R.P. Garg, Accountant Member -
(1.) THESE two appeals are by the assessee - one against the quantum and the other is against the penalty under Section 271(1)(c), both for the assessment year 1990-91.
(2.) The assessee derives income from execution of civil contract works, the major there being of execution of work in sub-contractor's capacity. The assessee filed a loss return of Rs. 28,27,249. Noticing the failure of the assessee to respond various notices of hearing the Income-tax Officer completed the assessment under Section 144. He noted that the assessee followed mercantile system of accounting, projectwise accounts were not kept, books of account were not produced and that the copies of subcontracts did not indicate profit margin. Therefore, rejected the books of account and applied the provisions of Section 145 of the Income-tax Act and reduced the loss by an estimated round sum figure of Rs. 10,00,000. He also noticed the difference of Rs.. 19,15,002 in the receipts declared by the assessee at Rs. 1,09,18,314 and as per T.D.S. Certificates submitted at Rs. 1,28,33,316 and added the same to the income of the assessee.
The Commissioner of Income-tax (Appeals), Visakhapatnam, upheld both the additions as the assessee could not explain the difference in the receipts and the rate of profit including the unaccounted receipts of Rs. 19,15,002 was 27.62% as against 33% disclosed by the assessee in the earlier year. He observed paras 10 and 11 as under:
Suppression of contract receipts: P & L A/c. accompanying the return of income, disclosed the gross contract receipts at Rs. 1,09,18,314 whereas the T.D.A. Certificates showed that the gross receipts were Rs. 1,28,33,316. The difference of Rs. 19,15,002 has been brought to tax.
Attempting reconciliation between the two conflicting figures, the learned AR has fairly conceded that gross receipts amounting to Rs. 6,90,088 were not inadvertently disclosed as these were receipts against escalation bill which were directly credited to the personal accounts of the principal contractors M/s Asian Tech. Pvt. Ltd. He further claims that receipt of Rs. 3,96,133 against the works executed by the appellant on its own, were not included in the actual receipts but were shown as closing work-in-progress. He also claims that the principal contractors had erroneously depicted the payments made to the appellant, at Rs. 95,18,275 whereas the payments actually received were Rs. 86,89,494.
The T.D.S. Certificates have been obtained and furnished by the appellant only. The bills statement showing the total receipts at Rs. 86,89,494 has been prepared at the appellant's end. The particulars noted therein have neither been verified nor been certified to be true by the principal contractors. Even though, as contended before me, the bill statement now furnished before me has been prepared on the basis of the receipts actually credited in the bank account of the appellant, the said statement does not have greater evidenciary value than the T.D.S. Certificates. I am, therefore, unable to accept that the figures depicted in the T.D.S. Certificates were erroneous. So far as the work-in-progress is concerned, in spite of the claim that it included actual receipts amounting to Rs. 3,96,133, exact details of the work-in-progress have not been furnished which only could have lent credence to the claim. It is worth-while to bear in mind that for the preceding year, the appellant had admitted suppression of gross receipts and for this year also, suppression is admitted. I would confirm the addition of Rs. 19,15,002;
Lumpsum addition of Rs. 10 lakhs : On the ground, of inadequacy of the disclosed results, a sum of Rs. 10 lakhs has been added. The learned AR has fairly conceded that the state of account-keeping remained the same as it was for the preceding year. That is, the books of account were neither complete nor correct. For the preceding year, an intangible addition was not favourably viewed because the disclosed profit was eminently reasonable.
The position for the year under consideration is analysed hereunder :
The over-all gross receipts including the principal contractor's margin of profit was Rs. 1,39,35,000 approximately. Therefore, the disclosed profit before depreciation was 27.62% of the gross- receipts. The disclosed profit for the preceding year was almost 13%. Although in the cases of contractor's lesser margin of profits is considered reasonable, the appellant itself had been such higher profit in the preceding year and the proportion of sub-contractor's rates, the profit before depreciation works out to Rs. 45.96 lakhs approximately. Whereas by making the addition of Rs. 10 lakhs, the Assessing Officer has assessed the net profit at Rs. 37.47 lakhs only. I would view the addition made on assessment as reasonable.
(3.) ON application by the assessee under Section 154, the Commissioner of Income-tax (Appeals) reduced the addition of Rs. 10,00,000 to Rs. 7,45,253 as some mistake in the computation with the last year's occurred.;