Appeal details
Counselvise Citation
[2017] 123 COUNSELVISE.COM (IT) 3018 (ITAT-VISAKHAPATNAM)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
28-04-2017
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB
Assessment Year
2007-2008
Appeal Filed On
17-02-2017
Judgement Text
ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.261&262/VIZAG/2015 ( / ASSESSMENT YEARS: 2007-08 & 2008-09) DCIT, CIRCLE - 2(1), VIJAYAWADA M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWADA [PAN NO. AAOFS7183E ] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NOS.13 & 14/VIZAG/2017 (ARISING OUT OF I.T.A.NOS.261&262/VIZAG/2015) ( / ASSESSMENT YEARS: 2007-08 & 2008-09) M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWADA DCIT, CIRCLE - 2(1), VIJAYAWADA ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI K. DEVA RATNA KUMAR, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 19. 0 4.2017 / DATE OF PRONOUNCEMENT : 28.04.2017 ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 2 / O R D E R PER SHRI G. MANJUNATHA, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE REVENUE AND TWO CRO SS OBJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAIN ST SEPARATE, BUT IDENTICAL ORDERS OF THE CIT(A), VIJAYAWADA DATED 15 .4.2014 FOR THE ASSESSMENT YEAR 2007-08 & 2008-09. SINCE, THE FACT S ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENI ENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONTRACTS FIL ED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 & 2008-09 ON 28.10. 2007 AND 29.9.2008 DECLARING TOTAL INCOME OF ` 4,87,06,350/- AND ` 4,54,49,410/- RESPECTIVELY. THE ASSESSMENTS FOR THE ASSESSMENT Y EAR 2007-08 AND 2008-09 HAVE BEEN COMPLETED U/S 143(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') ON 13.11.2009 AND 4.6.2010, DETERMINING TOTAL INCOME AT ` 4,96,10,750/- AND ` 4,54,49,410/- RESPECTIVELY. SUBSEQUENTLY, THE ASSESSMENTS FOR TH E ASSESSMENT YEARS 2007-08 & 2008-09 HAVE BEEN RE-OPENED U/S 147 OF TH E ACT, FOR THE REASON THAT THE ASSESSEE HAS UNDERSTATED ITS CLOSIN G WORK IN PROGRESS, WHICH RESULTS IN ESCAPEMENT OF INCOME CHARGEABLE TO TAX FOR THE ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 3 ASSESSMENTS AND ACCORDINGLY, ISSUED NOTICE U/S 148 OF THE ACT, CALLING FOR RETURN OF INCOME. IN RESPONSE TO NOTICE U/S 14 8 OF THE ACT, THE ASSESSEE HAS FILED A LETTER ON 9.5.2015 STATING THA T THE ORIGINAL RETURN FILED U/S 139(1) OF THE ACT, MAY BE TREATED AS RETU RN FILED IN RESPONSE TO NOTICE ISSUED U/S 148 OF THE ACT. 3. SUBSEQUENTLY, THE CASES HAVE BEEN SELECTED FOR S CRUTINY AND ACCORDINGLY, NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED BOOKS OF A CCOUNTS AND OTHER DETAILS CALLED FOR. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE ALL THE DOCUMENTARY E VIDENCES FOR THE EXPENDITURE CLAIMED UNDER VARIOUS HEADS SUCH AS LAB OUR CHARGES, ADMINISTRATION EXPENSES, TRANSPORT CHARGES, WORK EX PENSES, VEHICLE MAINTENANCE, MACHINERY MAINTENANCE, ETC. SINCE, TH E ASSESSEE HAS FAILED TO SUBSTANTIATE THE EXPENSES CLAIMED WITH PR OPER SUPPORTING EVIDENCES AND ALSO MOST OF THE EXPENDITURE WERE SUP PORTED BY SELF- MADE VOUCHERS, THE A.O. REJECTED BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT AND ESTIMATED INCOME FOLLOWING THE RATIO IN THE CASE OF M/S. KNR CONSTRUCTIONS LIMITED AND ADOPTED NET PROFIT RATE O F 12.5% ON MAIN CONTRACT WORKS, 8% ON SUB CONTRACT WORKS AND 4% ON SUB CONTRACT ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 4 WORKS GIVEN TO THIRD PARTIES, SUBJECT TO FURTHER DE DUCTIONS TOWARDS INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS U/ S 40(B) OF THE ACT. FURTHER, THE A.O. MADE SEPARATE ADDITIONS TOWARDS I NCOME FROM OTHER SOURCES BEING INTEREST INCOME AND MISCELLANEOUS REC EIPTS UNDER THE HEAD INCOME FROM OTHER SOURCES. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE CHALLENGED THE VALIDITY OF RE-ASSESSMENT ON THE GROUND THAT TH E A.O. RE-OPENED THE ASSESSMENTS MERELY ON CHANGE OF OPINION WITHOUT A NY NEW MATERIAL OR INFORMATION FOUND TO ESTABLISH THAT THERE IS AN ESC APEMENT OF INCOME TO INVOKE THE PROVISIONS OF SECTION 147 OF THE ACT. T HE ASSESSEE ALSO CHALLENGED THE ACTION OF THE A.O. IN REJECTION OF B OOKS OF ACCOUNTS U/S 145(3) OF THE ACT AND ESTIMATION OF NET PROFIT. TH E ASSESSEE FURTHER SUBMITTED THAT THE A.O. WITHOUT ASSIGNING ANY COGEN T REASONS, REJECTED BOOKS OF ACCOUNTS, WHICH WERE ACCEPTED BY THE A.O. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) OF TH E ACT. THE A.O. ERRED IN ESTIMATION OF NET PROFIT OF 12.5% ON MAIN CONTRACT WORKS, 8% ON SUB CONTRACT WORKS AND 4% ON SUB CONTRACT WORKS GIVEN TO OTHERS FOR EXECUTION BY REFERRING TO THE DECISION OF M/S. KNR CONSTRUCTIONS LIMITED, WHEREAS THE FACTS OF THE ASSESSEES CASE IS ALTOGET HER STANDS IN A ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 5 DIFFERENT FOOTING. THE A.O. OUGHT NOT TO HAVE RELI ED UPON THE RATIO OF THE SAID CASE FOR ESTIMATION OF NET PROFIT. 5. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE REJECTED THE CLAIM OF THE ASSESSEE THAT THE A.O. WA S ERRED IN RE-OPENING THE ASSESSMENT MERELY ON CHANGE OF OPINION ON THE GROUND THAT THE ASSESSEE HAD RESPONDED TO THE ISSUE OF NOTICE U/S 1 48 OF THE ACT AND APPEARED BEFORE THE A.O. AND PARTICIPATED IN THE AS SESSMENT PROCEEDINGS, THEREFORE, THERE IS NO MERIT IN THE CL AIM OF THE ASSESSEE, HENCE, THE GROUND RAISED BY THE ASSESSEE IS DISMISS ED. IN SO FAR AS REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF NE T PROFIT FROM BUSINESS, THE CIT(A) OBSERVED THAT THE ASSESSEE HAS FAILED TO PRODUCE NECESSARY BILLS AND VOUCHERS IN SUPPORT OF EXPENDIT URE DEBITED IN THE P&L ACCOUNT. THEREFORE, THE A.O. LEFT WITH NO OPTI ON BUT TO ESTIMATE THE NET PROFIT, PROCEEDED TO ESTIMATE NET PROFIT BY FOL LOWING THE DECISION OF ITAT, HYDERABAD IN THE CASE OF M/S. KNR CONSTRUCTIO NS LIMITED, THEREFORE, THERE IS NO MERITS IN THE CLAIM OF THE A SSESSEE THAT THE A.O. WAS ERRED IN REJECTION OF BOOKS OF ACCOUNTS. AS RE GARDS ESTIMATION OF NET PROFIT, THE CIT(A) BY FOLLOWING THE DECISION OF ITAT, HYDERABAD IN THE CASE OF M/S. SRINIVASA LAKSHMI CONSTRUCTIONS VS . DCIT IN ITA NO.1347/H/2010 DIRECTED THE A.O. TO ESTIMATE NET PR OFIT OF 8% ON MAIN CONTRACT WORKS AND 6% ON SUB CONTRACT WORKS. IN SO FAR AS SUB CONTRACT ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 6 WORKS GIVEN TO THIRD PARTIES FOR EXECUTION, THE CIT (A) UPHELD THE ESTIMATION OF NET PROFIT OF 4% MADE BY THE A.O. IN SO FAR AS ADDITIONS TOWARDS INTEREST INCOME AND OTHER MISCELLANEOUS REC EIPTS UNDER THE HEAD INCOME FROM OTHER SOURCES, THE CIT(A) CONFIR MED THE ADDITIONS MADE BY THE A.O., AS THE ASSESSEE DID NOT PRESS THE GROUND RAISED CHALLENGING THE ADDITIONS. AGGRIEVED BY THE CIT(A) ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO ESTIMATE NET PROFIT OF 8% ON MAIN CONTRACT WORKS AND 6% ON SUB CONTRACT WORKS. THE DIRECTION OF THE CIT(A) IS NEITHER BASED ON ANY MATERIAL NOR ON VALID BASIS. THE D.R. FURTHER SUBM ITTED THAT THE PERVERSITY OF THE LD. CIT(A) ORDER STARES AT THE FA CE WHEN EFFECT IS GIVEN TO HER APPEAL ORDER AS THE RESULTANT INCOME IS GOES BELOW THE RETURNED INCOME. THE LD. CIT(A) HAS NOT TAKEN RELEVANT MATE RIAL FACTORS FOR DETERMINING THE RATE OF PROFIT, WHEREAS, THE NET PR OFIT ADOPTED BY THE A.O. FOR ESTIMATION OF INCOME IS BASED ON THE DECIS ION OF JURISDICTIONAL ITAT, WHICH SHOULD BE UPHELD. THE LD. D.R. FURTHER SUBMITTED THAT THE LD. CIT(A) WAS ERRED IN SCALED DOWN NET PROFIT ESTI MATED BY THE A.O. FROM 12.5% TO 8% IN RESPECT OF MAIN WORKS AND 8% TO 6% IN RESPECT OF SUB CONTRACT WORKS WITHOUT APPRECIATING THE FACT TH AT THE BOOKS OF ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 7 ACCOUNTS OF THE ASSESSEE ARE NOT SUSCEPTIBLE FOR VE RIFICATION. THE ASSESSEE FAILED TO PRODUCE VALID SUPPORTING DOCUMEN T IN RESPECT OF MAJOR EXPENDITURE DEBITED TO THE P&L ACCOUNT. MOST OF THE EXPENDITURE ARE SUPPORTED BY SELF-MADE VOUCHERS, THEREFORE, THE A.O. LEFT WITH NO OPTION, BUT TO ESTIMATE NET PROFIT HAS RIGHTLY FOLL OWED THE DECISION OF COORDINATE BENCH OF ITAT, WHEREIN THE ITAT HAS DIRE CTED THE A.O. TO ESTIMATE NET PROFIT OF 12.5% AND 8% IN RESPECT OF M AIN WORKS CONTRACTS AND SUB CONTRACTS. 7. THE LD. A.R. FOR THE ASSESSEE, STRONGLY SUPPORTE D ORDER OF THE CIT(A). THE A.R. FURTHER SUBMITTED THAT THE CIT(A) HAS RIGHTLY ADOPTED NET PROFIT OF 8% AND 6% RESPECTIVELY ON MAIN CONTRA CT WORKS AND SUB CONTRACT WORKS, BASED ON THE DECISION OF ITAT, IN T HE CASE OF M/S. SRINIVASA LAKSHMI CONSTRUCTIONS VS. DCIT IN ITA NO. 1347/H/2010, WHEREIN THE ITAT HAS DIRECTED THE A.O. TO ESTIMATE NET PROFIT OF 8% AND 6% RESPECTIVELY. THE LD. A.R. FURTHER SUBMITTED TH AT ONE OF THE GROUND RAISED BY THE REVENUE IS THAT THE ASSESSED INCOME A FTER GIVING EFFECT TO FINDINGS OF THE CIT(A) GOES BELOW THE RETURNED INCO ME FOR WHICH THE ASSESSEE CONCEDES ITS ARGUMENT TO THE EFFECT THAT, IF THE ASSESSED INCOME GOES BELOW THE RETURNED INCOME, A RIDER MAY BE GIVEN SO AS TO RESTRICT THE ASSESSED INCOME TO THE INCOME RETURNED BY THE ASSESSEE. ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 8 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. REJECTED BOOKS OF ACCOUNTS AND ESTIMATED NET P ROFIT FROM THE CONTRACT RECEIPTS. THE A.O. WAS OF THE OPINION THA T THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NOT SUSCEPT IBLE FOR VERIFICATION. THE A.O. FURTHER WAS OF THE OPINION THAT THE ASSESS EE HAS FAILED TO PROVE EXPENDITURE WITH SUPPORTING BILLS AND VOUCHERS. MO ST OF THE EXPENDITURE DEBITED UNDER THE HEAD LABOUR AND LIKE CHARGES AR E SUPPORTED BY SELF- MADE VOUCHERS, THEREFORE, OPINED THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE DOES NOT GIVE TRUE AND CORRECT PROF IT FROM THE BUSINESS. THE A.O. FURTHER OBSERVED THAT NET PROFIT DECLARED BY THE ASSESSEE IS QUITE LOW WHEN COMPARED TO THE NATURE AND SIZE OF W ORKS CONTRACT UNDERTAKEN. THE A.O. FURTHER OBSERVED THAT THE JUR ISDICTIONAL ITAT, UNDER SIMILAR FACTS AND CIRCUMSTANCES HAS DIRECTED THE A.O. TO ESTIMATE NET PROFIT OF 12.5% ON MAIN CONTRACT WORKS AND 8% O N SUB CONTRACT WORKS, THEREFORE, ESTIMATED NET PROFIT OF 12.5% ON MAIN CONTRACT WORKS AND 8% ON SUB CONTRACT WORKS BY RELIED UPON THE DEC ISION OF ITAT, IN THE CASE OF M/S. KNR CONSTRUCTIONS LIMITED. IT IS THE CONTENTION OF THE ASSESSEE THAT THE NET PROFIT ESTIMATED BY THE A.O. IS QUITE HIGH WHEN COMPARED TO THE NATURE AND TYPE OF WORKS CONTRACT E XECUTED. THE ASSESSEE FURTHER CONTENDED THAT IT HAS EXECUTED WOR KS CONTRACT IN A ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 9 PLACE WHERE THE COST OF LABOUR IS QUITE HIGH, THERE FORE, THE A.O. WAS NOT CORRECT IN ADOPTING NET PROFIT OF 12.5% AND 8% ON M AIN WORKS CONTRACTS AND SUB CONTRACTS. 9. WE FIND THAT WHILE ESTIMATING NET PROFIT OF 12.5% ON DIRECT WORKS AND 8% ON SUB CONTRACT WORKS, A.O. HAS RELIED UPON THE DECISION OF ITAT, IN THE CASE OF M/S. KNR CONSTRUCTIONS LIMITED . ON THE OTHER HAND, THE ASSESSEE HAS RELIED UPON THE DECISION OF ITAT, IN THE CASE OF EASWAR REDDY & COMPANY VS. ACIT (SUPRA), WHEREIN TH E ITAT HAS DIRECTED TO ESTIMATE NET PROFIT OF 8% ON MAIN CONTR ACT WORKS AND 5% ON SUB CONTRACTS. IT IS AN ADMITTED FACT THAT ESTIMAT ION OF NET PROFIT FROM CIVIL CONTRACTS BUSINESS IS CONSISTENTLY FOLLOWED B Y THE DEPARTMENT ON VARIOUS RATES DEPENDING UPON THE FACTS AND CIRCUMST ANCES OF EACH CASE. BUT, WHILE ESTIMATING NET PROFIT THE A.O. SHOULD TA KE A BASIS FOR ESTIMATION, I.E. EITHER PAST HISTORY OF THE ASSESSE E OR COMPARABLE CASES WHICH ARE HAVING SIMILAR NATURE OF WORKS AND RISK A SSOCIATED. IN THE PRESENT CASE ON HAND, THE A.O. HAS ADOPTED NET PROF IT OF 12.5% AND 8%, HOWEVER, FAILED TO BRING ON RECORD ANY COMPARAB LE CASES OF SIMILAR NATURE TO JUSTIFY HIS CASE. ON THE OTHER HAND, THE ASSESSEE CLAIMS THAT THE NET PROFIT RATE ESTIMATED BY THE A.O. IS ON HIG HER SIDE, BUT FAILED TO BRING ON RECORD ANY COMPARABLE CASES TO JUSTIFY ITS CASE. IN THE CASE OF ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 10 ESTIMATION, IT IS DIFFICULT TO TAKE ANY ONE OF THES E CASES AS PRECEDENT, BECAUSE OF PECULIAR FACTS OF EACH CASE. ADMITTEDLY , THE ASSESSEE IS A LARGE CONTRACTOR HAVING MORE THAN RS.90 CRORES TURN OVER. AS POINTED OUT BY THE A.O., THE BOOKS OF ACCOUNTS OF THE ASSES SEE ARE NOT AMENABLE FOR VERIFICATION. THE EXPENDITURE CLAIMED BY THE A SSESSEE ARE NOT SUPPORTED BY PROPER BILLS AND VOUCHERS. THE ASSESS EE FAILED TO EXPLAIN THE REASONS FOR NOT MAINTAINING THE PROPER BOOKS OF ACCOUNTS AND BILLS AND VOUCHERS IN SUPPORT OF EXPENDITURE DEBITED TO P &L ACCOUNT. THEREFORE, WE ARE OF THE VIEW THAT THE A.O. WAS JUS TIFIED IN REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT AND ESTIMAT ION OF NET PROFIT. 10. THE A.O. HAS RELIED UPON CERTAIN JUDICIAL PRECE DENTS TO ESTIMATE NET PROFIT, WHEREIN NET PROFIT OF 12.5% AND 8% IN R ESPECT OF MAIN CONTRACTS AND SUB CONTRACTS ARE UPHELD. THE A.O. H AS GIVEN HIS OWN REASONS FOR TAKING PARTICULAR RATE OF NET PROFIT. THE ASSESSEE HAS RELIED UPON CERTAIN JUDICIAL PRECEDENTS, WHEREIN THE NET P ROFIT OF 8% AND 5% IS UPHELD. THE ASSESSEE ALSO RELIED UPON ITS OWN CASE FOR THE EARLIER YEAR, WHEREIN THE ITAT, VISAKHAPATNAM BENCH IN ITA NO.523 /VIZAG/2014 FOR THE ASSESSMENT YEAR 2011-12, DIRECTED THE A.O. TO A DOPT A NET PROFIT OF 10% ON DIRECT WORKS CONTRACTS AND 6% ON SUB CONTRAC T WORKS. THOUGH, THE ASSESSEE CLAIMS THAT BECAUSE OF PECULIAR NATURE OF WORKS CONTRACT, ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 11 ITS PROFIT MARGIN IS VERY LOW WHEN COMPARED TO GENE RAL WORKS CONTRACT EXECUTED BY OTHER CONTRACTORS, FAILED TO JUSTIFY IT S STAND WITH NECESSARY EVIDENCES. THERE IS NO STRAIGHT JACKET FORMULA FOR ESTIMATION OF NET PROFIT. BEFORE ESTIMATION OF NET PROFIT, FACTS AND CIRCUMSTANCES OF EACH CASE SHOULD BE CONSIDERED. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD, WE FIND THAT THE ASS ESSEE IS A LARGE CONTRACTOR HAVING A TURNOVER OF MORE THAN RS.90 CRO RES. THEREFORE, KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF T HE CASE AND ALSO CONSIDERING THE ASSESSEES OWN CASE FOR THE EARLIER PERIOD, TO MEET THE ENDS OF JUSTICE, WE DIRECT THE A.O. TO ESTIMATE NET PROFIT OF 10% ON MAIN CONTRACT WORKS AND 7% ON SUB CONTRACT WORKS, NET OF ALL EXPENDITURE INCLUDING DEPRECIATION, BUT SUBJECT TO FURTHER DEDU CTIONS TOWARDS INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS U/S 40(B) O F THE ACT. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS PA RTLY ALLOWED. 11. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM ASSESSEES CROSS OBJECTION IS VALIDITY OF RE-ASSESSMENT PROCEE DINGS ON THE GROUND THAT THE A.O. HAS RE-OPENED THE ASSESSMENT MERELY O N CHANGE OF OPINION WITHOUT THERE BEING ANY NEW MATERIAL OR IN FORMATION WHICH SUGGESTS ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147 OF THE ACT, THEREFORE, THE RE-ASSESSMENT PROCEEDINGS A RE ILLEGAL AND VOID- ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 12 AB-INITIO. DURING THE COURSE OF HEARING, THE LD. A .R. FOR THE ASSESSEE SUBMITTED THAT, IF THE BENCH IS CONSIDERED THE PLEA OF THE ASSESSEE FOR ESTIMATION OF NET PROFIT BY FOLLOWING ASSESSEES OW N CASE FOR THE ASSESSMENT YEAR 2011-12, THEN HE WOULD NOT PRESS TH E GROUND RELATING TO CHALLENGING THE VALIDITY OF RE-ASSESSMENT PROCEE DINGS. SINCE, WE HAVE DIRECTED THE A.O. TO ESTIMATE NET PROFIT BY FO LLOWING THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011-12, SUBJECT T O A MODIFICATION IN RESPECT OF NET PROFIT ON SUB CONTRACT WORKS, WE DIS MISS GROUND RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF RE-ASSESSM ENT PROCEEDINGS AS NOT PRESSED. 12. THE ASSESSEE HAS CHALLENGED THE ADDITIONS SUSTA INED BY THE CIT(A) TOWARDS INTEREST INCOME AND OTHER MISCELLANEOUS REC EIPTS UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LD. A.R. FOR THE ASSESSEE STATED THAT WHEN NET PROFIT IS ESTIMATED FROM THE BUSINESS , THE A.O. OUGHT TO HAVE INCLUDED INTEREST RECEIPTS AND OTHER MISCELLAN EOUS RECEIPTS IN THE GROSS CONTRACT RECEIPTS FOR THE PURPOSE OF ESTIMATI ON OF NET PROFIT. WE DO NOT FIND ANY MERITS IN THE ARGUMENTS OF THE LD. A.R. FOR THE ASSESSEE, FOR THE REASON THAT INTEREST RECEIPTS AND OTHER MIS CELLANEOUS RECEIPTS IS NOTHING TO DO WITH THE BUSINESS OF THE ASSESSEE, TH EREFORE, INTEREST INCOME AND OTHER MISCELLANEOUS RECEIPTS CANNOT BE I NCLUDED IN THE GROSS ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 13 RECEIPTS FOR THE PURPOSE OF ESTIMATION OF NET PROFI T. THE CIT(A) AFTER CONSIDERING THE RELEVANT SUBMISSIONS HAS RIGHTLY UP HELD THE ADDITIONS MADE BY THE A.O. WE DO NOT FIND ANY ERROR OR INFIR MITY IN THE ORDER OF THE CIT(A), HENCE, WE INCLINED TO UPHELD CIT(A) ORD ER AND REJECT THE GROUND RAISED BY THE ASSESSEE. 13. THE NEXT GROUND RAISED BY THE ASSESSEE TOWARDS ESTIMATION OF NET PROFIT ON CONTRACT WORKS GIVEN TO OTHERS. THE A.O. ESTIMATED NET PROFIT OF 4% ON CONTRACT WORKS GIVEN TO OTHERS FOR EXECUTI ON. THE ASSESSEE CONTENDED THAT THE NET PROFIT ESTIMATED BY THE A.O. IS ON HIGHER SIDE WHEN COMPARED TO THE NATURE OF BUSINESS OF THE ASSE SSEE, THEREFORE, REQUESTED TO ESTIMATE NET PROFIT OF 3% ON CONTRACT WORKS GIVEN TO OTHERS. WE FIND THAT THE ASSESSEE HAS FAILED TO ADV ANCE ANY REASONS FOR ESTIMATION OF 3% NET PROFIT ON SUB CONTRACT WORKS G IVEN TO OTHERS. WE FURTHER OBSERVED THAT THE A.O. HAS ADOPTED NET PROF IT OF 4% WHICH IS QUITE REASONABLE WHEN COMPARED TO THE NATURE OF BUS INESS OF THE ASSESSEE. THEREFORE, WE UPHOLD THE NET PROFIT ESTI MATED BY THE A.O. AND REJECT GROUND RAISED BY THE ASSESSEE. 14. IN THE RESULT, THE APPEALS FILED BY THE REVENUE IN ITA NOS.261 &262/VIZAG/2015 FOR THE ASSESSMENT YEARS 2007-08 & 2008-09 ARE PARTLY ALLOWED AND CROSS OBJECTIONS FILED BY THE AS SESSEE IN CO NOS.13 & ITA NOS.261 & 262/VIZAG/2015 & CO NOS.13 & 14/VIZAG /2017 M/S. SRI SAI LAKSHMI CONSTRUCTIONS & CO., VIJAYAWAD A 14 14/VIAG/2017 FOR THE ASSESSMENT YEARS 2007-08 & 200 8-09 ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28 TH APR17. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 28.04.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-2(1), VIJAYAWAD A 2. / THE RESPONDENT M/S. SRI SAI LAKSHMI CONSTRUCTI ONS & CO., D.NO. 59-7-11/2, SRI SAI NILAYAM, ACHARYA RANGA STREET, R AMACHANDRA NAGAR, VIJAYAWADA- 520 010. 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY //
