ITO Vs Sharad Anandrao Deore (ITAT Pune)
ITAT Pune held that estimation of profit at 8% in case of contract work for government department, by taking provisions of section 44AD of the Income Tax Act as parameter, is justifiable. Accordingly, order of CIT(A) uphold.
Facts- The assessee is an individual and engaged in the business as government contractor. He filed his return of income on 31.10.2018 declaring total income of Rs.49,61,890/-. The case was selected for limited scrutiny assessment under the E-assessment Scheme, 2019. In absence of non-furnishing of supporting documents to prove the genuineness of contractual payments, the Assessing Officer held that such sub-contract payments to the extent of Rs.3,16,96,450/- is non-genuine and bogus.
CIT(A) / NFAC directed the Assessing Officer to estimate the profit at 8% of the gross contract receipts. Being aggrieved, the present appeal is filed.
Conclusion- Held that although in the case of the assessee, the turnover is above the prescribed limit as per the provisions of section 44AD and the accounts are audited, still the provisions of section 44AD can be taken as a parameter for estimating the income. Further, addition of the total amount of Rs.3,16,96,450/- to the returned income of Rs.51,11,891/- on a turnover of Rs.9,22,49,433/- will give a profit percentage of about 40% which is not possible in such type of activities especially when the assessee is doing contract work for government department. Under these circumstances and considering the totality of the facts of the case and considering the fact that the average net profit ratio for the last four years i.e. from assessment year 201 5-16 to 2021-22 is 5.37%, we are of the considered opinion that the order of Ld. CIT(A) / NFAC directing the Assessing Officer to estimate the profit at 8% is justified under the facts and circumstances of the case. We, therefore, uphold the order of the Ld. CIT(A) / NFAC on this issue and the grounds raised by the Revenue are dismissed.
