Case Number: ITA 2838/DEL/2022
Appellant: DCIT Central Circle-2, Noida
Respondent: Shiv Shakti Construction, Greater Noida
Assessment Year: 2019-20
Result: Appeal Partly Allowed
Case Filed On: 2022-12-02
Order Type: Final Tribunal Order
Date of Order: 2023-07-27
Date of Pronouncement: 2023-07-27
The case involves an appeal filed by DCIT Central Circle-2, Noida against Shiv Shakti Construction, Greater Noida. The primary issue in this case pertains to the disallowance under Section 14A of the Income Tax Act for the assessment year 2019-20. The appeal was filed on December 2, 2022, and the final tribunal order was pronounced on July 27, 2023.
The case was presented before the Income Tax Appellate Tribunal, Delhi Bench “G”. The appeal was heard by Shri Challa Nagendra Prasad, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member. The appeal numbers and assessment years involved were as follows:
The respondent, Shiv Shakti Construction, is a partnership firm engaged in 100% government contracts and is a government-approved civil contractor. The firm is involved in various construction activities, including irrigation development, canal lining works, river and canal protection works, and other similar activities. The firm operates in remote areas where materials are often sourced from local vendors.
The primary issues raised in the appeal were:
The DCIT Central Circle-2, Noida, argued that the CIT(A) erred in law and on facts by granting partial relief to the assessee and scaling down the disallowances made by the Assessing Officer. The department contended that the assessee failed to prove the genuineness of the purchases and the corresponding sundry creditors. The appellant argued that the CIT(A) ignored the incriminating documents found during the search and seizure operations and the statement of the accountant of the firm, which indicated that the creditors in the books were mere entries.
The respondent, Shiv Shakti Construction, contended that the CIT(A) correctly provided partial relief based on the detailed submissions and factual analysis presented. The respondent argued that the nature of their business, which involves working in remote areas, necessitated purchases from local vendors, many of whom operate in the unorganized sector. The firm presented evidence, including confirmations from creditors, supporting vouchers, and payment details through banking channels.
The tribunal observed that the CIT(A) provided a balanced and fair consideration of the facts and circumstances of the case. The CIT(A) noted the peculiar nature of the respondent’s business and the challenges associated with it, including the need for cash transactions in remote areas. The CIT(A) rejected the books of accounts and estimated the net profit at 10% of the gross receipts from the contractor-ship business while excluding other income such as interest on FDRs, IT refunds, NSC interest, and profit share from joint ventures.
The tribunal affirmed the CIT(A)’s approach to estimating the net profit at 10% of the contract receipts while excluding the other income streams. The tribunal also accepted the respondent’s plea to include interest income from fixed deposits as part of the business receipts for estimation purposes, considering the fixed deposits were integral to the business operations.
In conclusion, the appeal filed by DCIT Central Circle-2, Noida, was partly allowed. The tribunal upheld the CIT(A)’s decision to reject the books of accounts and estimate the net profit at 10% of the gross receipts from the contractor-ship business. However, the tribunal modified the order to include interest income from fixed deposits as part of the business receipts for estimation purposes.
Order Pronounced on: 27/07/2023
Per: PRADIP KUMAR KEDIA, A.M.
Order was pronounced in the open Court on 27/07/2023.
Sd/- Sd/-
CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER
PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
DATED: 27/07/2023
Prabhat
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