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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI G.S.PANNU
The captioned appeal filed by the assessee pertaining to assessment year 2010-11 is directed against an order passed by CIT(A)- 25, Mumbai dated 01/12/2014, which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 17/12/2013.
In this appeal, assessee has raised the following grounds of appeal:-
“1. The Learned CIT (A) erred in facts and circumstances of the case and in law in framing order without providing even a single opportunity after the change of Jurisdiction of Commissioner of Income Tax (appeals) from CIT(A)- 33 to CIT(A)-25 Without Prejudice to the above.
2. The Learned CIT (A) erred in facts and circumstances of the case and in law in holding the assessment that the AO framed is as per terms of CBDT instruction on the subject.
3. The Learned CIT (A) erred in facts and circumstances of the case and in law in confirming adhoc addition by 30% of material purchases. 4. The Learned CIT (A) erred in facts and circumstances of the case and in law in confirming ad hoc addition by 20% of labour charges. 5. The Learned CIT (A) erred in facts and circumstances of the case and in law in confirming addition by disallowing bonus under section 43B of Income Tax Act 1961. 6. The Learned CIT(A) erred in facts and circumstances of the case and in law in confirming ad hoc addition by 20% of bonus payments. 7. The Learned CIT (A) erred in facts and circumstances of the case and in law in confirming adhoc addition on account of conveyance , repairs and staff welfare expenses. 8. The Learned CIT (A) erred in facts and circumstances of the case and in law in confirming action of not accepting revised computation of Income furnished during assessment proceedings. Reasons given by learned CIT (A) for confirming the additions are wrong, insufficient and contrary to facts and evidence on record and in law.” 2. Though the appellant has raised multiple grounds of appeal, but none of them was pressed at the time of hearing except raising a singular argument that the business profit assessed by the income tax authorities is on a higher side. The Ld. Representative for the assessee submitted that the appellant assessee is an individual, who is a proprietor of M/s. Shine Construction, engaged in the business of civil contracting. It was further explained that assessee has primarily rendered services to Government department, namely CPWD . It was explained that assessee had filed the return of income declaring a total income of Rs.5,04,662/-, which was around 6% of the gross receipts. In the course of scrutiny assessment, various disallowances have been made out of purchases, labour charges, staff welfare, bonus, transportation, etc., whereby the total income has been assessed at Rs.38,20,890/-. The Ld. Representative for the assessee pointed out that, if the aforesaid level of income is assessed, it would reflect a net profit rate of 40%, which is extremely excessive in such line of business. It has been pointed out that the entire services had been rendered to CPWD and that the assessee would be satisfied if a reasonable rate of profit is applied to compute his income from the business of civil contracting.
On this aspect, Ld. Departmental Representative has not seriously opposed the plea of the assessee for determination of income on an estimate basis.
In the above back ground, the orders of the authorities below have been perused. The orders passed by the Assessing Officer and thereafter by the CIT(A) reveal that essentially additions have been made on estimate basis out of various heads of expenditure debited in the P&L Account. It also transpires that the assessee could not satisfactorily produce the required record in order to enable the Assessing Officer to verify the various expenditures debited in the P&L Account. It has also seen by the Assessing Officer that for the earlier assessment year of 2009-10 assessee had declared the income on a presumptive basis in terms of section 44AD of the Act. No specific arguments had been raised for any of the issues before us except regarding the reasonableness of the determination of final income from business. On this aspect, the plea of the assessee that the final assessed income is excessive, considering the nature of business is quite plausible. Therefore, considering the entire facts and circumstances of the case, it would be in the fitness of things that the net profit from the business be estimated at 10% of the gross receipts. Accordingly, the matter is restored back to the file of Assessing Officer to recompute the income from business of civil contracting at 10% of gross profits and no individual additions be made out of items of expenditure referable to the gross receipts of such business.
Thus, the appeal of the assessee is partly allowed, as above.
Order pronounced in the open court on 05/10/2016