ERA INFRA SAIDUTTA JV,NOIDA vs. CIRCLE 5(1)(1), GB NAGAR, NOIDA
Before: SHRI CHALLA NAGENDRA PRASAD, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
This appeal by the Revenue is preferred against the order of the NFAC, dated 26.03.2024 pertaining to A.Y. 2017-18. ITA No. 2819/DEL/2024 [A.Y. 2017-18]
2. The assessee has raised the following grounds of appeal:
“1. That the order passed by the assessing officer is contrary to the facts, bad in law and must be quashed.
2. That having regard to the facts and circumstances of the case,
Ld AO/CIT(A) has erred in law and on the facts in making addition of Rs.1.31 crore on the basis of estimation of profit calculated @ 8
percent of Gross Receipt of Rs. 20.75 crore. The addition made by Ld. AO/CIT(A) treating them as non-genuine is arbitrary, capricious, unwarranted and must be quashed.
3. That the action of Ld. Assessing officer/CIT(A) in making addition of Rs.1.31/- crore on account of rejection of audited books of accounts by invoking provisions of section 145(3) is erroneous. The addition so made is arbitrary, capricious, unwarranted and must be quashed.
4. That in any case and in view of the matter, the allegation of Ld.
AO/CIT(A) in not accepting the facts and disbelieving the results of the appellant are not supported by any documentary evidence and being arbitrary, capricious, unwarranted and must be quashed.
5. That the Ld. Assessing officer/CIT(A) is erred in law in initiating penalty proceedings u/s 270A for under reporting or misreporting is unwarranted and must be quashed.
6. That the appellant craves the leave to add, amend, modify, delete any of the grounds of appeal before or at the time of hearing and all the above grounds are without prejudice to each other.”
ITA No. 2819/DEL/2024 [A.Y. 2017-18]
Saidutta JV is a joint venture association formed between M/s Era Infra
Engineering Pvt Ltd ("Era") holding 51% shares being the lead partner and M/s Sai Dutta Transport and Developers Pvt Ltd ("Sai Dutta") holding 49%
shares. The assessee being competent in executing infrastructure contracts relating to development of highways, metros, railways, etc and Sai Dutta being competent in construction of civil works and infrastructure projects, entered into a joint venture agreement on 04.01.2014 to bid together for the project executed by Mumbai Rail Vikas Corporation. Copy of the joint venture agreement.
The assessee was awarded a contract by Mumbai Rail Vikas Corporation (MRVC) by way of successful tender for construction of Foot Over Bridges, Skywalks, and other works such as overhead electric equipment installations, etc in connection with Trespass control at Kurla and Dadar Stations in Mumbai - LOT III amounting to Rs. 60 Cr. 5. The assessee filed its return of income declaring income of Rs. 34,95,789/- alongwith audited financial statements. The assessment was completed u/s 143(3) of the Income-tax Act, 1961 [the Act, for short] while rejecting the books of account and an adhoc addition of Rs. 1,66,01,922 was made by estimating net profit @ 8% of gross receipts of Rs.
ITA No. 2819/DEL/2024 [A.Y. 2017-18]
PC; Contract Charges PC with materials; Wages (direct wages) and Wages and Muster Roll which were vital to determine the net profit, were not submitted. Accordingly, the CIT(A) affirmed the action of the AO.
7. Aggrieved further, the assessee is in appeal before us.
8. Before us, the ld. counsel for the assessee vehemently stated that the rejection of books of account u/s 145(3) of the Act for want of furnishing of complete books is improper as no incompleteness was specified in the assessment order. The ld. counsel for the assessee invited our attention to the relevant extract of Section 145(3) of the Act and submitted that in the instant case, the Assessing Officer has not pointed out any incorrectness or incompleteness in the books of account submitted by the assessee and outrightly rejected the same as the assessee failed to produce complete books of account with supporting documents. It is the say of the ld. counsel for the assessee that if the assessee fails to produce
ITA No. 2819/DEL/2024 [A.Y. 2017-18]
Delhi in ITA No. 6168/Del/2016 24 Feb, 2020, CIT-IX vs Jas Jack Elegance
Exports, 325 ITR 217 (Del HC) and a catena of other decisions of various courts to support his submissions.
ITA No. 2819/DEL/2024 [A.Y. 2017-18]
11. On the other hand, the ld. DR vehemently contended that the Assessing Officer rejected the books u/s 145(3) on account of the failure to submit complete books of accounts and evidence required to determine the net profit of the assessee. The ld DR submitted that the AO made the adhoc addition@ 8% of gross receipts for the reason that the assessee failed to produce "complete" books of account along with supporting documents.
12. We have heard the rival submissions and have perused the relevant material on record. We find that in the immediately preceding year, the NP rate of the was 1.74% which has now reduced to 1.65% in the impugned year. Considering the reduction of net profit coupled with non-furnishing of relevant documents/evidence, the AO rejected the books of account u/s 145(3) and estimated the NP rate at 8%.
13. In the given factual matrix of the instant case, we note that the assessee has not given any details of the contract and various expenses incurred for those contracts. The accordingly had show caused the assessee that in absence of the complete books of account, the same will be rejected and net profit would be estimated at @ 8% of the Turnover. Thus, where the assessee failed to furnish complete books of account enabling the AO to determine the net profit of the assessee properly, the assessee’s books of account are liable to be rejected/s 145(3) as the AO cannot be ITA No. 2819/DEL/2024 [A.Y. 2017-18]
satisfied about the correctness or completeness of the accounts of the assessee in absence of relevant documents/evidence. We are of the considered view however, that the estimated NP rate at 8% of turnover is at a higher side considering the trend of net profit declared by the assessee in previous years.
14. Considering the entire factual matrix in perspective and in the interest of justice, we are of the considered view that 2% of the NP rate be considered as adequate for the instant year. Since the assessee has not given any plausible reason for non-submission of complete books of account, therefore, estimation of 2% of NP rate is considered reasonable to cover all loopholes in submission of various details. Accordingly, the balance 6% of estimated profit is directed to be deleted. The ground 1 to 4 are partly allowed.
15. Ground 5 regarding penalty is premature.
16. In the result, appeal of the assessee in ITA No. 2819/DEL/2024 is partly allowed.
The order is pronounced in the open court on 10.12.2025. [CHALLA NAGENDRA PRASAD]
[NAVEEN CHANDRA]
JUDICIAL MEMBER
ACCOUNTANT MEMBER
Dated: 10th DECMBER, 2025. ITA No. 2819/DEL/2024 [A.Y. 2017-18]
VL/