DEPUTY COMMISSIONER OF INCOME-TAX,, JALGAON vs. SHRI MAHENDRA MURLIDHAR PATIL,, JALGAON

The assessee has raised following grounds in appeal against the order of Commissioner of Income Tax (Appeals) : “[1] On the facts and in the prevailing circumstances of the case and in law, the learned CIT(A) is not justified in confirming the estimated addition of Rs.2,96,75,198/- @10% of contract receipt), as against estimated addition made by the A.O of Rs.4,45,l2,797/- @15% of contract receipt), without considering the nature of business and with any comparable cases in the similar line of business of contracts. Therefore, addition may please be deleted. Therefore, estimated addition sustained at Rs.1,45,64,777/-(2,96,75,198 (-)1,51,10,421) by CIT(A) may please be deleted. [2] On the facts and in the prevailing circumstances of the case and in law, if the estimated addition as per appellate order of CIT(A) is considered, then Net Profit would be at Rs.6,46,59,347/- [Rs.2,96,75,198/- as per CIT(A) + Depreciation Rs.83,14,920/-+ Interest. Rs.l,86,69,432&Rs.79,99,797/-], which will be rated at 21.78% % [Rs.6,46,59,347/Rs.29,67,51,978.x100], as against profit shown by appellant at Rs.5,00,94,570-[Rs.1,51,10,421. + Depreciation Rs.83,14,920/-interest .Rs.l,86,69,432 & Rs.79,99,797.] which is rated @ 16.88%% [Rs. 5,00,94,5701 Rs.29,67,51,978.x100.] As the appellant has shown reasonable profit, further estimated addition retained at Rs.1,45,64,766/-(2,96,75,198 (-)Rs.l,51,l0,421) by the CIT(A) is not justified and hence, addition may please be deleted [3] On the facts and in the prevailing circumstances of the case and in law and as the appellant has shown net profit @16.88%,subject to interest and depreciation is more than 8%, no separate. trading addition is required to be made. Therefore, estimated addition sustained at Rs.1,45,64,777/- (2,96,75,198(-)1,51,10,421) by CIT(A) may please be deleted. [4] The Appellate craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of the appeal, if deemed necessary at the time of hearing of the appeal.”

The Revenue has assailed the findings of Commissioner of Income Tax (Appeals) on the following grounds : “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in estimating the net income of the assessee @10% as

Shri Sunil Ganoo appearing on behalf of the assessee submitted that the short issue raised in the appeal by the assessee is against estimation of net profit @ 10% of the gross contract receipt by the Commissioner of Income Tax (Appeals). In assessment proceedings the Assessing Officer after rejecting books of account estimated net profit @ 15% of the total contract receipts. The Commissioner of Income Tax (Appeals) reduced the same to 10%. In the earlier assessment years i.e. assessment years 2008- 09, 2009-10 and 2011-12 net profit was estimated by the Assessing Officer and the Commissioner of Income Tax (Appeals) in similar manner @ 15% and 10%, respectively. The assessee carried the matter in appeal to the Tribunal in ITA Nos. 1566, 1563 & 1565/PUN/2014 for the assessment years 2008-09, 2009-10 and 2011-12, respectively against fixing net profit @ 10%. The Revenue also carried the matter in appeal before the Tribunal in ITA No. 1689 to 1692/PUN/2014 for the assessment years 2008-09 to 2011-12. The Revenue assailed the findings of Commissioner of Income Tax (Appeals) in reducing the net profits from 15% to 10%. The Tribunal

Shri Mukesh Jha representing the Department vehemently supported the assessment order. However, the ld. DR fairly admitted that the issue raised by the Revenue and assessee in present set of appeals is similar to the one decided by the Co-ordinate Bench of the Tribunal in assessee’s own case for assessment years 2008-09, 2009-10 and 2011-12.

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. We have also considered the decision of Co-ordinate Bench in assessee’s own case in ITA Nos. 1566, 1563 & 1565/PUN/2014 (supra) and ITA Nos. 1689 to 1692/PUN/2014 (supra). The solitary issue raised in the present cross appeals is the rate of net profit earned by the assessee in the period relevant to the assessment year under appeal. The Assessing Officer after rejecting books of account has estimated net profit @ 15% of gross contract receipts. In first appeal the Commissioner of Income Tax (Appeals) reduced the same to 10% of the gross contract receipts. In the earlier assessment years the Tribunal has estimated the net profit @ 9% of the total gross receipts. The relevant extract of the findings of Tribunal are as under : “7. It is an undisputed fact that the assessee has made irregularities in recording financial transactions. There are certain unexplained expenditure and investments. The assessee in grounds of appeal as agreed for estimated addition of Net profit @ 8%. Certainly, estimation of income @ 15% of gross contract receipts is on higher side and without any rational. The ld. DR has not been able to substantiate the action of Assessing Officer in adopting 15% ratio. After taking into consideration totality of facts, we are of considered view that if the estimation of net profit as proposed by Commissioner of Income Tax (Appeals) is further reduced by 1% (one percent)

Both the sides are unanimous in stating that the facts in the assessment year under appeal are similar to earlier assessment years i.e. assessment years 2008-09 to 2011-12. Following the decision of Co- ordinate Bench, we estimate net profit of the assessee @ 9% of the total gross contract receipts in the assessment year under appeal as well.

In the result, the appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed.