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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 01/07/2024 Date of Order – 11/07/2024
O R D E R PER V. DURGA RAO, J.M.
The present appeal has been filed by the assessee challenging the impugned order dated 18/10/2023, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2005–06.
The assessee has raised following grounds:–
“1) The ld. AO is not justified in assessing the income of the assessee Rs. 53,44,390/-. 2) The Id. Authorities are not correct in making assessment u/s. 144 of I.T. Act and assessing the income @8% of total receipt when the assessee has appeared before the Authorities time to time and also submitted required details by the Authorities.
Snnehshilp Constructions ITA no.413/Nag./2023 3) The Id. AO has not rejected the books of accounts of the assessee and assessed the income u/s. 144 of the 1.T. Act which is totally illegal and bad in law. 4) The Id. AO is not justified in stating that the assessee has not submitted sub-contract details when assessee has filed a copy of contract and all other details about sub-contract. 5) The Id. AO has not made the computation correctly and not correct in considering the income of Rs.41,32,485/- as per assessment order dtd. 31/12/2017. The addition as per dtd. 31/12/2017 Rs.11,98,065/- towards estimated profit @8% and additions of Rs.29,34,420/- u/s. 40(a)(ia) has already been added while calculating the 8% estimated income on the total receipts. Hence the amount of Rs.41,32,485/- is nothing other than the double taxation of the assessee. The CIT appeal is not justified in confirming the said computation of income. Any other ground of appeal at the time of hearing with prior approval of the Hon'ble Bench.”
This is the second round of litigation. Facts in brief are as follows:–
The sole issue that arose out of the aforesaid grounds for our adjudication relates to the Assessing Officer making assessment under section 144 of the Income Tax Act, 1961 ("the Act") in assessing the income @ 8% of the total receipt.
Brief facts are, the appellant is a civil contractor. For the year under consideration, the assessee filed its return of income on 30/03/2006, declaring loss of ` (–) 93,611. The case was selected for scrutiny. The original assessment under section 143(3) r/w section 144 of the Act was completed on 31/12/2007, by making addition of ` 41,32,485, which included addition of ` 11.98.065, on account of profit estimated @ 8% of the gross receipts of ` 1,48,75,822., and addition of ` 29.34,420, on account of disallowance under section 40(a)(ia) of the Act. Against the order passed by the Assessing Officer, the assessee being aggrieved carried the matter before the first appellate authority.
Snnehshilp Constructions ITA no.413/Nag./2023
During the appellate proceedings, the learned CIT(A) observed that the assessee claimed TDS on gross contract receipts of ` 3,01,24,661, as against the gross receipts taken by the Assessing Officer at ` 1,49,75,822, and, therefore, vide order under section 263 of the Act dated 26/03/2009, set- aside the assessment order dated 31/12/2007, with a direction to the Assessing Officer to modify the assessment accordingly.
Meanwhile, the learned CIT(A), vide his order dated 25/03/2010, dismissed the appeal of the assessee on the issue of addition under section 40(a)(ia) of the Act. With respect to the addition made on estimation of net profit at ` 11,98,065, the learned CIT(A) held that the estimation of net income @ 8% on gross contract receipt is correct. However, with regard to the income from other sources from sub–contract, the learned CIT(A) took note of the order passed 263 of the Act by the learned CIT and directed the Assessing Officer to exclude the income from other sources for estimation of the net profit from contract receipts. Against the revision order passed under section 263 of the Act, the assessee preferred appeal before the Tribunal. The Co–ordinate Bench of the Tribunal decided the appeal of the assessee vide order dated 28/08/2015, in and set-aside the matter to the file of the Assessing Officer with following direction:
".....In these circumstances in our considered opinion, though we agree with the Id. CIT that the order of the assessing officer is erroneous and prejudicial to the interest of the revenue, we are not in agreement with the finding that the flat rate of 8 percent should also be applied on the sub contract portion of assessee's work without further examination. Hence we modify the order of Id CIT. We remit the issue for estimation of examination and rate of income on the sub-contracted portion of the assessee's work to the assessing officer. The Assessing Officer shall make necessary examination and pass an order on veracity of income pertaining to the sub-contracted portion." Page | 3
Snnehshilp Constructions ITA no.413/Nag./2023 7. In compliance to the direction of the Tribunal, the Assessing Officer completed the assessment under section 144 r/w section 254 of the Act vide order dated 08/09/2016, determining income of ` 53,44,392, which included addition of ` 24,09,973, @ 8% on gross receipt of ` 3,01,24,661. The assessee being aggrieved with the order so passed by the learned CIT(A), is in further appeal before the learned CIT(A).
The learned CIT(A) dismissed the appeal filed by the assessee. The operative part of the order of the learned CIT(A) is reproduced below:–
“5.8.3 The appellant has challenged the computation of income done by the AO. It has been claimed that if at all, net estimated profit @ 8% of receipts of Rs. 3,01,24,661/- should only be considered as total income and the initial computation of income at the time of original assessment should not have been considered The contention of the appellant has been considered. It is pertinent to note that at the time of original assessment order dated 31.12.2007, addition of Rs.41.32.485/- was made which included addition of Rs. 11,98,065/- on account of profit estimated @ 8% of the gross receipts of Rs. 1,48,75,822/- and addition of Rs.29.34,420/- on account of disallowance u/s 40(a)(ia) of the Act. The addition of Rs.29,34,420/-has been upheld by the CIT(A)-II, Nagpur vide order dated 26.03.2009 and the said addition has not been contested further before the Hon'ble ITAT by the appellant. The said addition therefore stands confirmed. The AO has thus rightly considered the said addition while computing the total income of the appellant Rs.53,44,390/- vide order dated 08.09.2016. 5.9 In view of the above discussion, the addition made by the AO is upheld. The ground of appeal raised is dismissed.
7. In the result, the appeal is dismissed.”
The assessee being aggrieved is in further appeal before the Tribunal.
We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. We find that the assessee has shown commission income from sub–contracting and further examine before estimating income from sub–contract work. The assessee has shown commission income from sub–contracting of the main contract to M/s. Page | 4
Snnehshilp Constructions ITA no.413/Nag./2023 D.V. Mohite and company and M/s. Sonal Construction Pvt. Ltd. as per details given below:–
Commission in Name of the Party Work Receipts Commission Percentage M/s. D.V. Mohite and 22,77,495 71,224 3.127% Company M/s. Sonal Construction Pvt. 1,45,43,722 7,54,421 5.187% Ltd.
The assessee had declared work receipts of ` 1.33 crore and other income ` 16.45 lakh in its P&L Account. However, the details of the TDS credit claimed by the assessee on the payment received towards work contract shows the gross receipts of ` 3.01 crore. The assessee instead of offering the total receipts of ` 3.01 crore in its P&L Account, had offered ` 1.33 crore as work receipts and commission income of ` 8.38 lakh from sub-contracting the main contract of ` 1.68 crore awarded to the assessee firm. The assessee, before the learned CIT(A), had produced copy of ledger accounts of the above two companies. The assessee has also submitted copies of work contracts with M/s. D. V. Mohite and company and M/s. Sonal Construction P. Ltd. The Assessing Officer in the assessment order has calculated the income of the assessee as under:
Total income as per order u/s 143(3) 41,32,485 dated 31/12/2007 Add: 8% gross receipt (` 3,01,24,661) as 24,09,973 discussed above Less; 8% of receipt shown in P&L Account (–) 11,98,066 (` 1,49,75,822) Assessed total income 52,44,392 Assessed income rounded off u/s 288A 53,44,390
Snnehshilp Constructions ITA no.413/Nag./2023 11. From the details submitted by the assessee, the Assessing Officer estimated the quantum of profit @ 8% of on sub–contract portion of work which was confirmed by the learned CIT(A) also. Before us, the learned A.R. pleaded that since the work has been sub–contracted, the margin of profit would at most be @ 4% and it appears that the commission to that extent has already been disclosed by the assessee. Since the matter is very old and in view of the forgoing discussion, we deem it fit and proper to adopt @4% on the sub–contract work instead of @8% as adopted by the Assessing Officer and confirmed by the learned CIT(A). Consequently, the assessee gets part relief of ` 6,72,849 (i.e., ` 22,77,495 (+) ` 1,45,43,722 = ` 1,68,21,217 x 4%). Thus, all the grounds raised by the assessee are partly allowed.
In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open Court on 11/07/2024