Sai Siddhi Constructions Vs ITO (ITAT Pune)
18% Profit Rate on Contract Receipts Held Excessive – ITAT Restricts Estimation to 8% and Grants Major Relief
The Pune ITAT granted substantial relief to a civil contractor by holding that estimating profit at 18% of gross receipts was excessive and unreasonable, and directed that income be computed at 8% of turnover in line with the presumptive taxation principles under section 44AD.
The assessee, a Body of Individuals (BOI), had not filed a return of income for AY 2018-19. Based on information that it had received ₹1.66 crore from a charitable organization for contract work and that tax had been deducted under section 194C, reassessment proceedings were initiated. Due to non-compliance, the Assessing Officer completed the assessment ex parte and estimated net profit at 18% of gross receipts, resulting in a substantial addition.
There was also a 287-day delay in filing the appeal before the Tribunal. The assessee explained that he was a small contractor with limited education, was unaware of tax procedures, faced confusion between his personal PAN and the BOI’s PAN, and was simultaneously dealing with his father’s prolonged cancer treatment and eventual demise. Accepting these circumstances as reasonable cause, the Tribunal condoned the delay.
On merits, the Tribunal noted that although the assessee had failed to participate in the assessment proceedings and had not furnished detailed books or supporting records, the Assessing Officer’s estimation of profit at 18% lacked justification. Considering the nature of the business and the presumptive taxation benchmark under section 44AD, the ITAT held that 8% of gross receipts would be a fair estimate of taxable income.
Accordingly, the Tribunal reduced the taxable income to ₹13.34 lakh (8% of ₹1.66 crore) and deleted the balance addition of approximately ₹16.68 lakh, partly allowing the appeal.
FULL TEXT OF THE ORDER OF ITAT PUNE
The captioned appeal at the instance of assessee pertaining to the Assessment Year 2018-19 is directed against the order dated 14.11.2024 of National Faceless Appeal Centre, Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of the Assessment Order dated 29.03.2023 passed u/s.147 r.w.s.144 of the Act.
