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Issues involved: Assessment of income u/s 143(3) of the Income Tax Act, 1961 for a firm engaged in carting, purchase, and sale of sand and kapatchi.
Summary: The Appellate Tribunal ITAT Ahmedabad heard cross-appeals by the assessee and the revenue against the order of the CIT(A)-V, Surat regarding the assessment u/s 143(3) of the Income Tax Act, 1961. The assessee firm, involved in carting, purchase, and sale of sand and kapatchi, declared total income as NIL. Due to loss of books of accounts in floods, the income was estimated by the AO resulting in an assessment of &8377; 24,99,780. The CIT(A) made adjustments, estimating transport receipts at &8377; 16,12,800 and allowing partial relief for disallowed expenses. The Tribunal directed the AO to compute income from trucking business u/s 44AE and from trading business u/s 44AF, as statutory provisions for presumptive income apply to both activities. The appeals were partly allowed, and the income was to be recomputed based on the Tribunal's directions. In the present case, the issue arose due to the inability of the assessee to produce books of account following the loss in floods, leading to the AO estimating the income. The Tribunal emphasized that such estimation must not be irrational or arbitrary, and statutory provisions dictate how income should be estimated, overriding any other estimates. The Tribunal noted that the assessee's business of transporting material could have income estimated u/s 44AE, considering the ownership of a maximum of four trucks. Similarly, the income from the retail trade of construction material was to be estimated u/s 44AF, as turnover was below 40 lakhs. As both businesses fell under statutory provisions for presumptive income, the AO was directed to recompute the income based on these provisions. The Tribunal's decision highlighted the importance of applying statutory provisions for estimating income in cases where books of account are unavailable, ensuring a fair and legal assessment process.
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