IN INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. No. 861/HYD/2014 Assessment Year: 2009-10 DY. Commissioner of M/s. ADVIK Builders & Income Tax, Vs Consultants Pvt. Ltd., Circle-1(1), HYDERABAD HYDERABAD [PAN: AAECA3793K] (Appellant) (Respondent) For Revenue : Shri P. Somasekhar Reddy, DR For Assessee : Shri B. Satyanarayana Murty, AR Date of Hearing : 12-09-2016 Date of Pronouncement : 21-09-2016 ORDER PER B. RAMAKOTAIAH, A.M. : This is appeal by Revenue against order of Ld.Commissioner of Income Tax (Appeals)-II, Hyderabad, dated 20-02-2014. Revenue has raised following grounds in this appeal: 2. CIT(A) ought to have appreciated AOs addition with regard to bogus creditors. 3. CIT(A) erred in ignoring remand report of AO with regard to denials of creditors and sub-contractors. 4. CIT(A) erred in arriving at conclusion of assessing high percentage of profits . Ground Nos. 1 & 5 are general in nature. I.T.A. No. 861/Hyd/2014 :- 2 -: M/s. ADVIK Builders & Consultants Pvt Ltd., 2. Briefly stated, assessee is civil contractor and has offered total income of Rs. 99,67,280/- on gross receipts of Rs. 19.88 Crores. Assessing Officer (AO) in course of scrutiny has made various enquiries mostly with reference to outstanding credits in Balance Sheet and arrived at conclusion that assessee cannot have that many credits equivalent to expenditure claim and further those creditors have denied any business activity with assessee. Accordingly, by making various disallowances including more than 90% of expenditure claimed under head material purchases and direct expenses , total income of assessee was determined at Rs. 18,80,60,122/-. Ld. CIT(A) by noting reasons of AO disallowing 90% of expenses in para 3, considered submissions of assessee in order and finally gave relief stating as under: 4.3. Admittedly books of accounts are not properly maintained by assessee. No vouchers for expenses could be produced during assessment proceedings. reasons given were that Accountant who was looking after purchases and payments had left job. In any case, income admitted was Rs. 99,67,280/- and assessee had admitted additional income of Rs. 5,95,31,478/- as no TDS was deducted on sub-contract payments (contract obtained from GKC projects). Hence, total income offered to tax is Rs. 99,67,280/- + 5,95,31,478/- which works out to 34.96% which is very reasonable in business of civil construction. Even in cases where books of account were rejected percentage of profits estimated in this line of activity vary from 8 to 12%. In case of Teja Constructions Vs. ACIT, 129 TTJ 0057 ITAT, Hyderabad, AO was directed to estimate assessee s income @9% - if contract is directly executed, @8% - if contract is sub-contracted out and 4% - if sub-contract work is executed. Moreover, to estimate income of assessee at 94.60% of gross receipts is completely unfair and unreasonable. It is pertinent to mention here that AO for subsequent assessment year 2010-11 had estimated profit at 7.5% of gross receipts. Further, Hon'ble ITAT, A.P. in case of M/s. Tirumala Earth Movers Vs. JCIT, ITA No. 712/Hyd/2009 AY. 2006- 07 and also in case of M/s. C. Eswar Reddy and Co. Vs. ACIT, I.T.A. No. 861/Hyd/2014 :- 3 -: M/s. ADVIK Builders & Consultants Pvt Ltd., ITA No. 668 & 670/Hyd/2009 AYs. 2003-04 & 2004-05 held that depending on facts and circumstances of each case Tribunal has been adopting profit from 8 to 12.5% in case of main contract and 5 to 7% in case of sub-contract. Therefore, disallowance made by Assessing Officer of Rs. 11,85,61,634/- is deleted . Revenue is aggrieved. 3. Ld. CIT-DR submitted that AO has not rejected Books of Account and therefore disallowance of expenditure claimed is proper. It is not correct on part of Ld. CIT(A) to reject Books of Account and delete addition by resorting to comparison of ultimate profit worked out. It was submitted that amount of Rs. 5,95,31,478/- disallowed is not GP addition but disallowance u/s. 40(a)(ia), therefore, taking that amount for GP computation is not correct. It was submitted that order of AO may be restored. 4. Ld. Counsel submitted that assessee has done sub-contract works in two contracts and as main contractor in two of projects which were verified by inspectors of department in course of remand proceedings and there was evidence that assessee has executed projects. Since employees have resigned and left company, Books of Account could not be supported by various bills and vouchers, accordingly assessee has agreed for disallowance of amount of Rs. 5,95,31,478/- It was submitted that income offered is more than reasonable and therefore, order of CIT(A) is to be confirmed. I.T.A. No. 861/Hyd/2014 :- 4 -: M/s. ADVIK Builders & Consultants Pvt Ltd., 5. We have considered rival contentions and perused orders of AO and CIT(A). We are surprised that AO had to resort to disallowance of 90% of expenditure, when he has not enquired about any expenditure as such, but issued summons/letters to various creditors. He has made verification of Balance Sheet entries and not claim of expenditure in P&L A/c. Whatever may be findings of AO in scrutiny, it is not possible to complete project without any expenditure. Therefore, disallowance of 90% of expenditure claim is not proper on part of AO. Considering that Ld. CIT(A) has examined these issues and total income determined is more than estimation of income in contractors cases by various decisions of ITAT, we do not see any reason to interfere with order of Ld.CIT(A). Accordingly, grounds raised by Revenue are rejected. 6. In result, appeal of Revenue is dismissed. Order pronounced in open Court on 21st September, 2016 Sd/- Sd/- (P. MADHAVI DEVI) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 21st September, 2016 TNMM I.T.A. No. 861/Hyd/2014 :- 5 -: M/s. ADVIK Builders & Consultants Pvt Ltd., Copy to : 1. Deputy Commissioner of Income Tax, Circle-1(1), Hyderabad. 2. ADVIK Builders & Consultants Pvt. Ltd., 1-7-29/B/13, Leela Nagar, Ameerpet, Hyderabad. 3. CIT(Appeals)-II, Hyderabad. 4. CIT-I, Hyderabad. 5. D.R. ITAT, Hyderabad. 6. Guard File. Dy. Commissioner of Income-tax, Circle-1(1), Hyderabad v. M/s. ADVIK Builders & Consultants Pvt. Ltd