MD Yasin Construction Pvt Ltd Vs ACIT (ITAT Ranchi)
In the case of MD Yasin Construction Pvt Ltd Vs ACIT (ITAT Ranchi), the Income Tax Appellate Tribunal (ITAT) remanded the matter back to the Commissioner of Income Tax (Appeals) (CIT(A)) due to a procedural lapse. The appeal contested the addition of ₹54,70,260 to the company’s income, which was estimated by the Assessing Officer (AO) at a 10% profit margin without rejecting the company’s books of account. The AO’s estimate was challenged on grounds that it was based on assumptions and lacked comparative support. The CIT(A) had dismissed the appeal without providing specific reasons for the decision and without addressing the issues raised, particularly the absence of proper documentation and non-compliance by the assessee. ITAT found that the CIT(A) failed to mention reasons for dismissal as required under Section 250(6) of the Income Tax Act. Consequently, the ITAT directed a de novo consideration of the appeal, emphasizing the need for a fair adjudication process and proper documentation. The case was allowed for statistical purposes, and the assessee was instructed to comply with all notices and requirements in the remanded proceedings.
FULL TEXT OF THE ORDER OF ITAT RANCHI
The captioned appeal has been filed at the instance of the assessee against order u/s 250 of the Income Tax Act,1961 (hereinafter ‘the Act’) dated 27.12.2022 passed by the ld. CIT(A), Patna-3 for the assessment year 2015-2016, on the following grounds of appeal :-
1. For that Id AO was not justified in estimating net profit @ 10% on the total turnover simply on the assumption that assessee is a government/ PSU contractor and in such government or PSU contracts there is provision of 10% profit. The estimate made is simply on AO own assumption without any basis and as such, the addition made for Rs. 54,70,260/- is fit to be deleted.
2. For that Ld AO was not justified in estimating the net profit without rejecting the audited books of the assessee. No estimate of profit can be made by the AO without rejecting the books of the assessee.
3. For that there was no basis for the AO to have estimated net profit @ 10%. The assessee during the year had disclosed a Net Profit of 3.98% which was reasonable enough and compared well with previous and subsequent years records. Profit being estimated on assumption basis by the Ld AO without any parallel/ comparative source is highly unreasonable and uncalled for, and as such, the addition made thereby for Rs. 54,70,260/- is fit to be deleted.
4. For that the Ld AO was not justified in charging interest U/s 234 on the assessed income. Following the decision of Hon’ble Jharkhand High Court, interest U/s 234 A and B should be charged on the returned income and not on the assessed income.
5. For that other grounds in detail will be argued at the time of hearing.
2. Facts in brief are that the assessee is a company which derives income from civil construction work and filed its return of income on 31.03.2017 declaring total income at Rs.2,31,08,550/-. The return was processed under Section 143(1) of the Act and the case was selected for limited scrutiny through CASS on the following issues :-
a) Large current liabilities in comparison to total asset in Balance Sheet;
b) Large other expenses claimed in the Profit & Loss A/c.
3. Accordingly, the AO issued notice u/s.143(2) of the Act which was served upon the assessee, which remained non-complied. Subsequent notices were issued to the assessee. However, the assessee neither made any proper compliance nor filed any explanation regarding his claim. As a result of continuous non- compliance on the part of the assessee, the AO also imposed penalty u/s.271(1)(b) of the Act. Thereafter, he issued a show cause notice to the assessee as to why not assessment be completed u/s.144 of the Act but the same was also not replied by the assessee. Accordingly, the AO completed the assessment u/s.144 of the Act estimating the net profit @10% of the total turnover of the assessee i.e. Rs 28,57,88,098/-and after considering the disclosed income of Rs 2,31,08,550/-added the difference of Rs 54,70,260/- to the total income of the assessee.
