TaxTMI 
TaxTMI 
2018 (11) TMI 999
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....of the Act. On the initial date of hearing, written submissions were filed along with the financial statements and thereafter none appeared on the date of hearing. Learned Assessing Officer (In short 'Ld.A.O') had no option except to frame ex-parte assessment. Ld.A.O made addition on unexplained sundry creditors at Rs. 60,42,964/- as the assessee failed to submit the confirmation and other details. Addition for unexplained unsecured loan of Rs. 9,48,000/- from M/s. Amt Construction and Shri Sheikh Allabakash was also made for lack of supporting documents. Also the assessee failed to produce books of accounts and other relevant details Ld.A.O rejected the book results u/s 145 of the Act and estimated income @10% of the total turnover of Rs. 7,29,45,673/- thereby making addition on account of net profit at Rs. 39,10,039/- after giving set off of profit shown by the assessee. Income assessed at Rs. 1,40,35,533/-. 3. Aggrieved assessee preferred appeal before Ld.CIT(A) raising three grounds for alleged three additions. However Ld.CIT(A) took a view that when the book results have been rejected and profit have been estimated then no further addition should have been made. Ld.CIT(A) fur....
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.... addition can be made, without appreciating the fact that identity of creditors and genuineness and rather of said transactions was not explained & roved by assessee. 2. Whether on the facts and in the circumstances of the case Ld.CIT(A) has erred in deleting the addition of Rs. 9,48,000/- on account of unsecured loan holding that once net profit is estimated no additions can be made, without appreciating the fact that unsecured loan do not form part of turnover on which net profit rate has been applied and they are part of balance sheet". The matter is covered under the exception as mentioned in para 8(c) of Circular 21/2015. 5. At the outset Ld. Departmental Representative submitted that rejection of book results and assuming net profit is only confined to the treatment of trading and profit & loss account. It however cannot be applied for the items of balance sheet. In this case alleged unexplained creditor as well as unsecured loans there is no connection of these two items with the business turnover and the expenditure incurred during the year. He further submitted that Ld.CIT(A) has not given any finding of fact relating to the alleged addition for unexplained credito....
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....followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in 10. From the perusal of the above provisions and most specifically Sub Section 3 of Section 145 of the Act it emanates that the Assessing Officer may make best judgment assessment in the manner provided in Sub Section 144 of the Act in case he is not satisfied about the following; (a) Correctness of completeness of the accounts of the assessee; (b) where the method of accounting provided in Sub Section 145(1) of the Act have not been regularly followed by the assessee; (c) Income has not been computed in accordance with the sub standards notified under sub-section 145(2) of the Act. 11. We find that in the instant appeal Ld.A.O rejected the book results and computed the net profit by applying the net profit rate of 10% on the total turnover of Rs. 7,2945,673/- observing as follows; "4. As per the audit report submitted by the assessee (col no.32), the assessee has shown contract receipts amounting to Rs. 7,29,45,673/- and shown Net Profit of Rs. 3384528/-, which comes out to 4.64%....
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....under sub-section (2) of , the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment : Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment : Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of has been issued prior to the making of an assessment under this section. (2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as ref....