Income Tax Appellate Tribunal - Chandigarh
Sh. Baldev Singh Contractor, Sangrur vs Department Of Income Tax on 24 April, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH "A" CHANDIGARH
BEFORE SHRI T.R. SOOD, AM AND Ms. SUSHMA CHOWLA, JM
ITA No. 911 /Chd/2010
Assessment Year: 2007-08
A.C.I.T. Circle V. Baldev Singh Contractor
Sangrur Sunam
PAN: AAHFB 1431 H
(Appellant) (Respondent)
Appellant by: Shri N.K. Saini
Respondent by: Shri Sudhir Sehgal
Date of hearing: 24.04.2012
Date of Pronouncement: 02.05.2012
ORDER
PER T.R. SOOD, A.M
In this appeal the Revenue has raised the following two grounds:
"1 In the facts and circumstances of the case, the ld. CIT(A) has erred in directing the Assessing Officer to adopt the net profit at the rate of 6.5% as against the rate of 10% applied by the Assessing Officer, without recording any tangible and cogent reasons, thus violating the rules of natural justice, as held by the Hon'ble Punjab & Haryana High Court at Chandigarh vide order dated 7.5.2007 passed in ITA No. 167 of 2007 in the case of CIT-III, Ludhiana V. M/s Shivam Construction Co.
2. In the facts and circumstances of the case, the ld. CIT(A) has further erred in directing the Assessing Officer to adopt the net profit at the rate of 6.5% as against the rate of 10% applied by the Assessing Officer, without appreciating that the Assessing Officer had pointed out the discrepancies noted in the books of account in detail and also placed reliance on the following judgments passed by the Hon'ble ITAT:
(i) ACIT V. Shivam Construction Co. ITAs 383/Chandi/2004, A.Y 1999-2000) & 384/Chandi/2004 (A.Y 2000-01).
(ii) Parbhat Kumar Contractor V. ACIT, ITA 323/Chandi/2005 (A.Y 2001-02)."
2. After hearing both the parties, we find that certain discrepancies were noted by the Assessing Officer during the assessment proceedings regarding purchase of material, expenditure incurred on earth filling, labour expenses etc. and accordingly the books of account were rejected. Thereafter the Assessing Officer applied 10% NP rate on gross receipts.
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3. On appeal, the ld. CIT(A) confirmed the action of the Assessing Officer regarding rejection of books of account. However, he estimated the profit rate at 6.5%.
4. Before us, the ld. DR for the revenue strongly relied on the order of the Assessing Officer. He further submitted that Section 44AD of the Act prescribes presumptive rate in civil construction at 8%.
5. On the other hand, ld. counsel for the assessee submitted that the assessee is a basically private concern and work for constructing houses for various parties. He further submitted that the ld. CIT(A) has only made reasonable estimate of profits and therefore, no interference is called for.
6. We have heard the rival submissions carefully. Since the rejection of books of account have been confirmed by the ld. CIT(A) which has not been challenged by the assessee. Therefore, only dispute before us is regarding estimate of profit. We are unable to agree fully with the submissions of the ld. DR for the revenue that the prescribed rate of 8% should be applied. Section 44AD is applicable where turnover is less than Rs. 40.00 lakhs. However, at the same time rate of 6.5% estimated by the ld. CIT(A) seems to be on lower side. Accordingly we proposed that the profit should be estimate at 7.5% of the gross turnover which was accepted by the ld. counsel for the assessee. Accordingly we set aside the order of the ld. CIT(A) and direct the Assessing Officer to estimate NP rate @ 7.5% of the gross receipts.
7. In the result, appeal of the Revenue is partly allowed.
Order pronounced on 02.05.2012
Sd/- Sd/-
(SUSHMA CHOWLA) (T.R. SOOD)
JUDICAL MEMBER ACCOUNTANT MEMBER
Dated: 02.05.2012
SURESH
Copy to: The Appellant/The Respondent/The CIT/The CIT(A)/ The DR 3 4 .