Appeal allowed, CIT(A) directs AO to accept book results, delete 15% income estimation.

The appeal was allowed in favor of the appellant. The CIT(A) directed the Assessing Officer to accept the book results and the income returned, rejecting the estimation of income at 15% on gross sales after rejecting the books of accounts. Additionally, the CIT(A) instructed the AO to delete the addition made on account of estimating business income at a uniform rate of 15%, as it lacked justification and was not based on tangible evidence. The Revenue's appeal was treated as allowed for statistical purposes, with the grievance restored back to the Assessing Officer for further proceedings.

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Issues:
- Rejection of estimation of income @15% on gross sales after rejection of Books of accounts.
- Deletion of addition made by AO as income was closely connected to business, no separate addition warranted.
- Adoption of uniform rate of 15% while estimating income.

Rejection of estimation of income @15% on gross sales after rejection of Books of accounts:
The appeal arose from the CIT(A)-3, Hyderabad's order concerning proceedings under section 143(3) of the Income Tax Act, 1961. The Revenue contended that the CIT(A) erred in rejecting the estimation of income at 15% on gross sales after rejecting the books of accounts. The CIT(A) reversed the assessment findings, emphasizing that rejection of books of account should not be done in a casual or mechanical manner. The AO failed to show specific deficiencies in the accounts leading to rejection. The appellant argued that the rejection was arbitrary and against the principles of natural justice. The CIT(A) directed the AO to accept the book results and the income returned, allowing the appeal on this ground.

Deletion of addition made by AO as income was closely connected to business, no separate addition warranted:
The Revenue also challenged the deletion of the addition made by the AO, claiming that the income in question was directly related to the business of the assessee. The CIT(A) held that the AO's rejection of books was not based on tangible evidence and was arbitrary. The appellant argued that the right to make an arbitrary assessment does not exist. The AO estimated the business income at a uniform rate of 15% without justification, including trading turnover in gross revenue. The CIT(A) directed the AO to delete the addition made on that account and accept the income returned, as the rate adopted was without basis and not justified.

Adoption of uniform rate of 15% while estimating income:
The Revenue's grievance was restored back to the Assessing Officer with a direction that the assessee must prove all receipts forming part of turnover and corresponding expenditure claims. Failure to do so would result in assessment based on a recent decision by the jurisdictional high court, which assessed contractual and sub-contractual receipts at 9% and 6%, respectively. The Revenue's appeal was treated as allowed for statistical purposes in these terms.

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