2021 (1) TMI 776 - AT - Income Tax

Tribunal upholds 8% income estimation under Section 44AD, stresses proper accounting

Shri Shivaji Anandrao Power Versus The Income Tax Officer Ward-1, Kolhapur

The Tribunal dismissed all four appeals by the assessee, affirming the Ld. CIT(Appeals)'s decision to estimate income at 8% based on Section 44AD. The ... Estimation of income - As contended by the assessee that the AO has not pointed out any discrepancies in the seized material on the basis of which he rejected assessee's business result and also did not provide any reason for estimating income @10% besides what the assessee has stated in his statement - CIT-A applied the rate of 8% - HELD THAT:- As per Section 44AD of the Act, the prescribed rate as a thumb rule in assessee's line of business is 8% of turnover. In case an assessee claims that his profits are below 8%, he must maintain books of account and get them audited. These exercises were not done by the assessee. Therefore, in the interest of justice, the Ld. CIT(Appeals) had applied the rate of 8% as per Section 44AD of the Act to the income of the assessee considering his area of business. Thus, the findings of the Ld. CIT(Appeals) are absolutely reasonable and as per law. Therefore, the same does not call for any interference. Hence, the findings of the Ld. CIT(Appeals) are upheld. - Decided against assessee. Issues:Estimation of income at 8% by Ld. CIT(Appeals) based on Section 44AD of the Income Tax Act, 1961.Analysis:The judgment involves four appeals by the assessee against the common order of the Ld. CIT(Appeals)-2, Kolhapur for the assessment years 2008-09 to 2011-12. The appeals were heard together as the issues and facts were identical. A survey under section 133A of the Act revealed that the assessee, a civil works sub-contractor, did not maintain proper books of account or get accounts audited. The Assessing Officer estimated income at 10% due to non-compliance and lack of maintained books. In the appellate proceedings, the assessee argued against the estimation, highlighting lack of discrepancies in seized material and non-provision of essential documents. The Ld. CIT(Appeals) noted the absence of reliable expenses against turnover and the un-audited nature of the accounts. The prescribed rate under Section 44AD is 8% of turnover, which the assessee did not meet. The Ld. CIT(Appeals) balanced interests by adopting an 8% rate, considering the line of business.The primary contention in the appeals was the income estimation at 8% by the Ld. CIT(Appeals). The Tribunal reviewed the case records, finding the assessee's evasion of assessment proceedings. The Assessing Officer resorted to best judgment assessment at 10%, while the Ld. CIT(Appeals) adjusted it to 8% based on Section 44AD. The Ld. CIT(Appeals) highlighted the lack of discrepancies in seized material, absence of reasons for the 10% estimation, and failure to provide essential documents to the assessee. The Tribunal concurred with the Ld. CIT(Appeals' decision, upholding the 8% estimation as reasonable and legally sound.In conclusion, the Tribunal dismissed all four appeals by the assessee, affirming the Ld. CIT(Appeals)'s decision to estimate income at 8% based on Section 44AD. The judgment emphasized the importance of maintaining proper accounts and complying with audit requirements in determining income, while also ensuring a fair balance between the assessee's interests and revenue considerations. The decision was deemed just and in accordance with the law, warranting no interference.