified. So far as the adoption of net profit rate is concerned, a perusal of the comparative chart of gross profit and net profit filed by the assessee reveals that the net profit varies from 5.31% to 5.87% from assessment year 2010-11 to 2015-16. Therefore, considering the totality of the facts of the case and in the interest of justice, we are of the considered opinion that adoption of net profit rate of 6% on the contract receipt for the impugned assessment year will meet the ends of justice. We hold and direct accordingly. The grounds raised by the assessee are accordingly partly allowed.