SHRI KAILASH SUKHLAL MANDAL,AHMEDABAD vs. THE INCOME TAX OFFICER,WARD-4(2)(2), AHMEDABAD

The facts leading to the present case are that on the basis of AIR information in respect of the assessee that the assessee had made contract receipt of Rs. 54,65,499/- during the year, but had not filed any return of income, the case of the assessee was reopened u/s. 147 of the Act.

The ld. CIT(A) however was not convinced with the explanation of the assessee and upheld the estimation of income from the contractual receipts @20%, holding at page 6 of his order as under: “It is seen that the turn over for A.Y. 2008-09 is less than Rs.40 lacs. However, returns for A.Y. 2012-13 & 2013-14 are not filed as per time limit of section 139(1). There is no audit report for A.Y. 2013-14 as per provisions of section 44AB. Therefore, it is very clear that the appellant is trying to make out a case u/s.44AD though the turnover for A.Y. 2010-11 and 2013-14 is not as per prescribed parameters. In the circumstances, it is considered a self serving statement to get benefit somehow or the other at the cost of revenue. When the turnover for A.Y. 2010-11 is at Rs.54,65,499/-, how the 8% criteria of section 44AD can be made applicable. Also how books of accounts have not been maintained for A.Y. 2010-11. I t can be clearly concluded that the appellant is not maintaining books of accounts even upto A.Y. 2013-14. Therefore, the argument Page No 4 Shri Kailash Sukhlal Mandal vs. ITO of the appellant are without any basis. It is noteworthy that decision not to confirm the addition of Rs.9,29,651/- has already been taken. In view of all the facts on record I am of the opinion that addition of Rs. 10,93,099/- as per para 3 of assessment order is judicious and need to be confirmed. Therefore, the addition of Rs.10,93,099/- is hereby confirmed and ground no. iv is partly allowed. Therefore, the assessed income should be at Rs.10,93,099/-instead Rs.20,22,750/-.

We have heard both the parties and we have gone through the orders of the authorities below. The solitary issue for determination is the net profit rate to be applied for estimation of income from the contractual receipts of the assessee during the year amounting to Rs. 54,65,499/-. We find from the orders of the authorities below that there is not justifiable basis given either by A.O. or Ld.CIT(A) for applying the rate of 20%for estimating profits of the contractual receipt. On the other hand, it has been pointed out by the ld. Counsel for the assessee, that the legislature has considered 8% net profit rate to be appropriate for estimating profits as per the provisions in the statute relating to presumptive taxation on Civil Contracts as provided u/s. 44AD of the Act. No doubt the said provision is applicable only with respect to turnovers up to 40 lakhs but it cannot be ignored that the 8% rate has been considered to be appropriate in such line of business and therefore can be taken as a base for determining the appropriate profit rate for turnovers exceeding 40 lakhs also as in the present case. In the impugned case, we find that the turnover just exceeds 40 lakhs limits specified u/s. 44AD of the Act, being Rs. 54 lakhs odd. Considering the same the rate of 20% applied by the Revenue authorities, Page No 5 Shri Kailash Sukhlal Mandal vs. ITO without any basis, is totally unjustified and in our view the 8% rate is justified.

In view of the above, we direct the addition on account of estimation of net profit to be restricted to 8% of the receipts of the assessee.

The grounds of appeal raised by the assessee are allowed in above terms.

In effect appeal of the assessee is allowed in above terms.