2014 (6) TMI 571 - AT - Income Tax

Tribunal upholds CIT(A)'s income estimation at 12.5% due to lack of records

Sri Surakshita Homes Versus DCIT, Circle 3(3), Hyderabad

The tribunal allowed the appeal by the assessee, confirming the CIT(A)'s decision to estimate income at 12.5% due to lack of maintained accounts and past ... Determination of gross business receipts – Estimation of income @ 12.5% of gross receipts – Held that:- The account copy indicated that deposits are made from 08.11.2006 to 29.03.2008 - closing balance as on 29.03.2008 is the balance available up to 29.12.2008 as well - prima facie this part of turnover taken into the total turnover of the assessee on the basis of the bank deposits may not pertain to the year under consideration - this aspect was not examined by the CIT(A) and also not raised before the AO as there was no compliance to various notices before the AO – the matter is required to be remitted back to the AO for fresh adjudication. The withdrawals may be for the purpose of business and since estimation was done on the basis of the receipts only, the withdrawals cannot be given credit - no books of account were maintained or no reasonable explanation was offered, the profit at the rate of 12.5% may meet the justice at both the ends - Based on the facts of the case, the profits of the assessee, deserved to be estimated at 12.5% on the turnover as quantified - assessee choose not to maintain books of accounts nor furnished any return of income inspite of various notices issued - CIT(A) is very considerate in estimating the income at 12.5% - there was no reason to interfere with the order of the CIT(A) – Decided partly in favour of Assesee. Issues: Condonation of Delay, Assessment of Gross Business Receipts, Estimation of IncomeCondonation of Delay:The appeal was filed with a delay of 16 days, which was condoned by the tribunal after considering the reasons provided in the petition, citing the illness of the Managing Partner as a reasonable cause for the delay. The appeal was admitted following the filing of an affidavit seeking condonation during the course of the hearing.Assessment of Gross Business Receipts:The assessee, a real estate partnership firm, had not filed a return of income for the relevant year, leading to an ex parte assessment by the Assessing Officer (A.O.). The A.O. treated total bank deposits of Rs.1,34,24,696/- as gross receipts, estimating the net profit at 15% and total income at Rs.20,13,704/-. The assessee contested the quantification of receipts, arguing that certain deposits did not pertain to the relevant year. The CIT(A) confirmed the turnover as quantified by the A.O., reducing the profit estimation to 12.5%.Estimation of Income:The A.O. had estimated the income at 15%, which was reduced to 12.5% by the CIT(A) considering the nature of the business and absence of past profit information. The tribunal upheld the CIT(A)'s decision, noting the lack of maintained books of accounts and returns of income despite multiple notices issued. The estimation at 12.5% was confirmed, and the appeal was partly allowed for statistical purposes.In conclusion, the tribunal addressed the issues of delay condonation, assessment of gross business receipts, and estimation of income in the appeal by the assessee, ultimately confirming the CIT(A)'s decision to estimate income at 12.5% based on the facts of the case. The tribunal found no reason to interfere with the CIT(A)'s order and partially allowed the appeal for statistical purposes.