2012 (5) TMI 687 - AT - Income Tax

Estimation of profit by applying 8% of Net Profit rate - Held that - No good reason for estimating profit by applying lower rate than 8% as small assessee having turnover not exceeding ₹ 40 lakhs are legally required under section 44AD to disclose profit by 8%. We confirm the order of Assessing Officer and CIT(A) where 8% profit rate has been applied for estimation of income. We find force in the submission of the assessee in the written submission that the interest income of ₹ 79,400/- is business income and the same need not be separately added in estimation by applying 8% profit rate. The interest income which is business income of the assessee is covered in the said estimation and separate addition is not required. Modify the order of the Assessing Officer and CIT(A) and direct the Assessing Officer not to include the interest income of ₹ 79,400//- in estimation of total income. The assessee gets relief of ₹ 79,400/-.

Summary

Issues: Estimation of profit based on Net Profit rate; Rejection of adjournment application

Estimation of Profit based on Net Profit Rate:
The appeal involved the estimation of profit by applying an 8% Net Profit rate on total receipts for the Assessment Year 2006-07. The assessee, a civil contractor, declared a profit inclusive of interest income but failed to produce relevant bills and vouchers of purchase and expenses. The Assessing Officer rejected the books of account and estimated the profit at 8% of total receipts, separately adding the interest income. The CIT(A) upheld this decision. During the hearing, the assessee argued that a 5% Net Profit rate should apply based on previous cases and the statutory presumptive tax scheme under section 44AD. The Tribunal considered the past history of the assessee and statutory provisions, ultimately confirming the 8% profit rate for estimation of income. However, the Tribunal agreed with the assessee that the interest income of Rs. 79,400 should not be separately added, as it is considered business income covered in the estimation. Therefore, the Tribunal modified the order to exclude the interest income from the total income estimation, providing relief to the assessee.

Rejection of Adjournment Application:
The assessee's adjournment application was rejected by the Bench due to insufficient reasons provided. Despite previous adjournments, the Tribunal proceeded to hear the appeal on merit. The rejection was based on the lack of good and sufficient grounds for adjournment, as the counsel cited personal reasons related to a bereavement. The Tribunal emphasized the importance of timely proceedings and decided to move forward with the appeal, considering the merits of the case without granting further adjournment requests.

In conclusion, the Tribunal partly allowed the appeal by modifying the estimation of total income to exclude the interest income while confirming the overall decision based on the 8% profit rate. The rejection of the adjournment application highlighted the significance of timely legal proceedings in addressing the issues at hand.