I.T.A. No. 293/Vizag/2016. Case: G. Raja Gopala Rao Vs DCIT, Circle-4(1). ITAT (Income Tax Appellate Tribunal)
| Case Number | I.T.A. No. 293/Vizag/2016 |
| Counsel | For Appellant: C.V.S. Murthy, AR and For Respondents: P. Srinivasa Murthy, DR |
| Judges | V. Durga Rao, Member (J) and G. Manjunatha, Member (A |
| Issue | Income Tax Act, 1961 - Sections 142(1), 143(2), 145(3), 30, 31, 32, 33, 34, 35, 36, 37, 38, 44AD |
| Judgement Date | January 20, 2017 |
| Court | ITAT (Income Tax Appellate Tribunal) |
Order:
G. Manjunatha, Member (A), (ITAT Visakhapatnam)
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This appeal filed by the assessee is directed against order of the Commissioner of Income Tax (A)-2, Guntur, camp office at Visakhapatnam dated 30.3.2016 and it pertains to the assessment year 2009-10.
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The brief facts of the case are that the assessee is an individual engaged in the business of execution of civil works contract, filed his return of income for the assessment year 2009-10 on 29.9.2009 declaring total income of ` 97,32,420/-. The case has been selected for scrutiny and accordingly, notices u/s. 143(2) & 142(1) of the Income Tax Act, 1961 (hereinafter called as 'the Act') were issued. In response to notices, the authorized representative of the assessee appeared from time to time and produced books of accounts along with bills and vouchers for verification. During the course of assessment proceedings, on verification of books of accounts and other details filed by the assessee, the A.O. noticed that most of the expenditures in respect of labour charges, work expenses, mess charges and other indirect expenses are not supported by proper bills and vouchers. The A.O. further observed that the assessee has kept self-made vouchers in support of major expenditure and accordingly, opined that the books of accounts maintained by the assessee are not amenable for verification and hence, rejected books of accounts under the provisions of section 145(3) of the Act and estimated net profit of 8% on gross contract receipts net of all deductions. In addition to estimation of net profit, the A.O. has made separate additions towards income from other sources being interest earned on fixed deposits under the head income from other sources.
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Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has filed written submissions. The assessee further contended that the A.O. was erred in rejection of books of accounts without pointing out any specific defects in the books of accounts which warrants rejection of books of accounts under the provisions of section 145(3) of the Act. The assessee further submitted that he had maintained bills and vouchers in respect of major expenditure, however, in respect of labour and like charges, he had maintained self-made vouchers because of nature of expenditure, which necessitated payment of wages by taking self-made vouchers. Therefore, the A.O. was incorrect in rejection of books of accounts, just because few expenditures are supported by self-made vouchers. The assessee further submitted that the A.O. was erred in not allowing deductions towards depreciation on assets, which is otherwise eligible to claim depreciation, even though the net profit is estimated from the business. In so far as separate additions towards interest on fixed deposits, the assessee submitted that he had kept fixed deposits in the name of principals for obtaining contracts and hence, any interest earned on such fixed deposit forms part of gross contract receipts and accordingly, the A.O. was erred in making separate additions towards interest income under the head income from other sources.
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The CIT(A) after considering the explanations of the assessee and also relied upon the decision of ITAT, Hyderabad in the case of M/s. KNR Constructions, held that considering the facts and circumstances of the case, net profit estimated by the A.O. on gross contract receipts is fair and reasonable which does not require any interference. The CIT(A) further held that there is no hard and fast rule for estimation of net profit. However, there should be basis for...
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