SAANVI INFRABUILD (P) LTD.,KOLKATA vs. I.T.O.,WARD-5(1), KOLKATA

The assessee in the present case is a Company, which is engaged in the business of share trading and investment. The return of income for Assessment Year: 2015-2016 Saanvi Infrabuild Pvt. Limited the year under consideration was filed by it on 19.08.2015 declaring total income at ‘NIL’. From the relevant ITS details, it was found by the Assessing Officer that the assesese had received contractual receipts of Rs.9,50,192/- during the year under consideration but the same were not reflected in the Profit & Loss Account of the assessee-company filed along with the return of income. In this regard, it was submitted on behalf of the assessee before the Assessing Officer during the course of assessment proceedings that the profit of Rs.76,015/- being 8% of the said contractual receipts may be brought to tax in its hands as per the provisions of section 44AD. This stand of the assessee was not found acceptable by the Assessing Officer. According to him, section 44AD had no application in the case of a Company. He accordingly added the entire undisclosed contract receipts of Rs.9,50,192/- to the total income of the assessee in the assessment completed under section 143(3) vide an order dated 22.12.2017. On appeal, the ld. CIT(Appeals) confirmed the said addition made by the Assessing Officer. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

I have heard the arguments of both the sides and also perused the relevant material available on record. As rightly submitted by the ld. Counsel for the assessee, the impugned amount of Rs.9,50,192/- added to the total income of the assessee represented service charges levied on one party viz. Kerp Resources Pvt. Limited as is evident from the copy of the relevant bill placed at page no. 7 of the paper book and since the said amount represented gross receipts against which certain expenses ought to have been incurred by the assessee-company, there is no justification to treat the entire amount representing gross receipts as the income of the assessee. What can be added to the total income of the assessee is only the net profit earned by the assessee-company from the said receipts and in the absence of any record maintained by the assessee regarding the expenses incurred, such profit can be estimated at some reasonable amount. Having regard to all the facts and circumstances of the case, I am Assessment Year: 2015-2016 Saanvi Infrabuild Pvt. Limited of the view that it would be fair and reasonable to estimate the net profit of assessee-company from this undisclosed service charges at 20% of Rs.9,50,192/-. I accordingly modify the impugned order of the ld. CIT(Appeals) and restrict the addition of Rs.9,50,192/- to Rs.1,90,000/-.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on January 23, 2020.