Tribunal adjusts income estimation method for assessee, lowering profit percentage, citing account discrepancies.

The Tribunal partially allowed the appeal, directing a re-computation of the assessee's income at a 7% net profit instead of the initial 12% estimation based on gross receipts. This decision stemmed from discrepancies in the account books and the need for a valid basis for income estimation after rejecting the records, differing from the AO's reliance on a previous case. The Tribunal's ruling provided partial relief to the assessee by adjusting the income calculation methodology.

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Issues involved: Assessment of income u/s 143(3) of the Income-tax Act, rejection of account books, estimation of income at 12% of gross receipts, non-maintenance of stock register, validity of estimation based on past history.

The appeal was filed by the assessee against the order of ld. CIT(A), Karnal dated 3.10.2011 u/s 250(6) of the Income-tax Act. The assessee raised grounds challenging the order on various issues including the rejection of account books, estimation of income, and the validity of the AO's decision.

Regarding the rejection of account books, the AO found discrepancies in the maintenance of records by the assessee, including incomplete muster-rolls and lack of proper details in photocopies of registers. The AO also noted missing bills for purchases of materials like stone, concrete, sand, and soil. Due to these deficiencies, the AO rejected the books of account u/s 143(3) and estimated income at 12% of gross receipts, relying on a previous case.

During the appellate proceedings, the assessee contended that they were not a civil contractor but engaged in road construction and repair. The assessee argued that non-maintenance of a stock register should not lead to the rejection of account books. However, the ld. CIT(A) upheld the AO's findings, leading to a dispute over the validity of the rejection.

The Tribunal reviewed the submissions and records, considering the assessee's challenge to the 12% income estimation. The Tribunal emphasized the need for a valid basis for estimating income after rejecting account books, citing the assessee's past profit percentages. The Tribunal differentiated the current case from the previous case relied upon by the AO and directed a re-computation of income at 7% net profit, providing partial relief to the assessee.

In conclusion, the appeal was partly allowed by the Tribunal, with a direction to recompute the income of the assessee based on a 7% net profit.

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