ITAT affirms Assessment of Profit on Main Contract at 8% and Income from Sub-Contracts at 5%

The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench affirmed the CIT(A) assessment of the profit on main contract at 8% and income from sub-contracts at 5%.

The assessee, Dasaradha Rami Reddy Somavarapu is an individual, carrying on contract business, filed his return of income admitting a total income of Rs.12.00 lakhs. Pursuant to the selection of return of income of the assessee for scrutiny through CASS to examine various receipts of “contractors business” , assessment under section 143(3) was taken up.

During the assessment proceedings, the Assessing Officer asked the assessee to produce the bills/vouchers for the expenses debited to the P&L A/c, a copy of the agreement entered into with the Principal Contractor and the TDS certificates pertaining to the gross receipts admitted.

However, the assessee failed to produce the relevant documents and therefore, the Assessing Officer rejected the books of account of the assessee and estimated the profit percentage at 8% of gross receipts on the main contracts and 6% on sub-contracts.

Aggrieved, the assessee preferred an appeal before the CIT(A) who confirmed the assessment of profit on main contract at 8% and income from sub-contracts at 5%.

The coram of P.Madhavi Devi did not find any reason to interfere with the orders of the CIT (A) as the CIT(A) has followed the precedents on the issue i.e. the decisions of the Tribunal which he has quoted in his order.

As regards enhancement of the income by the CIT (A) to the extent of 6,38,691/- is concerned also, the Tribunal found that the CIT (A) has directed the Assessing Officer to verify whether the said amount disclosed by the assessee in the subsequent Assessment Year 2011-12 relate to the contract amount received in the Assessment Year 2010-11 and thereafter, in the event of assessee’s failure to establish a direct nexus only, to enhance the amount to the extent of Rs.6,38,691/.

Support our journalism by subscribing to Taxscan AdFree. We welcome your comments at info@taxscan.in