TaxTMI 
TaxTMI 
2017 (5) TMI 1522
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....r reasons and hence the same kindly be deleted. 2.1 Rs. 14,00,000/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the application of Sec.145(3) of the Act. The provision so invoked and confirmed by the CIT(A) being contrary to the provisions of law and facts, the same may kindly be quashed. Consequently the trading addition of Rs. 14,00,000/- may kindly be deleted in full. Alternatively and without prejudice to above 2.2 The ld. CIT(A) further erred in law as well as on the facts of the case in confirming the addition of Rs. 12,15,176/- made by the AO (by applying NP @ 11.50%) and further erred in enhancing the addition to Rs. 1,84,824/-. The addition so made & confirmed and further enhanced by the CIT(A) is totally contrary to the provisions of law and facts on the record and hence the addition may kindly be deleted in full. 2.3 The ld. CIT(A) further erred in law as well as on the facts of the case in enhancing the income which is without jurisdiction being totally contrary to the provisions of law and facts on the record and hence the enhancement kindly be deleted in full. 3. Rs. 1,24,830/-: The Id. CIT(A) erred in law as well as on the f....
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....m the substantial depreciation claim made by the assessee. Due to such capital investment, the profit rate should also be higher. Considering all the facts and circumstances mentioned above, and also considering the nature of business and work executed by the assessee, the net profit rate is reasonable and applied 11.5% on total gross receipt subject to interest and depreciation. Accordingly, trading addition of Rs. 12,15,176/- is made as per details below: Profit on receipt of Rs. 24,27,14,639/- Rs. 2,79,12,183/- Profit declared by the assessee Rs. 2,66,97,007/- As discussed in para 3 trading addition Rs. 12,15,176/-'' 4.2 Being aggrieved, the assessee went in first appeal before the ld. CIT(A) who upheld the application of Sec. 145(3) and also issued a Show Cause Notice proposing enhancement. In response to Show Cause Notice assessee filed detailed written submissions time to time. The findings of the ld. CIT(A), are as under:- "I have gone through AO's findings and assessee's submissions. In fact the reply of assessee goes against him, the assessee submitted that civil work continuous on a regular basis and generally payment is received after 2....
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....2004-05 (PB 37-47). Kindly refer paper book page 39 at para 5 which is reproduced hereunder: "xxx.............. Therefore, in the circumstance and facts of the case we find no infirmity in the order of the ld. CIT(A) who has rightly invoked the provisions of section 145(3) of the Act." Similar view was taken in ITA No. 60/JP/08 & 17/JP/08 for A.Y. 2003-04 & 2004-05 at paper book page 44. Continuing the same line and consistency, the AO this year also asked the assessee to produce the books of account examined the same and after noticing various deficiencies and defects (AO Pg 2-5) invoked Sec.145(3) (AO Pg-5) against which, the assessee took specific GOA No.1 before the CIT (A) challenging the very invocation of Sec.145(3). 1.2 It is submitted that vide GOA 2 before the ld. CIT(A), the assessee challenged the additions made by the AO on merits. The ld. CIT(A) after reproducing the entire assessment order in its operative part, took the matter in altogether a different direction and ultimately confirmed the addition made by the AO in the sense that he made an enhancement hence, the original addition made by the AO, having been included within that itself, was also confirme....
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....ejected the account u/s 145(3), then has tried to make an assessment in the manner provided u/s 144 (though his estimation is separately under challenge). However, the ld. CIT(A) has adopted this strange theory where he has adopted a path which even the law has not visualized/provided for. The ld. CIT(A) having confirmed A.O.'s action and in turn having confirmed invoking of Sec.145(3), was obliged to see whether the assessment has been made by the A.O. in the manner provided u/s 144 or not. Alternatively however, if he says that the account were not rejected then the trading results as declared by the assessee must have been accepted and then there was no question of making any addition by the A.O. or any enhancement by the ld. CIT(A). 3.1 Fair estimation required - Legal Position: In these circumstances a pertinent question arise whether after the rejection of account and invoking of Sec.145(3), is there any scope of again referring to the same books of account finding various deficiencies, defects and faults and then to estimate the income on that basis. Although after rejecting the account it is not disputed that what is all required is a fair estimation. However, invoking ....
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....rejection of books of accounts, no disallowance can be made separately u/s 40A(3)" 6.1.2 The Hon'ble Allahabad High Court in CIT Vs Banwari Lal Banshidhar (1998) 229 ITR 229, 232 (All.) (DPB 1-3) held that: "3. All the three questions, referred to this Court, revolve round the same controversy. The question for consideration is that when no deduction was sought and allowed under s. 40A(3), was there any need to go into s. 40A(3) and r. 6DD(j). We see force in the view taken by the Tribunal that when income of the assessee was computed applying the gross profit rate and that when no deduction was allowed in regard to the purchases of the assessee, there was no need to look into the provisions of s. 40A(3) and r. 6DD(j). No disallowance could have been made in view of the provisions of s. 40A(3) r/w r. 6DD(j) as no deduction was allowed to and claimed by the assessee in respect of the purchases. When gross profit rate is applied, that would take care of everything and there was no need for the AO to make scrutiny of the amount incurred on the purchases by the assessee." 6.1.3 The Hon'ble Rajasthan High Court in CIT vs. G.K. Contractor (2009) 19 DTR 305 (Raj.) (DPB 4-5) held tha....
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....has been ignored by the ITO, there may not have been any difficulty in upholding that order. But, when he proposes to add back an exact item in the P&L a/c, he was relying on the rejected books which he could not do as held by the Bench of this Court in Maddi Sudarsanam Oil Mills Co. vs. CIT (supra). There is also a further difficulty if s. 40, as argued by learned counsel, is to be taken into account even after making an estimate. When there are certain other deductions which are to be disallowed such as wealth-tax payment in s. 40, can it be said that after making an estimate, the wealth-tax charged in the P&L a/c should again be added back to the profit. This example, illustrates how the contention of the Revenue, that s. 40(b) makes a difference in the situation, is untenable. In our considered opinion, the answer to the question has to be in the negative and in favour of the assessee. The question is answered accordingly." 6.1.5 Refer Maddi Sudarsanam Oil Mills Co. v/s CIT (1959) 37 ITR 369 (AP) (DPB 33-35). 6.1.6 The Hon'ble ITAT(Hyd) `B' bench in the case of ECI Engineering & Construction Co. Ltd in ITA No. 2048/Hyd/2011 (DPB 16-25) held that: "where the books of acc....
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....nthly basis at site and to compare with the books when it was submitted that there are running/ongoing projects which continue for more than one year and on the site, the assessee keeps on receiving the goods but due to late receipts of invoices, the same are accounted for later. The non booking of expenses in the same month resulted in negative stock. the CIT(A) also accepted this in principle in A.Y.2007-08 at pg 18 pr 13. 7.3 The relevant extract from the written submission before ld. CIT(A) are as under: "3) In this regard it is submitted that Assessee is not engaged in sale and purchase of any particular goods for which Closing stock can't b negative, rather than assessee purchase goods for work execution for which receipt of goods and it's booking in the books of accounts is not on the same time. It is general trend in the Construction Industry that goods were supplied on regular basis on challans and used for work execution and their bills comes after long time on the basis of which entries were made in the books of accounts. The detailed chart produced to your good self on monthly basis contains the above defect and monthly Closing Stock worked out was just a imaginary ....
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....econd method by applying varying NP rates depending upon the circumstances of each year. The CIT(A) has not at all justified any strong circumstances warranting a deviation there from. 7.5 Theory of CIT(A) against Rule of Consistency: 7.5.1 A support to this legal proposition can be taken from the ratio laid in CIT v/s Bhawan Path Nirman (2002) 258 ITR 440 (Raj) (DPB 61-71). The principal laid was that it is a matter of fair estimation between the parties and if the AO makes estimation in a particular manner in one year, the same pattern has to be followed in the later years also as to avoid any distortion in making a fair estimation. In the cited case of a civil contractor, the AO added sales tax refund in the subjected year even after application of a particular NP rate. The Hon'ble Court (in the context of the admitted facts that every year accounts were being rejected and income being assessed after application of NP rate) held that the AO merely relied on the practice of assessing business income on estimation by applying NP rate and there was neither any deduction nor any addition/disallowance discernable from the estimations made in the current year or in the past years. B....
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....ofits and hence, it was nothing but a surmises and conjectures. Pertinently, there is no allegation of unexplained purchases nor is the suppression of gross receipts alleged. At the year end there is no negative stock. There appears no logical way to infer any income more than declared. 9. No fair Estimation made: 9.1 Past History-Best Guide: We may submit that past history has been held to be the best guide in the cases of fair estimation. Kindly refer Kindly refer CIT v/s Gupta K.N. Construction Co. (2015) 116 DTR 377 (Raj), Vaibhav Gems 112 DTR 84 (Raj), CIT v/s Popular Electric Co. Pvt. Ltd (1993) 203 ITR 630 (Cal), MA Rauf v/s CIT (1958) 33 ITR 843 (Pat), CIT v/s Inami Marble 316 ITR 125 (Raj) (DPB 31-32). 9.2 However, it will appear that in the present case, neither the ld. AO nor the ld. CIT(A) has made a fair estimation in conformity of the above settled judicial guideline. On the contrary, he rather completely ignored the past history. It is not denied that the assessee was engaged in the business of civil contract in the past as also in the later years. The method & manner of carrying the work and accounting the transactions are the same. Therefore, there is n....
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.... 5. CIT vs. Maharaja Shree Umed Mills Ltd. ,192 ITR 565 (Raj.) 6. Kachawala Gems vs. JCIT , 288 ITR 10 (SC) 7. Narsingdas Ramkishan Pungaliya vs. ACIT, 184 CTR 448 (Raj) 4.6 We have carefully considered the rival contentions and perused the material available on record. As regards the enhancement made by the ld. CIT(A), we do not accept the contention of the ld. AR that such enhancement is without jurisdiction in as much as there is no new item or income source has been discovered. However, we are not convinced with the method adopted by the ld. CIT(A) for the purpose of making the enhancement as discussed at page 10 to 13. We are convinced with the contention of the ld. AR that after rejecting the books of account u/s 145(3), there was no need for the ld. CIT(A) to again consider the same set of books of account and to work out the alleged shortfall of the stock on monthly basis. Particularly, when it is neither the case of the AO nor of the ld. CIT(A) that the declared receipts were suppressed in any manner. It is also not a case of survey or search wherein, the evidences showing inflation of the expenses or suppression of receipt or closing stock is found by the authorit....
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....ference in the situation, is untenable. In our considered opinion, the answer to the question has to be in the negative and in favour of the assessee. The question is answered accordingly." It is noted that there are deficiencies in the working done by the ld. CIT(A) which does not carry any weight. It is also noted that the ld CIT(A) in A.Y.2007-08 & 2008-09 has also discussed with regard to some inflation of expenses in relation to the transactions with the subcontractor M/s SJPS Builders & Contractors, making of cash payment, disallowance u/s 43B of the Act. However, since we have already rejected the method adopted by the ld. CIT(A) and in absence of any cogent evidence in support of the allegations brought on record, we have adopted the method of fair estimation after application of Sec.145(3) of the Act. hence, there was no justification in discussing individual disallowances. Moreover, in A.Y.2008-09, the ld. CIT(A) himself found that the addition already made by the AO was more than the addition computed by him. Pertinently in A.Y.2009-10 & 2010-11, the ld. CIT(A) is completely silent on his own working. Therefore, the only proper course was to consider the fairness & co....
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....A). 5.2 Being aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us against the sustenance of disallowance of Rs. 1,24,830/- 5.3 After going through the orders of the authorities below and the materials available on record, we hold that once the books of account are rejected and income is estimated then there is no further scope for any addition out of various expenses debit in profit and loss account. Therefore, we find no merit in the order of the ld. CIT(A) which is not justified in confirming the disallowance of Rs. 1,24,830/-. In this view of the matter the Ground No. 3 of the assessee is allowed 6.1 The Ground No .4 of the assessee is regarding charging interest u/s 234B & 234D of the Act and also withdrawing interest u/s 244A of the Act which is consequential in nature and mandatory Thus, the appeal of the assessee is partly allowed. Appeal No. 496/JP/2013 assessment year 2007-08 7.1 In this appeal, the assessee has raised the following grounds of appeal :- "1. The impugned additions and disallowances made in the order u/s 143(3) dated 26.11.2009 are bad in law and on facts of the case, for want of jurisdiction and various other reasons an....
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....depreciation ). Thus, the AO made addition of Rs. 25,95,796/- to the declared income. 9.2 In first appeal, the ld. CIT(A) upheld the application of Sec. 145(3) of the Act and also issued a Show Cause Notice proposing enhancement. In response to Show Cause Notice appellant assessee filed detailed written submissions time to time before the ld. CIT(A) . The relevant findings of the ld. CIT(A), are as under:- "Considering the above, the facts in this case can be summarized as under:- i) The assessee was inflating the expenses related to sub-contractors and other expenses, the same were shown to have been paid in cash, where each payment was shown to have been less than Rs. 20,000/-. ii) Some of the undisclosed profit remained with assessee as undisclosed closing stock which was reflected as negative closing stock in the charts prepared by us. iii) The negative balance as on 31.10.2007 can be attributed to two things:- a) Undisclosed opening stock as on 01.04.2007 (Closing stock as on 31.03.2007). b) Actual G.P. being higher than the disclosed G.P. (on the basis of which the charts were prepared) during the period 01.04.2007 to 31.10.2007. iv) In item No. (xiii), w....
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.... the ld. AO nor the ld. CIT(A) has made a fair estimation in conformity of the above settled judicial guideline. On the contrary, he rather completely ignored the past history. It is not denied that the assessee was engaged in the business of civil contract in the past as also in the later years. The method & manner of carrying the work and accounting the transactions are the same. Therefore, there is no reason still not to consider the past history which is the best material to be used for fair estimation as per the binding decisions. The ld. AO is totally silent on this aspect. 4.1 Last Year (i.e. A.Y. 2006-07) was not comparable: At the outset, there is no dispute on this aspect and even the authorities below have not followed A.Y. 2006-07 in this very or in any later years. 4.2 The result declared in A.Y. 2006-07 by showing NP rate of 11% (after interest and depreciation) was an abnormal year because of the peculiar facts involved in that case in as much as, there were certain old contracts, the receipts of which were received only this year whereas the related expenditure were already been incurred and debited in the earlier year/s. These projects were mainly NMC 7.882 51.....
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....00% (adjusted NP 9.98%) 11.50% 11.58% Enhancement of Rs. 1,84,824/- Pending 2007-08 Rs.41,14,68,583/- Increased by 69.52% Rs.4,00,46,600/- 9.73% (before Interest & Dep.) 7.25% (after Dep.) 9.50% (Subject to Depreciation only) 10.36% (Subject to interest & Depreciation only) 11.68% Enhancement of Rs. 54,11,562/- Pending 2008-09 Rs.54,72,55,102/- Increased by 33% Rs.4,69,19,829/- 8.57% 9.50% (Subject to Depreciation only) 9.86% (Subject to interest & Depreciation only) 9.50% (Confirmed AO) 9.86% (Subject to interest & Depreciation only) Pending Note: NP rate shown is before/subject to interest and depreciation etc. It is evident from the above comparative chart that again this year also there is a sharp increase in the turnover from 24.27cr to 41.15cr which shows an increase by whopping 70%. The N.P declared at 9.73 % is certainly better than rate of 9.50% applied by the department in the past and 8.50 % upheld by the ITAT. 6.2 In any case, the appellant's turnover jumped nearly 70% at Rs. 41.15 Crores this year from 24.27 Crores last year. Needless to say that to achieve such abnormal increase in the turnover, one has to....
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.... of ITAT in assessee's own case in A.Y.2003-04, 2004-05, 2005-06 have upheld NP rate of 8.50% (subject to interest & depreciation). The AO himself has applied 9.50% in A.Y.2005-06. Moreover, the gross receipts have gone up from Rs. 41.15 Crores which means an increase in the receipts by almost 70%. The assessee of course, declared 11% (subject to interest & depreciation) in the immediately preceding year i.e. A.Y.2006-07 however, as clarified by the ld. AR, the facts of that year are not comparable and the higher NP rate was only because of the circumstances prevailed in that year. It is pertinent to note that neither the AO nor the ld. CIT(A) followed A.Y.2006-07 while applying estimated NP rate or even while making enhancement of this year. Therefore, there was no justification for him to apply 9.50% (subject to depreciation only) or 10.36% (subject to interest & depreciation ). For the same reasons, enhancement made by the ld. CIT(A), which in terms of NP rate comes to 11.68% is also unjustified. It is also noted that the AO has not provided any basis of applying 9.50% (subject to depreciation only) or 10.36% (subject to interest & depreciation ). He neither referred p....
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....pose. During the period the assessee executed contract at different sites. The return of income was filed on 29.09.2008 declaring total income of Rs. 3,58,08,130/-. During the year under consideration the assessee had shown gross contract receipts at Rs. 54,72,55,102/- and NP rate of 8.57% (subject to Interest & depreciation) this year,. The AO rejected the books of account by applying the provisions of Sec.145 (3) of the Act and enhanced the NP rate @ 9.50% (subject to depreciation only) which NP rate comes to 9.86% (subject to Interest & depreciation ). Thus, the AO made addition of Rs. 70,46,571/- to the declared income. 13.2 In first appeal, the ld. CIT(A) upheld the application of Sec. 145(3) of the Act and also issued a Show Cause Notice proposing enhancement. In response to Show Cause Notice assessee filed detailed written submissions time to time. The relevant findings of the ld. CIT(A) at pages 21 & 22, to the issue in question are as under:- "Considering the above, the facts in this case can be summarized as under:- i) The assessee was inflating the expenses related to sub-contractors and other expenses, the same were shown to have been paid in cash, where each payme....
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.... of Rs. 70,46,571/- by the ld. CIT(A). It may be noted that at the time of hearing of the appeal, the ld. AR of the assessee has not pressed the application of provision of Section 145(3) of the Act. Hence the same is dismissed being part 2 of the ground. 13.4 During the course of the hearing, the ld. AR filed detailed written submissions along with comparative charts which are as under:- "1. Firstly, the application of S.145 is not disputed. 2. As regards the enhancement: it is submitted that since the facts and circumstances of this case are identical with the assessee`s own case in ITA No.495/JP/13 for A.Y.2006-07 hence, the submissions made in that year on enhancement kindly be considered in the present case also. Moreover, the decision paper book filed in that case is equally relevant and relied upon in this case also apart from the paper book being filed in this case. On merits: 3. No fair Estimation made: 3.1 Past History-Best Guide: We may submit that past history has been held to be the best guide in the cases of fair estimation. Kindly refer Kindly refer CIT v/s Gupta K.N. Construction Co. (2015) 116 DTR 377 (Raj), Vaibhav Gems 112 DTR 84 (Raj), CIT v/s P....
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....54,11,562/- Pending 2008-09 Rs.54,72,55,102/- Increased by 33% Rs.4,69,19,829/- 8.57% 9.50% Subject to Depreciation only 9.50% (Confirmed AO) Pending Note: NET PROFIT rate shown is before/subject to interest and depreciation etc. 5.2 It is evident from the above comparative chart that again this year also there is a sharp increase in the turnover from 41.15 cr to 54.33 cr that is an increase by 33 %. The NP declared 8.57%, better than 8.50 % upheld by this Hon'ble bench in past three years and hence the result declared are certainly better particularly when there is a substantial increase in the turnover. In any case, the appellant's turnover jumped nearly 33% at Rs. 54.72 Crores this year from 41.14 Crores last year. Needless to say that to achieve such abnormal increase in the turnover, one has to compromise on its margins and such a fact certainly deserved consideration in the matters of fair estimation Suresh Chand Nahata 45 TW 164 Para 9(JP), CIT v/s Amrapali Jewels (P) Ltd. (2012) 65 DTR 196 (Raj) and ITAT order of M/s Singhal Builders Contractor in ITA NO.904/JP/2012 & ITA No.896/JP/2012 vide order dated 20.08.2013. 5.3 Result of this yea....
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....ustification to apply 9.50% (subject to depreciation only) or 10.36% (subject to interest & depreciation ). Considering the totality of facts & circumstances of the case, past history and increase in turnover , we uphold the addition of Rs. 4.00 lacs only. Thus ground of appeal no. 2 of the assessee is partly allowed. 14.1 The Ground No. 3 of the assessee is regarding charging of interest u/s 234B & 234D of the Act which are consequential in nature and mandatory . Thus, the appeal of the assessee is partly allowed. ITA No. 2/JP/2014 A.Y. 2009-10 (Revenue) 15.1 The Revenue has raised the solitary ground as under:- ''On the facts and in the circumstances of the case, the ld. CIT(A) has erred in restricting the trading addition of Rs. 45,93,905/- to token addition of Rs. 10,00,000/- only while rejection of books results has been upheld.'' 15.2 The brief facts of the case are that the assessee is engaged in civil contractor business mainly in constructing of canals for irrigation purpose. During the period the assessee executed contract at different sites. The return of income was filed on 29.09.2009 declaring total income of Rs. 2,32,28,500/-. During the year under considerati....
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....also supposed to collect necessary material for the purpose, if so required. An arbitrary, capricious and wild estimation, as done in the present case, are not at all permitted in the eyes of the law. The ld. AO however did not confirm to its settled requirement. Kindly refer Jotram Shershing vs. CIT 2 ITR 119 (All). 1.2 Addition Need Not Be Made, Even if Sec.145 Invoked : In the case of CIT vs. Gotan Lime Khaniz Udyog 256 ITR 243 (Raj), it has been held that mere rejection of books of accounts need not necessarily lead to additions to the returned income. It was also held that the books of account , together with past history of the case as also material collected by the AO (of course, after confronting the appellant) should be considered for estimation of income. 2. Better Results: 2.1 We may submit that past history has been held to be the best guide in the cases of fair estimation. Kindly refer Kindly refer CIT v/s Gupta K.N. Construction Co. (2015) 116 DTR 377 (Raj), Vaibhav Gems 112 DTR 84 (Raj), CIT v/s Popular Electric Co. Pvt. Ltd (1993) 203 ITR 630 (Cal), MA Rauf v/s CIT (1958) 33 ITR 843 (Pat). The appellant, this year declared NP rate of 11.54% (before interest & de....
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....45/239/65-ITJ], dated 31-8- 1965 and now the provisions contained u/s 44AD have also statutory recognized this practice. However, without any plausible reason, the AO applied flat NP rate of 7% in this year without allowing these deductions. Therefore, the AO must have considered the NP rate subject to these deductions only. The AO himself adopted this principle but now changed with any justifiable reason. 2.3 Much Better Result: Accordingly, the above chart clearly shows much better result declared this year i.e. N.P. rate before interest and depreciation at 11.54% as against 8.57% and 9.73% in the preceding two years respectively and this did not at all call for any addition by the AO nor even a part sustenance by the ld. CIT(A) upto Rs. 10 lakhs. Therefore, the appeal of the department deserves to be dismissed. 2.4 The AO itself had applied the maximum NP rate at 9.50% in A.Y.2005-06 and the Hon'ble ITAT in assessees own case in ITA No.586/JP/2007 & ITA No.60/JP/2008 from A.Y. 2003-04, 2004-05 and 2005-06 has already upheld NP rate of 8.50%. Thus from all angles the result are much better. 3. Reasons for low N.P.: Still assuming that the AO was correct (though not concedin....
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....9;s own case in A.Y.2003-04, 2004-05, 2005-06 have upheld NP rate of 8.50% (subject to interest & depreciation). The AO himself has applied 9.50% in A.Y.2005- 06. It is noted that the assessee has declared better results even if NP rate after deductions is considered. It is seen that the NP rate (after all deductions) declared this year was 5.46% only as against 6.13% last year and thus, there was fall of 0.67%. However, it is noticed that the assessee has declared receipts of Rs. 36.39 Crores only this year as against Rs. 54.73 Crores last year and thus, the same has drastically came down by 33%. It is a fact that despite decrease in the turnover, the assessee has to bear certain fixed expenditure and the depreciation allowance which affects the ultimate NP rate (after all deductions). It is noticed that the amount of depreciation of this year has increased by Rs. 55 Lacs i.e. Rs. 1.14 Crores from last year to Rs. 1.69 Crores this year. This extra claim of deprecation has contributed to a fall of 2.56% NP rate. It is also noted that AO has not provided any basis of applying 7% (after all the deductions) or 13.08% (subject to interest & depreciation ). He neither referred past hist....
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....ngs. Considering the past history and findings given by the AO, rejection of books of accounts, is upheld. The AO in the assessment has assessed the interest income of Rs. 1,75,25,724/- as income from other sources. Therefore, the income from business after re-computation (excluding interest income) comes to Rs. 2,27,93,596/- (Rs.4,03,19,320 - Rs. 1,75,25,724). In the assessment order the AO has given the following finding:- "Considering the totality of the facts available on record, net profit rate @ 8% is applied on the gross contract receipts of Rs. 57,57,96,344/- after allowing claim of depreciation and interest". However, in the computation, the AO did not reduce depreciation and interest from net profit computed @ 8%. As per the correct calculation (giving effect to the AO's finding), the income from business should be as under: Turnover Rs.57,57,96,344/- Net profit @ 8% Rs.4,60,63,708/- Less: i) Interest Rs.1,49,30,007/- ii) Depreciation Rs. 1,63,42,697/- Rs.3,12,72,704/- Income from Business Rs.1,47,91,004/- Therefore, as per AO's finding itself the correct income of assessee from business comes to Rs. 1,47,91,004/- as against this, the cor....
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....st estimation of income, keeping in view of the material available on record, past history of the case, local knowledge and repute of the assessee. He is also supposed to collect necessary material for the purpose, if so required. An arbitrary, capricious and wild estimation, as done in the present case, are not at all permitted in the eyes of the law. The ld. AO however did not confirm to its settled requirement. Kindly refer Jotram Shershing vs. CIT 2 ITR 119 (All). 1.2 Addition Need Not Be Made, Even if Sec.145 Invoked : In the case of CIT v/s Gotan Lime Khaniz Udyog 256 ITR 243 (Raj), it has been held that mere rejection of books of accounts need not necessarily lead to additions to the returned income. It was also held that the books of account , together with past history of the case as also material collected by the AO (of course, after confronting the appellant) should be considered for estimation of income. 2. Better Results: 2.1 We may submit that past history has been held to be the best guide in the cases of fair estimation. Kindly refer Kindly refer CIT v/s Gupta K.N. Construction Co. (2015) 116 DTR 377 (Raj), Vaibhav Gems 112 DTR 84 (Raj), CIT v/s Popular Electric....