ERA INFRA SAIDUTTA JV,NOIDA V. CIRCLE 5(1)(1), GB NAGAR, NOIDA

ITA 2819/DEL/2024

AI Insights

The case involves Era Infra Saidutta JV, a joint venture between M/s Era Infra Engineering Pvt Ltd and M/s Sai Dutta Transport and Developers Pvt Ltd, which was awarded a contract by Mumbai Rail Vikas Corporation for construction work. The Assessing Officer rejected the books of account submitted by the JV under section 145(3) of the Income-tax Act, 1961, due to incomplete records and made an adhoc addition to the income by estimating the net profit at 8% of gross receipts. The CIT(A) upheld this decision, leading the JV to appeal to the Income Tax Appellate Tribunal. The Tribunal acknowledged the rejection of the books but found the estimated profit rate excessive, considering the lower rates in previous years, and thus reduced it to 2%.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791064 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2017-2018
• Appeal Filed On: 03-06-2024
• Other Referred Cases: ITO vs Sh. Sunil Nayyar, Delhi in ITA No. 6168/Del/2016, CIT-IX vs Jas Jack Elegance Exports, 325 ITR 217 (Del HC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANKUSH KALRA
• Assessee Lawyers: CHINU BHASIN
• Section: 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘E’ BENCH, NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 2819/DEL/2024 [A.Y. 2017-18] Era Infra Saidutta JV Vs. The A.C.I.T C-56/41, Sector – 62 Circle – 5(1)(1) Noida, Uttar Pradesh Noida PAN – AAAAE 6714 E (Applicant) (Respondent) Assessee By : Ms. Chinu Bhasin, ADv Department By : Ms. Ankush Kalra, Sr. DR Date of Hearing : 11.11.2025 Date of Pronouncement : 10.12.2025 ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- This appeal by the Revenue is preferred against the order of the NFAC, dated 26.03.2024 pertaining to A.Y. 2017-18. Printed from counselvise.com ITA No. 2819/DEL/2024 [A.Y. 2017-18] Era Infra Saidutta JV Vs. ACIT Page 2 of 8 2. The assessee has raised the following grounds of appeal: “1. That the order passed by the assessing officer is contrary to the facts, bad in law and must be quashed. 2. That having regard to the facts and circumstances of the case, Ld AO/CIT(A) has erred in law and on the facts in making addition of Rs.1.31 crore on the basis of estimation of profit calculated @ 8 percent of Gross Receipt of Rs. 20.75 crore. The addition made by Ld. AO/CIT(A) treating them as non-genuine is arbitrary, capricious, unwarranted and must be quashed. 3. That the action of Ld. Assessing officer/CIT(A) in making addition of Rs.1.31/- crore on account of rejection of audited books of accounts by invoking provisions of section 145(3) is erroneous. The addition so made is arbitrary, capricious, unwarranted and must be quashed. 4. That in any case and in view of the matter, the allegation of Ld. AO/CIT(A) in not accepting the facts and disbelieving the results of the appellant are not supported by any documentary evidence and being arbitrary, capricious, unwarranted and must be quashed. 5. That the Ld. Assessing officer/CIT(A) is erred in law in initiating penalty proceedings u/s 270A for under reporting or misreporting is unwarranted and must be quashed. 6. That the appellant craves the leave to add, amend, modify, delete any of the grounds of appeal before or at the time of hearing and all the above grounds are without prejudice to each other.” Printed from counselvise.com ITA No. 2819/DEL/2024 [A.Y. 2017-18] Era Infra Saidutta JV Vs. ACIT Page 3 of 8 3. Briefly stated, the facts of the case are that the assessee, Era Infra Saidutta JV is a joint venture association formed between M/s Era Infra Engineering Pvt Ltd (\"Era\") holding 51% shares being the lead partner and M/s Sai Dutta Transport and Developers Pvt Ltd (\"Sai Dutta\") holding 49% shares. The assessee being competent in executing infrastructure contracts relating to development of highways, metros, railways, etc and Sai Dutta being competent in construction of civil works and infrastructure projects, entered into a joint venture agreement on 04.01.2014 to bid together for the project executed by Mumbai Rail Vikas Corporation. Copy of the joint venture agreement. 4. The assessee was awarded a contract by Mumbai Rail Vikas Corporation (MRVC) by way of successful tender for construction of Foot Over Bridges, Skywalks, and other works such as overhead electric equipment installations, etc in connection with Trespass control at Kurla and Dadar Stations in Mumbai - LOT III amounting to Rs. 60 Cr. 5. The assessee filed its return of income declaring income of Rs. 34,95,789/- alongwith audited financial statements. The assessment was completed u/s 143(3) of the Income-tax Act, 1961 [the Act, for short] while rejecting the books of account and an adhoc addition of Rs. 1,66,01,922 was made by estimating net profit @ 8% of gross receipts of Rs. Printed from counselvise.com ITA No. 2819/DEL/2024 [A.Y. 2017-18] Era Infra Saidutta JV Vs. ACIT Page 4 of 8 20,75,24,036. Relief of already declared net profit of Rs. 34,95,789 was granted and a net addition of Rs. 1,31,06,133 (Rs. 1,66,01,922 Less Rs. 34,95,789) was made. 6. Aggrieved, the assessee went in appeal before the ld. CIT(A) who dismissed the appeal of the assessee and observed that some details were furnished by the assessee but the relevant ledgers like Contract Charges PC; Contract Charges PC with materials; Wages (direct wages) and Wages and Muster Roll which were vital to determine the net profit, were not submitted. Accordingly, the CIT(A) affirmed the action of the AO. 7. Aggrieved further, the assessee is in appeal before us. 8. Before us, the ld. counsel for the assessee vehemently stated that the rejection of books of account u/s 145(3) of the Act for want of furnishing of complete books is improper as no incompleteness was specified in the assessment order. The ld. counsel for the assessee invited our attention to the relevant extract of Section 145(3) of the Act and submitted that in the instant case, the Assessing Officer has not pointed out any incorrectness or incompleteness in the books of account submitted by the assessee and outrightly rejected the same as the assessee failed to produce complete books of account with supporting documents. It is the say of the ld. counsel for the assessee that if the assessee fails to produce Printed from counselvise.com ITA No. 2819/DEL/2024 [A.Y. 2017-18] Era Infra Saidutta JV Vs. ACIT Page 5 of 8 complete books of account i.e. if certain supporting documents or ledgers are not produced, it cannot be said that the books of account are incomplete to fall within the ambit of Section 145(3) of the Act. The assessee has submitted most of the documents sought for by the Assessing Officer and if a couple of ledgers are not furnished, it cannot be a basis of rejection of books of account until and unless any discrepancy or infirmity is detected in the books already furnished by the assessee. 9. The ld. counsel for the assessee submitted that the assessee submitted the audit report and the audited financial statement when the complete books of account were sought since complete books of accounts including all documents and invoices would have meant humongous details and the Assessing Officer did not specifically ask the assessee any specific question in the show cause notice issued and kept on asking complete books of account. Further, the Assessing Officer neither pinpointed any defect in the information submitted earlier nor sought for any further information or queries. 10. The ld. counsel for the assessee relied on ITO vs Sh. Sunil Nayyar, Delhi in ITA No. 6168/Del/2016 24 Feb, 2020, CIT-IX vs Jas Jack Elegance Exports, 325 ITR 217 (Del HC) and a catena of other decisions of various courts to support his submissions. Printed from counselvise.com ITA No. 2819/DEL/2024 [A.Y. 2017-18] Era Infra Saidutta JV Vs. ACIT Page 6 of 8 11. On the other hand, the ld. DR vehemently contended that the Assessing Officer rejected the books u/s 145(3) on account of the failure to submit complete books of accounts and evidence required to determine the net profit of the assessee. The ld DR submitted that the AO made the adhoc addition@ 8% of gross receipts for the reason that the assessee failed to produce \"complete\" books of account along with supporting documents. 12. We have heard the rival submissions and have perused the relevant material on record. We find that in the immediately preceding year, the NP rate of the was 1.74% which has now reduced to 1.65% in the impugned year. Considering the reduction of net profit coupled with non-furnishing of relevant documents/evidence, the AO rejected the books of account u/s 145(3) and estimated the NP rate at 8%. 13. In the given factual matrix of the instant case, we note that the assessee has not given any details of the contract and various expenses incurred for those contracts. The accordingly had show caused the assessee that in absence of the complete books of account, the same will be rejected and net profit would be estimated at @ 8% of the Turnover. Thus, where the assessee failed to furnish complete books of account enabling the AO to determine the net profit of the assessee properly, the assessee’s books of account are liable to be rejected/s 145(3) as the AO cannot be Printed from counselvise.com ITA No. 2819/DEL/2024 [A.Y. 2017-18] Era Infra Saidutta JV Vs. ACIT Page 7 of 8 satisfied about the correctness or completeness of the accounts of the assessee in absence of relevant documents/evidence. We are of the considered view however, that the estimated NP rate at 8% of turnover is at a higher side considering the trend of net profit declared by the assessee in previous years. 14. Considering the entire factual matrix in perspective and in the interest of justice, we are of the considered view that 2% of the NP rate be considered as adequate for the instant year. Since the assessee has not given any plausible reason for non-submission of complete books of account, therefore, estimation of 2% of NP rate is considered reasonable to cover all loopholes in submission of various details. Accordingly, the balance 6% of estimated profit is directed to be deleted. The ground 1 to 4 are partly allowed. 15. Ground 5 regarding penalty is premature. 16. In the result, appeal of the assessee in ITA No. 2819/DEL/2024 is partly allowed. The order is pronounced in the open court on 10.12.2025. Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10th DECMBER, 2025. Printed from counselvise.com ITA No. 2819/DEL/2024 [A.Y. 2017-18] Era Infra Saidutta JV Vs. ACIT Page 8 of 8 VL/ Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order 2. Date on which the typed draft order is placed before the Dictating Member 3. Date on which the typed draft order is placed before the other Member [in case of DB] 4. Date on which the approved draft order comes to the Sr. P.S./P.S. 5. Date on which the fair Order is placed before the Dictating Member for sign 6. Date on which the fair order is placed before the other Member for sign [in case of DB] 7. Date on which the Order comes back to the Sr. P.S./P.S for uploading on ITAT website 8. Date of uploading, inf not, reason for not uploading 9. Date on which the file goes to the Bench Clerk 10. Date on which the file goes for Xerox 11. Date on which the file goes for endorsement 12. The date on which the file goes to the Superintendent for checking 13. Date on which the file goes to the Assistant Registrar for signature on the order 14. Date on which the file goes to the dispatch section for dispatch the Tribunal order 15. Date of Dispatch of the Order 16. Date on which the file goes to the Record Room after dispatch the order Printed from counselvise.com "