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Income Tax Appellate Tribunal, ‘ D’ BENCH : CHENNAI
Before: SHRI CHANDRA POOJARI & Shri Duvvuru RL Reddy
आदेश / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER
This appeal of the Revenue is directed against the order of the Commissioner of Income-tax (Appeals), Salem dated 22.03.2017 pertaining to assessment year 2013-14.
ITA No.1537/Mds./17 :- 2 -:
The Revenue has raised the following grounds for our adjudication.
The Ld.CIT(A) is contrary to law and against the f acts and circumstances of the case; 2. The Ld.CIT(A) ought to have considered that the assessee failed to produce any corroborative evidence for wages payment to the tune of Rs.9,70,69,358/- which accounts for 44.5% of total contract receipts. 3. The Ld.CIT(A) has not considered the reasons evidently recorded by the AO for rejecting the books of accounts of the assessee. In addition, the AO clearly brought out that the sub contractor of the assessee paid only 5.7% of gross income towards wages and assessee firm is not maintaining any wages register or labour attendance register. As nearly 50% of the expenditure were supported only by self made vouchers, the AO rejected the books of accounts. Hence, the Madras High Court decision CGT vs. A.Vajjram Bros (326 ITR 551)(Mds.) squarely cover the issue in hand. 4. The Ld.CIT(A) has not considered that the AO has adopted income reasonably at 8% in view of the order of the Madras High Court in 326 ITR 551 (Mad.)cited surpa.
The facts of the issue are that the assessee is engaged in the business of Civil Engineering Contractor and in the assessment year under consideration, the assessee turnover was at `21,68,15,304/-.
The AO found that the assessee claimed the expenses at 44.5% of total reciepts in respect of civil contract, which was said to be very high as compared to labour expenses at 5.7% and 5.38% in respect of sub-contracts. Hence, the AO was of the opinion that the books of accounts are not verifiable and reliable, hence, rejected it. The AO estimated the income of assessee at 8% of the gross profit by placing
ITA No.1537/Mds./17 :- 3 -: reliance in the judgement of jurisdicitional High Court in the case of CGT Vs. A.vajjram Bros., in 326 ITR 551 (Mad.). Aggrieved by the order of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A). On appeal, Ld.CIT(A) considering the GP rate for assessment years 2010-11, 2011-12 & 2012-13, which are at 1.88%, 1.87% & 2.16% of the gross profits respectively and adopted GP rate at 2.5% of the gross profit of the assessee and worked out at `54,20,382/-. Against the order of Ld.CIT(A), now the Revenue is in appeal before us.
We have heard both the parties and perused the material on record. Admittedly in the assessee’s case, the assessment was framed u/s.144 of the Act and the assessee has not produced books of accounts before the ld. Assessing Officer. However, the Ld.CIT(A) without examining the books of accounts, based his conclusion on the previous assessment year’s GP rate and computed the income of assessee at 2.5% of the gross turnover. In this case, the AO has given a specific finding that the assessee claimed the expenditure very exorbitant compared to the assessees in similar line of business. In our opinion, the assessee turnover is `21,68,15,304/- and the assessee required to maintain regular books of accounts and to be audited u/s.44AB of the Act. Hence, it is appropriate to frame the ITA No.1537/Mds./17 :- 4 -:
assessment on the basis of books of accounts of the assessee, which was not produced before the AO. Accordingly, we are of the opinion that it is appropriate to remit the entire issue to the file of AO with a direction to the assessee to place all books of accounts maintained for assessment year under consideration for the purpose of assessment. If the AO finds that the books of accounts not verifiable, then he has to reject the books of accounts and thereafter, he is at liberty to estimate the income of assessee. With this observation, we remit the issue in dispute to the file of AO for fresh consideration.
In the result, the appeal of the Revenue is partly allowed for statistical purposes.
Order pronounced on 23rd August, 2017, at Chennai.