TaxTMI 
TaxTMI 
2026 (6) TMI 141
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.... The Ld. CIT(A) had erred on the facts and in the circumstances of the case and in law, in estimation of net profit@10% of gross receipts by the AO in the absence of any evidence in a work contract business cannot be considered as arbitrary. 3. The Ld. CIT(A) had erred on the facts and in the circumstances of the case and in law, in deleting addition of unsecured loans as per the provisions of section 68 of the Act amounting to Rs. 20,00,000/- on the basis of evidence submitted by the assessee during the course of appellate proceedings, in the absence of not submitting any evidence during the course of assessment proceedings, thus rendering the additional evidence relied upon by the Ld. CIT(A) is contrary to the provisions of Rule 46A of Income Tax Rules. 4. The Ld. CIT(A) had erred on the facts and in the circumstances of the case and in law, in deleting addition of Rs. 1,40,47,654/ on account of unexplained sundry creditors, by holding that no addition on account of sundry creditors can be made when the books of accounts have been rejected and the income of the assessee has been determined as per best judgement assessment, when the AO, without disallowing the to....
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....her observed that merely filing of return of income is not sufficient to prove the genuineness of the correctness of the particulars furnished in the return of income, assessee has failed to prove the onus lying upon it to prove the genuineness of the transactions reported in return of income. In absence of complete information, Ld. AO completed the assessment u/s. 144 r.w.s. 144B of the Act making addition of Rs. 3,25,34,911/- on account of estimation of net profit @10% of total turnover after abatement of income declared in return; and addition of Rs. 1,40,47,654/- on account of unexplained cash credits/sundry creditors u/s. 68 of the Act and Rs. 20,00,000/- on account of unexplained unsecured loans. 4. Assailing the above order, assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A), after considering the assessment order, submissions of the assessee and material available on record, observed that the Assessing Officer rejected the books of account under section 145(3) being not satisfied about the completeness and correctness of books of account and estimated net profit at 10% of turnover without bringing any comparable cases or cogent material on record. It was hel....
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....l of the assessee was allowed. 5. Ld. DR supported the assessment order and submitted that despite several opportunities, assessee failed to furnish complete books of account, bills, vouchers, confirmations and other supporting evidences. Therefore, the Assessing Officer rightly rejected the books under section 145(3) and completed the assessment under section 144 of the Act. It was contended that the assessee failed to substantiate its explanations regarding COVID-19 difficulties, partner disputes and medical emergencies with documentary evidence. Since the assessee did not furnish requisite details relating to expenses, creditors and unsecured loans, the Assessing Officer was justified in estimating net profit at 10% and making additions under section 68. The Ld. DR further submitted that the Ld. CIT(A) erred in deleting the additions without proper verification and wrongly relied upon past history of the assessee. It was argued that the assessee failed to discharge the onus cast upon it under section 68 in respect of sundry creditors and unsecured loans. Accordingly, the order of the Ld. CIT(A) deserves to be set aside and that of the Assessing Officer be restored in entirety....
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.... or deviation from assessee's past history. Therefore, estimation of profit at 10% appears to be excessive and arbitrary, erratic and whimsical which is unconscionable. The assessee is engaged in execution of Government construction contracts in Naxalite affected areas of Gadchiroli District where operational and overhead costs are comparatively higher which has dampening effect on margins. The assessee has also explained that profit margins fluctuate depending upon the stage of completion of contracts and escalation receipts. Considering the entire gamut of facts and circumstances, nature of business carried on by the assessee, past history and keeping in view the principles of reasonable estimation relying upon comparables, we direct that estimation of net profit at 6% of the gross turnover would meet the end of justice in view of the fact that net profit ratio for A.Y. 2017-18 and 2018-19 was 5.95% and 4.08%. Accordingly, we direct the Assessing Officer to recompute the income of the assessee by adopting net profit rate at 6% of the gross turnover as per return of income for Rs. 52,86,07,324/- after allowing due credit for income already declared by the assessee. Revenue partly ....