Case Law Details
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.
2. Registry has pointed out that there is delay of 287 days in filing the appeal before the Tribunal. Assessee has filed an affidavit explaining the delay and relevant contents are reproduced below:
“I am a civil contractor and a construction worker too. I studied till 10th standard only. I am not very well conversant with the Income Tax Law, its provisions and procedures. I am not very much conversant with the communication via email.
When I got the work of Surya Shikshan Prasarak Va Samajseva Mandal, Satana, Tal Baglan, Nashik, they themselves have opted for a PAN as Body of Individuals in the name of Sai Siddhi Constructions. I have my own PAN too. I was not having any other income on this PAN other than I received in the year under consideration.
I was not unaware as to whether I have to file Income Tax Return for BOI or not. Till date no Income Tax Return was filed by for this BOI due to unawareness of Income Tax Law.
My father was diagnosed with cancer in year 2022 and passed away in 2024. Most of my savings and earnings were spent on his health and medical treatment. Due to the said reason, I could not even respond to the notices issued by CIT(A), NFAC.
As I was not much aware about communication through an email, I could not know when the order was passed by the Ld. CIT(A), NFAC. It was only in the month of November 2025 I got to know about this order when I got a call from Income Tax Department for recovery of demand.
I immediately acted upon the same and connected with my consultant to understand what is to be done next. I was advised to file an appeal before the Hon’ble Income Tax Appellate Tribunal and the same was filed on 13.12.2025.
The delay caused is not intentional but due to the unawareness as well as the confusion between my own PAN and PAN of BOI ie. Sai Siddhi Constructions. This delay it totally circumstantial. Hence, I most respectfully pray to kindly condone the delay and grant me an opportunity of being heard.”
3. After hearing both the sides and considering the affidavit filed by the assessee stating the reasons which led to delay and also placing reliance on the judgment of Hon’ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors. (1987) 2 SCC 107) I find that due to ‘reasonable cause’ assessee failed to file the appeal within the time limit specified under the Act. I therefore condone the delay of 287 days in filing the appeal and admit the appeal for adjudication.
4. At the outset, ld. Counsel for the assessee submitted that due to non-appearance ld. Assessing Officer has estimated the profit @18% on the gross turnover/gross receipt of Rs.1,66,80,000/- received from Surya Shikshan Prasarak Va Samajseva Mandal. He submitted that ld. Assessing Officer has estimate the Net Profit at a very much higher rate and the same should be confined to a reasonable estimate.
5. On the other hand, ld. Departmental Representative supported the order of the Assessing Officer.
6. I have heard the rival contentions and perused the record placed before me. The assessee is a body of individual and no return of income was filed for A.Y. 2018-19. Based on the information about the assessee having received Rs.1,66,80,000/- from Surya Shikshan Prasarak Va Samajseva Mandal, case of the assessee selected for issuance of notice u/s.148 of the Act and the same validly served. Ld. Assessing Officer issued notice u/s.142(1) of the Act, however, assessee failed to file any return of income and also could not participate in the assessment proceedings. Ld. Assessing Officer on observing that TDS of Rs.1,05,380/- u/s.194C of the Act has been deducted by the taxpayer applied Net Profit rate of 18% on the gross receipt of Rs.1,66,80,000/- treating it as Business turnover. Though the assessee preferred appeal before ld.CIT(A) but due to non-compliance ld.CIT(A) has dismissed the appeal.
7. Before me, ld. Counsel for the assessee has prayed for estimating the fair Net Profit rate. Considering the fact that the assessee has not participated in the proceedings before the authorities nor has furnished any other relevant details exhibiting the calculation of total income, I therefore, considering the provisions of section 44AD of the Act applicable for Presumptive Taxation, deem it appropriate to estimate the Net Profit at 8% of the gross receipts as against 18% estimated by the Assessing Officer. Accordingly, income of the assessee is calculated at Rs.13,34,400/- and the remaining amount of addition at R.16,68,000/- is hereby deleted. Finding of ld.CIT(A) is set aside and the grounds of appeal raised by the assessee are partly allowed.
8. In the result, the appeal of the assessee is partly allowed.
Order pronounced on this 16thday of February, 2026.
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