BAISHNAB CHARAN NAYAK,JAGATSINGHPUR vs. ACIT, CUTTACK

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ITA 171/CTK/2015Status: DisposedITAT Cuttack29 May 2017AY 2010-117 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal upheld the AO's estimation of profit for the main contract at 8% but reduced the estimation for sub-contract work to 4% and for transport contract to 2.5%, following previous tribunal decisions.

What were the facts?

The assessee failed to produce books of accounts and supporting documents during scrutiny. The Assessing Officer (AO) completed the assessment by estimating profits on contract receipts. The Commissioner (Appeals) partly allowed the assessee's appeal.

What were the issues?

The primary issue was the correctness of the AO's estimation of net profit on various contract receipts due to the non-production of books of accounts. The secondary issue involved the appropriate rate of profit to be estimated for different types of contracts.

Which sections of the Income-tax Act were involved?

Section 144,Section 143(3),Section 44AB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK

Before: SHRI N.S. SAINI & SHRI KULDIP SINGH

For Appellant: Shri Sunil Mishra, AR
For Respondent: Shri A. Tigga, DR
Hearing: 27.04.2017

PER KULDIP SINGH, JUDICIAL MEMBER :

The Appellant, Baishnab Charan Nayak (hereinafter referred

to as ‘the assessee’) by filing the present appeal sought to set aside

the impugned order dated 28.11.2014 passed by the Commissioner

of Income-tax (Appeals), Cuttack qua the assessment year 2010-11

on the grounds inter alia that :-

“1. For that the orders of the Forums below are illegal, arbitrary and excessive jurisdiction of authority and as such liable to be quashed in its entirety.

ITA No.171/CTK./2015 2

2.

For that the order of assessment as well as the confirming order of Learned CIT (Appeals) are illegal and not maintainable in as much as it does not say specifically as to whether the assessment was completed U/s 143(3) or 144 of the Act specifically for the reason that had the assessment order been passed U/s 143(3) the AO would have accepted the Books of Accounts and made some specific additions and disallowances based on evidences, on the other hand, had the order been passed U/s 144, as per the settled principle of law the assessee would have been supplied with draft assessment order before such a huge tax burden was being passed on to it.

3.

For that the estimation of net profit @8% is uncalled for and excessive since the appellant executed the contract work single-handedly and even though it involves civil contract work but labour component is at a higher side. Hence, the return figure being the highest in comparison to the previous year may kindly be accepted.

4.

For that the estimation of the net profit @ 6% on the sub-contract work is excessive, since the same receipt has been taxed in the hand of the main contractor and by estimating @6% amounts to more than 14% in toto by violating the settled law and as such the same may be reduced to 4% as decided by this forum and even though the Learned CIT{Appeal) perused and observed the orders of this Hon'ble Tribunal but confirmed without agitating a single word in the order and as such the estimation is liable to be reduced to @4% in the interest of justice.

5.

For that the estimation of the net profit @4.5% on the transport contract work is also excessive and violation of the orders of this forum and our jurisdictional Tribunal, since it was decided in similarly placed cases the rate of profit in transport contract should be @ 2%. Hence the order may kindly be modified to this effect.

6.

For that the orders of the Forums below are also similarly illegal, since the authorities below, while estimating the net profit has not allowed Entry tax, VAT, ESI and EPF, which are allowable expenses as per the settled law and as such the learned AO has violated the settled position of law and the same may kindly be allowed for the interest of justice.

7.

For that, the order is also bad in law, since the learned AO has not given credit of the entire TDS being supported with the TDS Certificate, thereby violated the Provision of Section 205 of the Income Tax Act. Hence the credit of entire TDS may kindly be allowed.

ITA No.171/CTK./2015 3

8.

For that any other grounds is incidental to the grounds of the case may kindly be permitted to urge at the time of hearing of the case.”

2.

Briefly stated the facts necessary for adjudication of the

controversy at hand are : during the scrutiny proceedings, the

assessee was called upon to produce general ledger, subsidiary

ledger and bank statement and details of expenditure and other

details vide questionnaires dated 26.11.2012, 31.10.2012 along

with notices issued under section 142 (1) of the Income-tax Act,

1961 (for short ‘the Act’), but the ld. AR for the assessee has only

produced bank account copy and TDS certificates. Due to non-

producing the books of account and supporting documents, the AO

completed the assessment u/s 144 / 143(3) of the Act by estimating

the profit of the assessee as under :-

“The gross receipt of the assessee from the three activities are as under :-

Sl.No. Nature of work Gross receipt 1. Main contract Rs.6,44,72,659/- 2. Sub-contract Rs.4,92,81,408/- 3. Transport contract Rs.3,52,480/-

Taking into consideration of the above mentioned facts, the gross contract receipt of Rs.6,44,72,659/- under main contract is estimated @ 8% of the turnover which comes to Rs.51,57,812.72 u/s.44AD of the I.T. Act . Further taking into consideration, the past records of the assessee and profits declared by other assesses in similar contract work, the gross

ITA No.171/CTK./2015 4

contractual receipt from sub-contract is Rs.4,92,81,408/- and profit is estimated @ 6% of the turnover which comes to Rs.29,56,884.48. Similarly the net profit on transport contract is estimated @ 5% of the gross receipt of Rs.3,52,480/- which comes to Rs.17,624/-.”

and assessed the total income at Rs.88,77,980/-.

3.

Assessee carried the matter by way of filing an appeal before

the ld. CIT (A) who has partly allowed the appeal. Feeling

aggrieved, the assessee has come up before the Tribunal by filing

the present appeal.

4.

We have heard the ld. Authorized Representatives of the

parties to the appeal, gone through the documents relied upon and

orders passed by the revenue authorities below in the light of the

facts and circumstances of the case.

5.

Undisputedly, assessee when represented through Shir H.K.

Sahoo, Advocate/AR, during the assessment proceedings, has not

preferred to produce general ledger, subsidiary ledger and details

of expenditure and other details called for by the AO and

resultantly, the assessment proceedings were completed u/s 144/

143 (3) of the Act on estimate basis. The ld. AR for the assessee

by relying upon the decisions rendered by the coordinate Bench of

the Tribunal in ITA No.184/CTK/2013 in Susil Kumar Swain vs.

Addl.CIT (TDS), Cuttack dated 22.10.2014, ITA

ITA No.171/CTK./2015 5

No.509/CTK/2012 in Nasib Singh vs. ITO, Ward 2, Berhampur,

Odisha and ITA 090/CTK/2011 in S.N. Kanungo & Associates vs.

ACIT, Circle 2 (1), Cuttack, contended that net profit estimated by

the AO is not feasible in the business line of the assessee.

6.

So far as question of estimating the profit from the main

contract receipt @ 8% of the gross receipt u/s 44AB to the tune of

Rs.51,57,812.72 is concerned, coordinate Bench of the Tribunal in

case of M/s. S.N. Kanungo & Associates vs. ACIT (supra) has

directed the AO to adopt net profit @ 8% on the gross receipt of

the contract to be taxed and in this case also, the AO estimated the

main contract @ 8% of the turnover at Rs.6,44,72,659/-, to the tune

of Rs.51,57,812.72. So, when the assessee has not preferred to

bring on record its account books and supporting documents, no

ground is made out to interfere into the findings returned by AO

and affirmed by ld. CIT (A).

7.

So far as question of estimating the profit form sub-

contractual receipt @ 6% of the gross receipt of Rs.4,92,81,408/- to

the tune of Rs.29,56,884.48 is concerned, coordinate Bench in

Susil Kumar Swain vs. Addl.CIT (TDS) (supra) directed the AO to

adopt 4% of the net profit on the gross receipt on account of sub-

contract work. So, by following the decision rendered by the

coordinate Bench in case of Susil Kumar Swain vs. Addl.CIT

ITA No.171/CTK./2015 6

(TDS) (supra), we direct the AO to adopt 4% of the net profit on

gross receipt of Rs.4,92,81,408/- on account of sub-contract work.

8.

So far as question of estimating the net profit on transport

contract @ 5% of the gross receipt of Rs.3,52,480/- is concerned,

the coordinate Bench while dealing with the similar issue in case of

Nasib Singh vs. ITO (supra) wherein assessment was also

completed u/s 144 of the Act directed the AO to adopt the net

profit @ 2.5% of the gross receipts. Following the order passed by

the coordinate Bench of the Tribunal in Nasib Singh vs. ITO

(supra) and keeping in view the identical facts that assessee is also

a transport contractor, the net profit on transport contract is

directed to be estimated at 2.5% of the gross receipts i.e.

Rs.3,52,480/-.

9.

In view of what has been discussed above, the appeal filed

by the assessee is partly allowed. Order pronounced in open court on this 29th day of May, 2017.

Sd/- sd/- (N.S. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated the 29th day of May, 2017 TS

ITA No.171/CTK./2015 7

Copy of the order forwarded to: 1.Appellant - Baishnab Charan Nayak, HIG – 38, Gourav Vihar, Paradeep. 2.Respondent - ACIT, Circle 1 (1), Cuttack. 3.CIT 4.CIT (A)-II, Bhubaneswar. 5.DR(ITAT), Cuttack. 6.Guard File //True Copy//

BY ORDER

SR. PRIVATE SECRETARY, ITAT, CUTTACK

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