Form 26AS receipts accepted for income estimation, with reassessment sustained and profit taxed at 8% on gross receipts.

Reassessment under section 148 was sustained where the assessee had not filed returns for some years and Form 26AS showed substantial receipts, providing tangible material for reopening. For income computation, the receipts reflected in Form 26AS were accepted as the correct gross receipts because the assessee could not reconcile them with the returned figures. Income was then estimated at 8% of those gross receipts, rather than taxing the full receipts as income, with consequential allowance of Chapter VI-A deductions on furnishing details and credit for prepaid taxes and TDS appearing in Form 26AS.

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Issues: (i) Whether reopening of assessment under section 148 was valid for the assessment years in question; (ii) whether the assessee's income should be computed on the basis of gross receipts reflected in Form 26AS by applying a net profit rate of 8%, with consequential allowance of Chapter VI-A deduction and credit for prepaid taxes/TDS.

Issue (i): Whether reopening of assessment under section 148 was valid for the assessment years in question.

Analysis: The assessment was reopened on the basis that the assessee had not filed returns for some years and the receipts reflected in Form 26AS were substantial. On those facts, the jurisdiction to initiate reassessment was upheld for the years where the challenge was pressed and examined on merits.

Conclusion: The reopening was held valid.

Issue (ii): Whether the assessee's income should be computed on the basis of gross receipts reflected in Form 26AS by applying a net profit rate of 8%, with consequential allowance of Chapter VI-A deduction and credit for prepaid taxes/TDS.

Analysis: The assessee could not reconcile the receipts shown in the return with those reflected in Form 26AS. The receipts in Form 26AS were accepted as the correct gross receipts, but the entire receipts were not treated as income. Instead, the same profit rate of 8% was applied across the relevant years, with directions to allow Chapter VI-A deduction on furnishing of details and to grant credit for prepaid taxes and TDS as reflected in Form 26AS.

Conclusion: The income was directed to be computed at 8% of the gross receipts, with consequential relief for deductions and tax credit.

Final Conclusion: The assessee succeeded only to the extent of getting income estimated on a percentage of gross receipts rather than being assessed on the whole receipts, while the reopening challenge did not succeed for the years considered.

Ratio Decidendi: Where the assessee fails to reconcile receipts reflected in Form 26AS with the returned figures, the receipts may be accepted as the correct gross receipts for estimation of income, and reassessment can be sustained on the basis of tangible information showing unfiled returns or undisclosed receipts.

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