EPLUS PROJECTS PVT LTD,VIJAYAWADA vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3(1), VIJAYAWADA

PER S. BALAKRISHNAN, Accountant Member :

This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre, Delhi [CIT(A)-NFAC] in DIN & Order No. ITBA/NFAC/S/250/2023-24/105554646571(1), dated 29/8/2023

2 arising out of the order passed U/s. 143(3) of the Income Tax Act,

1961 [the Act] for the AY 2014-15.

firm, is engaged in the business of carrying on contract works

filed its return of income for the AY 2014-15 on 27/11/2014

admitting a total income of Rs. 98,43,280/- as against the

deemed total income of Rs. 67,85,114/- U/s. 115JB of the Act.

The case of the assessee was selected for scrutiny through CASS

and notice U/s. 143(2) was issued on 18/09/2015 and the same

was duly served on the assessee on 21/9/2015. Subsequently,

notice U/s. 142(1) of the Act dated 1/6/2016 was issued along

with annexure and called for certain information. In response,

the assessee’s Authorized Representative appeared before the Ld.

AO and furnished the information from time to time as called for.

As per the details submitted by the assessee, the Ld. AO noted

that during the AY 2014-15, the assessee has received gross

receipts aggregating to Rs. 16,31,65,179/- with respect to main

contracts [Rs. 10,56,45,061/-] and sub-contracts [Rs.

5,75,20,118/-] given at six different sites. Subsequently, the

assessee was asked to produce the agreement copies with

contractors / sub-contractors, books of account, evidences in

3 support of the claim of expenses under the schedule “other

expenses” etc. On perusal of the documents furnished by the

assessee, the Ld. AO noted that some of the bills/vouchers are

not verifiable and some of the expenses were supported by self-

made vouchers. In view of the above, a show cause notice was

issued to the assessee stating that why the income cannot be

estimated @ 12.5% on gross contract receipts. In response, the

assessee’s Representative submitted that the contract receipts of

Rs. 61,45,010/- made through M/s Swarna Constructions also

pertains to receipts from sub-contracts and has furnished the

documentary evidence in support of the same. The assessee’s

Representative further pleaded the Ld. AO to consider the

remuneration of Rs. 12,60,000/- paid to the Directors while

estimating the income on gross receipts @ 12.5% on main

contract receipts and @ 8% on sub-contract receipts. After

considering the submissions of the assessee, the Ld. AO rejected

the books of account of the assessee by holding that the assessee

has not maintained proper books of accounts and also failed to

produce some of the vouchers for verification and the expenditure

claimed by the assessee is not substantiated by proper bills /

vouchers. Therefore, the Ld. AO resorted to estimate the income

of the assessee-firm with respect to main contracts and sub-

4 contracts and estimated @ 12.5% on main (direct) contracts and

@ 8% on sub-contracts given (or) taken. While estimating the

income of the assessee, the Ld. AO held that the assessee is

entitled for depreciation and remuneration to directors on the

profit estimated. Accordingly, the Ld. AO estimated the total

income at Rs. 1,75,30,716/- [Rs.1,24,37,506 on main contracts

@ 12.5% + Rs. 50,93,210/- on sub-contracts given (or) taken @

8% ] and made addition of Rs.32,22,870/- being the difference

income on estimation and determined the assessed income at Rs.

1,30,66,150/-. Aggrieved by the order of the Ld. AO, the

assessee preferred an appeal before the Ld. CIT(A)-NFAC. On

appeal, the Ld. CIT(A)-NFAC, restricted the estimation to 8% on

receipts of main contracts and 5% on receipts of sub-contracts as

against the Ld. AO’s estimation of 12.5% and 8% on main

contracts and sub-contracts given (or) taken respectively. The

Ld. CIT(A)-NFAC, however denied the deduction claimed by the

assessee on account of Remuneration to Directors and

depreciation by relying on the decision of this Bench in the case

of M/s. K. Venkata Raju (ITA No. 501/Viz/2019, dated

7/4/2022). Thus, the Ld. CIT(A)-NFAC partly allowed the appeal

of the assessee and granted part relief to the assessee. Aggrieved

5 by the order of the Ld. CIT(A)-NFAC, the assessee is in appeal

before the Tribunal by raising the following grounds of appeal:

“1. The order of the Ld. CIT(A)-NFAC is contrary to the facts and also the law applicable to the facts of the case.

that the Ld. AO has rejected the books of account and estimated

the income @ 12.5% on the main contracts and @ 8% on the sub-

contract works. The Ld. AR further submitted that the Ld.

CIT(A)-NFAC has granted part relief to the assessee by allowing

8% on the main contracts and 5% on the sub-contracts.

However, the Ld. AR pleaded that the Ld. CIT(A)-NFAC did not

allow the depreciation and remuneration to Directors claimed by

the assessee and allowed by the Ld. AO while estimating the

profits of the assessee. The Ld. AR pleaded that since the issue

of allowance of remuneration and depreciation was not before the

6 Ld. CIT(A)-NFAC, he has suo-moto decided not to allow the same.

He therefore pleaded that the remuneration to Directors

amounting to Rs. 12,60,000/- may please be allowed.

Per contra, the Ld. Departmental Representative heavily

relied on the order of the Ld. CIT(A)-NFAC and strongly objected

that when the income is estimated, no further deductions can be

allowed from the total income of the assessee. He therefore

pleaded that the order of the Ld. CIT(A)-NFAC may be upheld.

available on record as well as the orders of the Ld. Revenue

Authorities. We find from the order of the Ld. CIT(A)-NFAC, the

Ld. CIT(A)-NFAC has considered and granted relief to the extent

of Rs. 19,22,890/- by reducing the estimated profits to 8% of

main contracts and 5% of sub-contracts as against 12.5% of

main contracts and 8% of the sub-contract works estimated by

the Ld. AO. We find that the Ld. CIT(A)-NFAC has granted

substantial relief to the assessee and this Bench of the Tribunal

has consistently held that while estimating the profits, it shall be

8% on the main contracts and 5% on the sub-contract work. The

Ld. CIT (A)-NFAC has relied on the decision of this Bench in the

case of M/s. K. Venkata Raju (ITA No. 501/Viz/2019, dated

7 7/4/2022) and accordingly estimated the income of the assessee. We therefore find no merit in the argument of the Ld. AR and we have no hesitation uphold the decision of the Ld. CIT(A)-NFAC and dismiss the grounds raised by the assessee.

Pronounced in the open Court on 13th February, 2024. Sd/- Sd/- (दु�वू� आर.एल रे�डी) (एस बालाकृ�णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) �या�यकसद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER Dated : 13.02.2024 OKK - SPS आदेश क� ��त�ल�प अ�े�षत/Copy of the order forwarded to:- �नधा�रती/ The Assessee – Eplus Projects (P) Ltd., D.No. 23-39-1/B, 1. Kanumurivari Street, Saqtyanarayana Puram, Vijayawada, Andhra Pradesh – 520003. राज�व/The Revenue – Income Tax Officer, CR Building, MG Road, 2. Vijayawada, Andhra Pradesh – 520002. 3. The Principal Commissioner of Income Tax, आयकर आयु�त (अपील)/ The Commissioner of Income Tax 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, �वशाखापटणम/ DR, ITAT, 5. Visakhapatnam गाड� फ़ाईल / Guard file 6. आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam