Revenue's Appeal Allowed Over Assessee's Accounts Rejection under IT Act Section 145(3)

The Revenue's appeal against the CIT(A)'s decision to reject the assessee's accounts under section 145(3) of the IT Act was allowed, reinstating the AO's order due to insufficient supporting bills and vouchers. The profit rate for income computation was reduced to 6% by the CIT(A) and upheld by the Tribunal, deeming it fair without complete documentation. The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection, partially allowing the departmental appeal and rejecting the assessee's objection.

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Issues involved:
The judgment involves issues related to rejection of accounts u/s. 145(3) of the IT Act and the computation of income based on profit rate.

Rejection of accounts u/s. 145(3) of the IT Act:
The AO rejected the books of account of the assessee due to lack of supporting bills and vouchers for claimed expenditures, leading to estimation of income at a higher rate. The ld. CIT(A) found the rejection unjustified as no specific defects were mentioned in the audit report. However, since the assessee failed to produce complete bills and vouchers, the rejection was deemed justified. The Revenue appealed against the CIT(A)'s decision, which was allowed, restoring the AO's order.

Computation of income based on profit rate:
The AO applied a profit rate of 12.5% initially, which was reduced to 6% by the ld. CIT(A) considering the history of the assessee and comparable cases. The Revenue challenged the reduction, but the Tribunal upheld the CIT(A)'s decision, stating that the 6% profit rate was fair and reasonable given the lack of complete supporting documents. The Tribunal dismissed the Revenue's appeal and the assessee's cross-objection.

In conclusion, the departmental appeal was partly allowed, and the cross objection of the assessee was dismissed.

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