Dwarka Pershad Radhey Ramanlal, Secunderabad Dy.Commissioner of Income Tax, Hyderabad

IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD ‘ B ‘ BENCH, HYDERABAD.

BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND
SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
(Through Virtual Hearing)

ITA No.1438/Hyd/2019
(Assessment Year : 2016-17)

M/s. Dwarka Pershad
Radhey Ramanlal,
5-2-103/104, R.P.Road,
Secunderabad-500 003
 PAQN AACFD 4470F
Appellant 

Vs. 

Dy. Commissioner of
Income Tax,
Circle 10(1), Hyderabad.
Respondent

Appellant By : Shri C. Suresh.
Respondent By : Shri Rohit Majumdar, D.R.

Date of Hearing : 04.03.2021.
Date of Pronouncement :09.06.2021.

O R D E R

Per Smt. P. Madhavi Devi, J.M. :

 This is assessee’s appeal for the Asst. Year 2016-17 filed against the order of Commissioner of Income Tax (Appeals)-6,Hyderabad dt.7.6.2019.

2. The facts of the case are that the assessee-firm, a civil construction contractor filed its Return of Income for the Assessment Year 2016-17 on 6.10.2016 admitting a total income of Rs.44,03,430. The case was selected for limited scrutiny under CASS to verify and examine the following issues :

(i) Whether sales turnover / receipts have been correctly offered for tax ?

(ii) Whether contract receipts/fees have been correctly offered for tax ? 

Accordingly, notice u. 143(2) of the Income Tax Act, 1961 ('the Act') was issued to the assessee. During the assessment proceedings u/s. 143(3) of the Act, the Assessing Officer observed that the assessee has received contract receipts of Rs.8,03,01,580. In this regard, the financials of the assessee were called for u/s. 142(1) of the Act. In response to the notice, the assessee submitted his P & L Account and Balance Sheet of the relevant financial year. The Assessing Officer observed that the net income was declared by the assessee at Rs.42,73,140 which includes the income (i) by refund of VAT amounting to Rs.11,04,805,(ii) income by interest on FDR to Rs.19,16,927; and (iii) income by interest on deposit amounting to Rs.3,383. After reducing the aforementioned indirect incomes, the net profit from construction activity worked out to Rs.12,38,025. Considering the turnover of Rs.8,03,01,580, net profit of Rs.12,38,025 was worked out to 1.54% of the turnover which was too low. The Assessing Officer, therefore called for books of accounts and found that most of the vouchers pertaining to labour charges and other expenses were self-made. Therefore, he held that there is no other option but to reject the assessee’s books of account and to estimate the profit @ 8% of the turnover.

3. Aggrieved by the said decision, the assessee filed an appeal before the CIT(A) by stating that the assessment was taken up for complete scrutiny by the Assessing Officer without following the due procedure. The CIT(A) however, held that the Assessing Officer has acted within his jurisdiction and confirmed the assessment order but accepted the income by refund of VAT as business income and thereafter, restricted the estimation of profit @ 6% of the turnover. 

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