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Facts
The assessee, a civil contractor, filed its return for AY 2007-08 showing an income of Rs. 22,09,810. The case was selected for scrutiny, but the assessee did not comply. The AO passed an ex-parte order under section 144, estimating income from contract receipts at 8% and making additions for interest income and sales tax refund.
Held
The Tribunal noted that the additions for interest income and sales tax refund were not justified as these were already included in the gross receipts. Regarding the profit on contract receipts, considering the facts and to cut short litigation, the Tribunal directed the AO to re-compute the income at 5.5% instead of the 8% confirmed by the lower authorities.
Key Issues
Whether the additions for interest income and sales tax refund were justified, and whether the estimation of profit on contract receipts at 8% was correct.
Sections Cited
143(1), 144, 143(3)
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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, BANGALORE
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI LAXMI PRASAD SAHU
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the assessee against the order dated 30.10.2023 impugned herein passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2007-08.
2 Late Shri Sheshappa Dasaraddy Raddi by Legal Heir Shri Manjunath Sheshappa Raddi 2. In the instant case, the assessee during the assessment year under consideration was working as civil contractor and by filing its return of income on dated 31.10.2007 had shown a taxable income of Rs.22,09,810/- which was processed under section 143(1) of the Act on 20.12.2007 whereby a refund of Rs.3,46,743/- was granted. Subsequently the case of the assessee was selected for scrutiny as per CBDT guidelines and consequently statutory notices were issued to the assessee. However, the assessee made no compliance and therefore finding no option, the Assessing Officer (AO) passed the order dated 30.11.2009 as ex-parte under section 144 of the Act, by which the AO estimated the net income from contract receipt of Rs.5,10,29,272/- @ 8% rejecting the net profit of Rs.30,69,810/- as shown by the assessee. The AO also made the additions of Rs.8,50,373/- and Rs.55,29,477/- on account of interest income and sales tax refund respectively.
The assessee being aggrieved challenged the said additions before the Ld. Commissioner, who sought remand report from the AO. However, in the remand proceedings, the assessee not cooperated and preferred not to file proper details and therefore the AO submitted the remand report adverse to the interest of the assessee before the Ld. Commissioner, who by taking into consideration the said fact and the particular circumstances “that during the course of appeal proceedings, the assessee has avoided any enquiry or investigation about the correctness of the assessee’s income and since the assessment order was passed under section 144 of the Act and the assessee has not cooperated in enquiry”, confirmed the gross profit rate @ 8% from contract receipts by rejecting the books of account as made by the AO.
Though at the outset the Ld. Counsel of the assessee argued the matter at length and tried to justify its claim and therefore
3 Late Shri Sheshappa Dasaraddy Raddi by Legal Heir Shri Manjunath Sheshappa Raddi prayed for deletion of the addition made by the AO and affirmed by the Ld. Commissioner @ 8% of the gross receipts, however, at last submitted that in case the claim of the assessee is not being allowed, then in order to cut short the litigation and for substantial justice, instead of remanding the case, the reasonable estimation of profit can be done by the Hon’ble Bench.
The Ld. D.R. also honestly submitted that instead of remanding the instant case again and in order to avoid the prolong litigations, he do not have any objection, if reasonable estimation can be made.
Hence, considering the peculiar facts and circumstances of the case and previous history of the assessee as demonstrated by the assessee, in our considered view, for the just decision of the case and for ends of litigation as submitted by the parties and for substantial justice, estimation of profit @ 5.5.% instead of 8% would suffice the purpose. Hence, the AO is accordingly directed to re-compute the income @ 5.5% of the profit instead of 8%.
Coming to the addition of Rs.8,50,373/- and Rs.55,29,477/- on account of interest income and sales tax refund respectively, we observe that the assessee, as it appears from the assessment order in para 3, had shown the interest income and sales tax refund of the aforesaid amounts in the gross receipts of Rs.5,10,29,272/-, hence there is no justification for making separate additions as made by the AO and affirmed by the Ld. Commissioner. Thus, for the just decision of the case and for the substantial justice, the additions under consideration on account of interest income of Rs.8,50,373/- and sales tax refund of Rs.55,29,477/- are deleted.
4 Late Shri Sheshappa Dasaraddy Raddi by Legal Heir Shri Manjunath Sheshappa Raddi 7. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 30.04.2024.