TaxTMI 
TaxTMI 
2021 (10) TMI 784
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....he nature of appellants business activities 3. The Ld. CIT(A) has erred in law in facts in disallowing the entire deduction claimed by the appellant under chapter VI A of the Income Tax Act amounting to Rs. 81,984/-. 4. The Ld. CIT(A) erred in confirming the charging of interest under section 234A, 234B 234C and 234D of the Income Tax Act 1961. 5. The Ld. CIT(A) erred in confirming the initiation of the penalty proceeding under section 271(1)(c) of the Income Tax Act 1961. 6. The Assessee craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing." 3. Facts in brief:- The assessee filed its return of income on 30th September 2012, declaring total income of Rs. 6,09,630. The return of income was processed under section 143(1) of the Income Tax Act, 1961 (for short "the Act"). Subsequently, the case was selected for scrutiny under CASS and notice under sections 143(2) and 142(1) of the Act were issued and served on the assessee. Since there was no compliance to none of the notices issued and the assessment was completed based on the best judgment under section 144 of the Act and the A....
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.... 31,95,382/- . The total net profit from both concerns were Rs. 2,29,141/- and income under the business head from both concerns were shown at Rs. 6,91,611/-, the bifurcation of which was not given by the assessee. The ratio of net profit from both concerns i.e. business income from M/s.Vaibhav Enterprises comes to Rs. 5,10,680/- which is more than 8% of total turnover of the assessee. Further, in ITRs for A.Y. 2013-14 and A.Y. 14-15, the assessee has itself offered business income at 8% of the total turnover. The business income at 8% was accepted by the AO in the assessment order u/s. 143(3) of the I.T. Act for the A.Y. 14- 15. Accordingly, the AO is justified in estimating the total income of the assessee at 8% in respect of M/s. Vaibhav Enterprises. Therefore, the appellant's claim regarding low OP in respect of M/s. Vaibhav Enterprises is rejected and hence dismissed. As for as M/s. Harsh Corporation, where the assessee has shown a turnover of Rs. 27,37,36,628/- and shown a net profit of just at Rs. 59,944/-. The AO has estimated business income in respect of this concern at 8% of the turnover. The AO has given ample opportunities to the assessee to substantiate w....
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....he estimated income of 8% on gross turnover of Rs. 27,69,32,010/-,which works out to Rs. 2,21,54,561/- is hereby confirmed, dismissing all his grounds of appeal." 5. Aggrieved with the above order, the assessee is in appeal before the Tribunal. 6. Before us, the learned Authorised Representative submitted as under:- "Further in continuation of submission dated 12.08.2021 for ground No.1 & 2 we would like to state as under:- CONTENTION OF LD. AO AND LD. CIT(A) The Ld. AO has mentioned in the assessment order on pg. no. 2 reading as under:- "The assessee has shown a net profit of Rs. 2,29,1421- only which is barely 0.083%. It is not known what is the nature of the assessee's business activities on the basis of the facts available on record. In the absence of any details, I hold the net profit to be 8% of the Gross turnover which works out to Rs. 2,21,54,5611-." The Ld. CIT(A) has mentioned in the appellate order on pg. no. 3 and 4 reading as under:- Pg. No. 3 "Further, in ITRs for AY 2013-14 and AY 14-15, the assessee has itself offered business income at 8% of the total turnover. The business income at 8% was accepted b....
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....books of accounts were not rejected by the assessing officer although these were audited under section 44AB of the Act by a Chartered Accountant. The Ld. AO could have ventured into estimation only after rejecting the books of accounts of the assessee u/s 145(3) and thereafter by best judgment assessment u/s 144 of the Act. Here in this case, the Ld. AO has not rejected the books of account and passed the order u/s 144 of the Act. Thus, the Ld. AO and Ld. CIT(A) without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be showing net profit ratio at a very low rate and also made estimation on basis of subsequent years profit. RELIANCE IS PLACED ON:- DCIT Vs. JSR Constructions (P.) Ltd 71 taxmann.com 184 (Bangalore - Trib.) Where in preceding two years, assessee had shown net profit at 1.7 per cent and 2.21 per cent and same had been accepted by Assessing Authority, estimation of netproflt at 8 per cent by Assessing Officer was not justified We have perused the record and heard the rival contentions. It has been not disputed by the Revenue that assessee's own assessments f....
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.... 8. In that view of the matter, the impugned orders ore unsustainable. Hence, the order passed by the tribunal is hereby set-aside. Matter is remitted back to the tribunal for fresh consideration in the light of the observations made above. In that view of the matter, the substantial question of law is answered in favour of the assessee and against the revenue and appeal is portly allowed.' 28. What we find from the above judgment is that in the said case, assessment was completed u/s. 144 of the Act estimating the income of assessee at 8% as done here. The concerned assessee had failed to produce books of account. The CIT(A), on assessee's appeal, had reduced the netprofit to 3% of the total turnover. This was reduced by the Tribunal to 2.5%. Their Lordships had held that such adhoc estimate was not warranted, when evidence in the nature of earlier returns filed by the assessee was available. Here in the case before us also, scrutiny assessments were done for AYs 2006-07 & 2007-08 and the netprofit rate accepted were much lower than 8%. Submission is that such rates came to 1.796 forAY 2007-08 and 2.21% for A Y 2006-07. We, therefore, set aside the orders of au....
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....ust be something more than mere suspicion. The Assessing Officer must make what he honestly believes to be a fair estimate of the proper figure of assessment and for this purpose he must take into consideration such materials as the assessing officer has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which the assessing officer thinks will assist him in arriving at a fair and proper estimate". Considering the above ratio, we are inclined to direct the Assessing Officer to estimate the profit based on the previous assessment year's actual profit, which was accepted by the Revenue. The assessee has declared 0.62% in assessment year 2010- 11 and 0.42% in assessment year 2011-12. The average profit declared by the assessee in the above assessment year is 0.52%. The Assessing Officer can estimate 0.52% as the profit for this assessment year since the assessee has already declared 0.08%, the balance 0.44% can be added to the profit for this assessment year. We direct the Assessing Officer to estimate the income as per above direction considering the fact that the profit has to be assessed based on the actual and in case, it is ....