ITA No. 176/Pat/2014. IN INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA. BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. No. 176/PAT/2014. Assessment Year : 2011-12. BK PK JV, Income-tax Officer, Shanti Nagar, Vs. Ward Battiah. Bettiah, Bihar. Appellant. Respondent. Appellant by : Shri G.P. Tulsiyan.. Respondent by : Shri R.K. Mishra. Date of Hearing : 03 -08-2016 Date of Pronouncement : 26th Sept., 2016 ORDER This appeal by assessee is directed against order of learned CIT(Appeals)-I, Patna dated 05-08-2014 and pertains to assessment year 2011- 12. grounds of appeal read as under : 1. order of learned CIT-A passed in above case is bad in law and not based on merit and facts of case. 2. disallowance of 5% being Rs.6,56,530/- on Earth Work & Labour Charges by AO was challenged before CIT-A. But learned CIT-A had neither asked to produce any bills/vouchers nor remand report from AO was called for and again mere on assumption sustain addition made by AO, which is totally arbitrary and unjustified and requested to be deleted. 3. 5% disallowance on account of following expenditure being Rs.5,15,840/- was also explained to learned CIT(A) to consist of expenses debited by assessee on account of material purchase for execution of works contract. learned CIT(A) appreciated it to be true and genuine, but confirmed this disallowance without appreciating facts examined. 2 ITA No. 176/Pat/2014. 2. assessee in this case is engaged in civil contract business. Assessing Officer made estimated disallowance of 5% out of labour charges and materials for want of proper supporting evidence 3. Upon assessee s appeal, learned CIT(Appeals) affirmed action of Assessing Officer. 4. Against above order assessee is in appeal before ITAT. submission of learned counsel of assessee is as under : 1. This is case of civil contractor whose declared income was enhanced by disallowance of 5% out of earthwork and 5% out of other direct contract expenses like cement and bricks, humepipes, machinery hire charges etc. (page no.04 of paper book & page no.6 of paper book respectively). 2. CIT(A) also confirmed addition of AO. 3. This is Audited Accounts prepared on basis of Bills, vouchers and other documents maintained by assessee as has been reported by auditor at page No. 10 of Paper Book. 4. AO has also confirmed production of bills & vouches at page no. 03 of paper book which were summarily due to reason that vouchers were appearing to be fresh. 5. As regards of voucher of earth work appellant has submitted at page no. 3 & 4 of paper book that labour register has been maintained but not produced, merely on this ground 5% of total expenditure on earth work Rs.6,56,530/- was disallowed. (Page no. 4 of paper book) 3 ITA No. 176/Pat/2014. 6. Similarly at page no. 06 of paper book, on basis of internal voucher and no stamps affixed on those voucher 5% of expenses were disallowed amounting to Rs.5,15,840/-. 7. In both above cases AO has not pointed out any specific instance or example but just made clandestine estimate making assessed income of assessee at 9.43% of GTO as against 5.16% claimed by assessee and given in his ITR. 8. This ITAT, Patna itself in is many cases restricted estimation income of contractor to 6% which may kindly be allowed. 9. If 6% income shall be 16,75,689/- If 7% income shall be 19,33,971/- As by AO 26,05,620/- working out 9.43%. Accordingly request for restricting addition to 1% only. If 3% if 2.5% if 2% if 1% Rate 7.77% 7.3% 6.9% 6.05% 5. I have heard both counsel and perused records. Learned counsel of assessee submitted that disallowance made by Assessing Officer has resulted in gross profit ratio of more than 9%. He submitted that ITAT Patna Bench in similar cases has held that 6% estimate of profit suffices interest of justice. 6. Per contra learned D.R. submitted that disallowance should be upheld to extent it results in profit ratio of 8%. 7. Upon careful consideration I find that it is not disputed that ITAT Patna in similar cases has upheld estimate of gross profit ratio at rate of 6%. Hence following precedent I hold that addition in this case should be 4 ITA No. 176/Pat/2014. limited to extent gross profit ratio does not exceed 6%. Assessing Officer is directed to limit addition accordingly. 8. In result this appeal by assessee is partly allowed. Order pronounced in Open Court on this 26th day of Sept., 2016. Sd/- ( SHAMIM YAHYA) ACCOUNTANT MEMBER. Dated: 26th Sept., 2016. Copy forwarded to : 1. BK PK JV, Shanti Nagar, Bettiah, Bihar. 2. I.T.O., Ward Bettiah. 3. C.I.T.- Patna. 4. CIT(Appeals)-I, Patna. 5. D.R., ITAT, Patna. 6. Guard File True Copy By Order Assistant Registrar, Income Tax Appellate Tribunal, Patna Bench, Patna. Wakode. BK PK – JV v. Income-tax Officer, Ward – Battiah