IN INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT Before: Shri S.S. Godara, Judicial Member and Shri Amarjit Singh, Accountant Member [Conducted through E-Court at Ahmedabad] ITA No. 195 /Rjt/2015 Assessment Year 2010-11 M/s. Amber Construction ITO, Co, Station Plot, Nr. W ard-1(2), Railway Station, Opp. Vs Junagadh Rokadiya Hanuman, (Respondent) Junagadh-362001, PAN: AAOFA3067F (Appellant) Revenue by: Smt. Usha N. Shrote, Sr. D.R. Assessee by: Shri Ranjit Lalchandani, A.R. Date of hearing : 03-10-2016 Date of pronouncement : 21-10-2016 /ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- This assessee s appeal for A.Y. 2010-11, arises from order of CIT(A)-3, Rajkot dated 02-03-2015 in appeal no. CIT(A)- 3/Rjt/0536/13-14, in proceedings under section 143(3) of Income Tax Act, 1961; in short Act . I.T.A No. 195/Rjt/2015 A.Y. 2010-11 Page No 2 M/s. Amber Construction Co. vs. ITO 2. asssessee has raised following ground of appeal:- 1) learned Commissioner of Income Tax erred in confirming rejection of result and disclosed by duly audited and regularly maintained books of accounts. 2) without prejudice ground no. 1 addition sustained at Rs. 2,37,646 is unwarranted and unjustified. 3) without prejudice to ground no. 1 and 2 addition of Rs. 2,37,646/-Is too heavy and arbitrary and unwarranted by facts of case. 3. In this case, assessee filed return of income declaring income of Rs. 11,69,954/-. assessee firm is civil contractor. During course of assessment proceedings, assessing officer noticed that assessee has not maintained record of quality and consumption of material. He further stated that assessee has also not maintained proper vouchers to do verification of expenses incurred by assessee. In view of this, Assessing Officer estimated addition of net profit @ 8% which comes to Rs. 14,81,204/- after deducting Rs. 9,74,444/- of not net profit already shown by assessee. He made addition of different amount of Rs 5,06,760/- in total income of assessee. assessee filed appeal before Ld. Commissioner of Income Tax(A) against order of Assessing Officer. Ld. Commissioner of Income Tax(A) has restricted addition to Rs. 2,37,464/- as against Rs. 5,06,760/- made by Assessing Officer by stating as under:- 5.2 I agree with appellant on most of counts. It is also seen that A.O. has not, even after mentioning defects in books of accounts, not rejected same u/s.145. This should have been done by A.O. However, observations of A.O. clearly point to same and his estimation of I.T.A No. 195/Rjt/2015 A.Y. 2010-11 Page No 3 M/s. Amber Construction Co. vs. ITO profit is therefore justified. question is about quantum. NP shown by appellant is 5.26% this year which is better than last two years. A.O. has also not given any comparable cases to show that net profit is 8%. However, it would be, in my opinion, proper if GP is compared for this purpose. appellant has shown GP of 12.72% this year as against 14.65% and 17.72% in last two years. appellant has not given any explanation for sharp drop in GP. By appellant's own admission, it is having many sites and self vouchers are made. probability of manipulation in such practice cannot be ruled out. I also do not agree with appellant that quantity and consumption registers cannot be maintained. Considering this, it would serve interest of natural justice, if GP is taken @ 14% on direct works as against 12.72% taken by appellant. On direct contract work of Rs.1,85,15,501, this comes to Rs.25,92,170/-. appellant has shown GP at Rs.23,54,524/- @ 12.72%. addition is therefore restricted to Rs.2,37,646/- as against Rs.5,06,760/- made by A.O. grounds of appeal are partly allowed. 4. During course of appellate proceedings before us, ld. A.R. stated that ld. Commissioner of Income Tax(A) has committed error in sustaining addition on estimated basis without any evidences which is unwarranted. submission of assessee made before Ld. Commissioner of Income Tax(A) is reproduced as under:- 1. only ground is against estimation of net profit from business @ 8% and hence addition of Rs. 506760/- to book result. 1.1 appellant carried business of road construction during year. 1.2 appellant receives income from three types of activities in his business [a] Service contract: This is 1% commission received from sub contractors on contracts taken then sub contracted to others [b] Sale of asphalt: There is no profit earned on this as asphalt is given to sub contractors at purchase price. [c] Road constructions done by self. I.T.A No. 195/Rjt/2015 A.Y. 2010-11 Page No 4 M/s. Amber Construction Co. vs. ITO 1.3 turnover of appellant was Rs 65560878 out of which Rs 47045377 was on account of sub contracts, Rs direct contract was ofRs 18515501. 1.4 AO has given general reasons and has estimated net profit at 8% and has made addition of Rs 506760\. 1.5 action of AO is not justified as [a] books of accounts are audited and auditor has not found any defect in mainteinence of accounts. copy of audited report is enclosed. [b] We have filed entire details of expenses and AO has not found any particular defect in expenses [c] We do not maintain measurement book since measurement is done by government authorities and payment is received on that basis. [d] In very nature of business carried on by appellant it is not possible to maintain day to day stock register. [e] In very nature of business carried on by appellant it is not possible to maintain day to day consumption register. [f] expenses narrated in point [g] are incurred at variousroad sites. In very nature of expenditure same have to be made on self vouchers. However vouchers are available and have been produced. [g] bill as per measurement of department shows extent of work done. [h] We do not made any profit from sales of asphalt to our sub contractors as, as per our agreement we supply them at cost. 1.6 assessments for years 2009-10 and 2011 -12 were also subject to scrutiny. In similar facts and circumstances AO has accepted our results. " 5. Ld. D.R. on other hand relied on order of Ld. Commissioner of Income Tax(A). We have heard both parties and perused material available on record. We find that Assessing Officer has not found any defects in books of accounts of assessee and not rejected books of accounts u/s. 145 of I.T. Act, 1961. books of accounts of assessee are audited and no specific defects were proved by Assessing Officer. Ld. I.T.A No. 195/Rjt/2015 A.Y. 2010-11 Page No 5 M/s. Amber Construction Co. vs. ITO CIT(A) also agreed that Assessing Officer has not mentioned defects in books of accounts. However, Ld. Commissioner of Income Tax(A) held that assessee has shown G.P. @ 12.72% and held that it would serve interest of natural justice, if G.P. is taken @ 14% on direct works, therefore, he restricted addition to Rs. 2,37,646/-. We consider that Ld. Commissioner of Income Tax(A) has made this addition without proper reasoning on surmises as Assessing Officer has not questioned assessee about any gross profit discrepancy in his order. In view of above stated facts and findings, we consider that Ld. Commissioner of Income Tax(A) is not justified to partly sustained addition made by Assessing Officer, therefore, we allow appeal of assessee. Order pronounced in open court on 21-10-2016 Sd/- Sd/- (S.S. GODARA) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 21/10/2016 ak / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order, I.T.A No. 195/Rjt/2015 A.Y. 2010-11 Page No 6 M/s. Amber Construction Co. vs. ITO Assistant Registrar, Income Tax Appellate Tribunal, Rajkot M/s. Amber Construction Co. v. ITO, Ward-1(2), Junagadh