BHUPENDRER PAL SINGH AND SONS,GUWAHATI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, GUWAHATI

This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2015-16 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals), Guwahati-2, I.T.A. No.: 71/Gty/2020 Assessment Year: 2015-16 Bhupinder Pal Singh and Sons. Guwahati [in short ld. “CIT(A)”] dated 23.01.2020 arising out of the assessment order framed u/s 143(3) of the Act dated 17.11.2017.

The assessee is in appeal before the Tribunal raising the following grounds: “

Brief facts of the case as culled out from the records are that the assessee is a HUF engaged in the business of event management under the name of Bhupinder Pal Singh and Sons. Income of Rs. 50 lakh declared in the e-return filed on 23.05.2016 for AY 2015-16. Case selected for limited scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. Ld. AO called for the details and noticed that the turnover of the assessee is Rs. 6,99,83,611/- but the assessee did not maintain books of account and the profits were declared on estimate basis @ 7.14%. However, due to absence of regular books of account and no sufficient details to verify the correctness of profits declared by the assessee, ld. AO estimated the profit at 8% and made the addition of Rs. 5,98,689/- and assessed the income at Rs. 55,98,689/-. Page 3 of 6 I.T.A. No.: 71/Gty/2020 Assessment Year: 2015-16 Bhupinder Pal Singh and Sons.

Aggrieved, the assessee preferred appeal before ld. CIT(A) but failed to succeed.

Aggrieved, the assessee is now in appeal before this Tribunal raising the legal issue of limited scrutiny as well as challenging the estimation of net profit @ 8%. Ld. Counsel for the assessee vehemently argued referring to the written submissions before the lower authorities.

On the other hand, ld. D/R vehemently argued supporting the orders of both the lower authorities.

We have heard rival contentions and perused the records placed before us. As regards the first ground that the assessment order is bad in law as ld. AO exceeded the scope of limited scrutiny without taking any permission, we note that the case of the assessee regarding limited scrutiny for the following two reasons: “a) Whether or not the contractual receipts appearing as per various sources (such as AIR, Form 26AS, Bank Statement etc.) have been offered for taxation or not and b) Whether or not the purported income embodied in these purported contractual receipts is also sufficient/proper?”

Further, we notice that ld. AO in order to examine these two issues asked the assessee to file various details including the books of account which the assessee failed to provide. Ld. AO has only estimated the profits on the turnover disclosed by the assessee and such action of ld. AO is well covered under the second reason mentioned above. Thus, ground no. 1 raised by the assessee has no merit and the same is dismissed.

Ground no. 2 relates to the estimation of net profit. The assessee has offered the income @ 7.14% of the gross turnover. In absence of proper books of account being maintained by the assessee, ld. AO estimated the net profit rate of 8%. It is contended by the ld. Counsel for the assessee that in the comparable cases of the contract being awarded by Public Works Department. This Tribunal in similar other cases has accepted the net profit rate of 5 to 6%. Further, it was submitted that normally the gross profit of the contractors is of 10% of the turnover and thereafter 3 to 4% is incurred on administrative expenses and the net profits normally range between 5 to 6%. To certain extent, we find merit in the contention of ld. Counsel for the assessee and therefore, in order to bring an end to this litigation, direct ld. AO to estimate the net profit @ 7.5% as against 8%. Thus, the addition of Rs. 2,48,771/- is sustained. The assessee gets relief of Rs. 3,49,918/- . Thus, ground no. 2 raised by the assessee is partly allowed.

Ground no. 3 is general in nature which needs no adjudication.

In the result, the appeal filed by the assessee is partly allowed. Kolkata, the 21st December, 2022. Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 21.12.2022 Bidhan (P.S.)