DCIT, CIRCLE-1(1), BHUBANESWAR, BHUBANESWAR vs. M/S. MAA BAGHEI CONSTRUCTION PVT. LTD., KHURDA

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAVAN KUMAR GADALE, JM आयकर अऩीऱ सं./ITA No.480/CTK/2014 (नििाारण वषा / Assessment Year :2010-2011) DCIT, Corporate Circle-1(1), Vs. M/s Maa Baghei Bhubaneswar Construction Pvt. Ltd., At/Po-Dadhimachhagadia, Khurda-752056 स्थायी लेखा सं./जीआइआर सं./ PAN/GIR No. : AAECM 7386 C (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. AND Cross Objection No.05/CTK/2015 (Arising out of ITA No.480/CTK/2014) (नििाारण वषा / Assessment Year :2010-2011) M/s Maa Baghei Vs. DCIT, Corporate Circle-1(1), Construction Pvt. Ltd., Bhubaneswar At/Po-Dadhimachhagadia, Khurda-752056 स्थायी लेखा सं./जीआइआर सं./ PAN/GIR No. : AAECM 7386 C (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. राजस्व की ओर से /Revenue by : Shri Kunal Singh, DR ननधााररती की ओर से /Assessee by : Shri S.K.Agrawalla, AR सुनवाई की तारीख / Date of Hearing : 14/06/2017 घोषणा की तारीख/Date of Pronouncement 29/06/2017 आदेश / O R D E R Per Shri Pavan Kumar Gadale, JM: The revenue has filed appeal and the assessee has filed cross objection against the order of CIT(A)-II, Bhubaneswar, dated 24.09.2014, passed in Appeal Reference No.073/2013-14, arising out of the order passed by the AO u/s.144 r.w.s.143(3)/147 of the I.T.Act, wherein the revenue has raised the following grounds :-

2 ITA No.480/14 & CO No.05/15 1. On the facts and in the circumstances of the case, the ld. CIT(A) is not justified in deleting the addition of Rs.1,21,78,867/- made by the AO estimated at 11% of the turnover, when the assessee did not produce the required books of accounts in spite of several opportunities. 2. On the facts and in the circumstances of the case, the ld. CIT(A) is not justified in deleting the addition made by the AO on account of sundry creditors and outstanding liabilities, when the assessee could not produce the details, bills and vouchers. 2. Brief facts of the case are that the assessee company engaged in the business of civil contract works, filed its return of income on 13.10.2010 declaring total income of Rs.Nil for the assessment year 2010-2011. Subsequently, the assessee filed its Revised return of income on 27.01.2011 disclosing total income of Rs.27,38,602/-. Thereafter notices under Section 143(2) & 142(1) along with questionnaire were issued. In compliance to the notices, the ld. AR of the assessee appeared from time to time and partly furnished books of accounts. The AO found that the assessee company has not produced the books of accounts as required and observed that no proper books of accounts maintained and dealt with the disputed issue at para 2.1.3 of the order. Further, the AO discussed the provisions on Rejection of Books of accounts and provisions of Section 144 of the Act as the assessee has not complied the notice u/s.142(1) of the Act, despite providing and availing the opportunities and finally ld. AO applied the Best judgment assessment based on the material evidence available on record and was not satisfied with the maintenance of books of accounts and rejected the same relying upon the judicial decisions. The ld. AO based on the contract receipts estimated the profit 11% of turnover and made the addition. Similarly, the

3 ITA No.480/14 & CO No.05/15 AO found that the sundry creditors are disclosed as outstanding liabilities and no information was submitted in spite of repeated reminders, since the assessee has not substantiated its sundry creditors, the AO made an addition and passed the order u/s.144/143(3) of the Act. 3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A). In the appellate proceedings, ld. AR of the assessee argued the grounds and reiterated the submissions made before the AO on the disputed issue of estimation of income at 11%. Ld. CIT(A) referred to the assessee’s submissions at pages 4 to 7 of the appellate order and dealt with the disputed issue at page 9 and deleted the addition. And, in respect of addition of sundry creditors and outstanding liabilities the ld CIT(A) observed that when the Books of accounts have been rejected by the AO in the assessment year under consideration and profit is estimated, further the addition on account of sundry creditors cannot be sustained and the ld. CIT(A) relying on the judicial decisions was of the opinion that when the Books of accounts are rejected u/s.145(3) of the Act, the ld. AO cannot make further addition on Books of Accounts. Accordingly, allowed the appeal of the assessee. 4. Aggrieved by the order of the CIT(A) the revenue has filed appeal with the Tribunal and the assessee is in cross objection before the Tribunal. 5. The ld. DR argued that the ld. CIT(A) has erred in deleting the addition on estimation of income at 11% of the total turnover without any basis as the assessee has not produced the books of accounts and

4 ITA No.480/14 & CO No.05/15 submitted the assessee’s income is below 3% of civil contract receipts whereas the Revenue has correctly considered income of the civil contract works and supported his arguments with the copies of the order of the coordinate bench of the Tribunal and prayed for allowing the appeal. 6. Per Contra, ld. AR relied on the order of CIT(A) and prayed for dismissal of the revenue’s appeal. 7. On the disputed issue of sundry creditors addition, ld. DR relied on the order of Assessing Officer, whereas ld. AR for the assessee supported the CIT(A)’s action in deleting the addition. 8. We have heard the submissions and perused the material available on record. The ld. DR argued that the CIT(A) has erred in deleting the addition estimating at 11% of the turnover is without any basis. We, on perusal of the assessment order, found that the AO before passing the best judgment assessment has provided opportunities to the assessee to produce the books of accounts and the assessee has not submitted the complete books of accounts, which necessitated the AO to reject the books of accounts u/s.145(3) of the Act. Further we find that the CIT(A) observed that the revenue has been accepting the margin between 2.5% to 3.5% of gross contract receipts which is not disputed and accepted by the Assessing Officer, in spite of books of accounts are rejected. Considering the apparent facts, we found that the income at 4% of gross contract receipts is reasonable. Since the Books of accounts are rejected by the AO and the estimation of net profit rate at 4% on civil contracts is

5 ITA No.480/14 & CO No.05/15 acceptable, we set aside the order of CIT(A) and direct the AO to consider the net profit at the rate of 4% of the gross contract receipts. This ground of revenue is partly allowed. 9. On the second disputed issue the income is estimated at 4% and the Books of accounts are rejected by the AO, therefore, addition in respect of sundry creditors and liabilities cannot be sustained. Accordingly, we uphold the action of CIT(A) on this issue and dismiss the ground of the revenue. 10. Thus, appeal of the revenue is partly allowed. 11. The assessee’s Cross Objection i.e. CO No.05/CTK/2015 supporting the orders of CIT(A), is partly allowed. 12. In the result, appeal of the revenue and cross objections of the assessee are allowed in part. Order pronounced in the open court on this 29/06/ 2017. Sd/- Sd/- (N. S. SAINI) (PAVAN KUMAR GADALE) ऱेखा सदस्य / ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनांक Dated 29/06/2017 प्र.कु.मि/PKM, Senior Private Secretary आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकर आयुक्त(अपील) / The CIT(A), आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कटक / DR, ITAT, Cuttack 5. आदेशािुसार/ BY ORDER, गार्ा पाईऱ / Guard file. 6. सत्यापऩत प्रनत //True Copy// (Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक / ITAT, Cuttack