MAHENDRA RAGHUNATH PATIL,,SATARA vs. INCOME-TAX OFFICER, WARD - 1,, SATARA

Briefly, in the facts of the case, the assessee had furnished the return of income declaring total income of Rs.6,78,140/-. The case of the assessee was selected for scrutiny. The Assessing Officer noted that the assessee was running three concerns. In respect of two concerns i.e. Patil Construction and Trimurti Stone Company, audit report under section 44AB of the Act was obtained. However, no audit was carried out in respect of contract receipts of Rs.2,29,86,840/-, on which TDS was also deducted. During the course of assessment proceedings, the assessee furnished revised audit report which was not accepted by the Assessing Officer. The assessee had not declared any income from the aforesaid contract receipts of Rs.2.29 crores (approximately) received from Flagship Infrastructure Pvt. Ltd. and C.B. Construction. The assessee filed revised return of income after the issue of notice under section 143(2) of the Act and declared additional income of Rs.22,98,684/- i.e. at the rate of 10% of the contract receipts of Rs.2.29 crores (approximately). The assessee also claimed credit of TDS of Rs.5,18,457/-. A show cause notice was issued in this regard by the Assessing Officer. The Assessing Officer noted that the same default was also committed by the assessee in financial year 2007-08 wherein contract receipts of Rs.1.55 crores (approximately) were received from Flagship Infrastructure Pvt. Ltd., which were not declared. The Assessing Officer was of the view that the assessee had mala-fidely concealed its income for two consecutive years and thereafter estimated the income from the unaccounted receipts at the rate of 15% and made addition of Rs.34,48,026/-. Since the assessee had already declared income of Rs.15,54,248/- in the revised return of income, the balance income of Rs.11,49,342/- were also added in the hands of the assessee. 4. The CIT(A) confirmed the said addition and the assessee is in further appeal before the Tribunal against the order of the CIT(A).

The learned Authorized Representative for the assessee fairly admitted that the aforesaid receipts were not disclosed in the original return of income but the same were disclosed in the revised return of income under the Act and requested that the said income is to be assessed at the rate of 8% of the gross receipts. 6. The learned Departmental Representative for the Revenue, on the other hand, placed reliance on the orders of the authorities below. 7. On perusal of the record and after hearing the Authorized Representatives of both sides, I find the issue arises in the present appeal is the application of GP rate on the undisclosed contract receipts amounting to Rs.2.29 crores (approximately). The assessee had declared the income from two of its concerns and the audit report was also obtained from the said two concerns. However, the receipts totaling to Rs.2.29 crores (approximately) were not disclosed in the original return of income and when confronted i.e. after the issue of notice under section 143(2) of the Act, the assessee declared the additional income of Rs.22,98,684/- at the rate of 10% of the contract receipts of Rs.2.29 crores (approximately) in the revised return of income. The Assessing Officer was of the view that the said income is to be estimated at the rate of 15% which has been confirmed by the CIT(A). The case of the assessee is that the application of the GP rate for estimating the undisclosed income is on higher side. In view of the facts and circumstances of the case and in view of the provisions of the Act where contract receipts, if falling below a particular limits, are received then they have to be estimated by applying NP rare at the rate of 8%. But the receipts in the hands of the assessee are undisclosed in the Audited Balance Sheet. Therefore, I restrict the GP rate to