9911796707
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Issues Involved:
The judgment deals with the issue of deletion of addition on account of rejection of books of account and application of net profit rate at 5%. Deletion of Addition on Account of Rejection of Books of Account: The assessee, a building contractor, showed a net profit of &8377; 27,32,528/- on total contract receipts of &8377; 9,13,70,892/-. The Assessing Officer (AO) rejected the books of account under section 145 of the Act and estimated net profit at 5% due to discrepancies in material consumed and labor expenses at different sites. The AO asked for evidence to substantiate the expenses claim, but none was provided by the assessee. CIT(A)'s Decision: Before the Commissioner of Income-tax (Appeals) (CIT(A)), the assessee contended that all relevant documents were produced, and the AO rejected the books without a clear basis. The CIT(A) observed that there was no agreement by the assessee for the estimation of income at 5% and deleted the addition. The CIT(A) noted that the low gross profit/net profit rate alone cannot justify the rejection of book results without material deficiency or discrepancy being detected. Arguments and Conclusion: The Senior DR supported the AO's order, while the assessee's representative argued that no mistakes or discrepancies were identified in the books of account. The Tribunal found that the AO rejected the books without a valid basis or material deficiency justifying the rejection. As there was no evidence of the assessee agreeing to the estimation of income at 5%, the CIT(A)'s decision to delete the addition was upheld. The appeal by the Revenue was dismissed, and the order of the CIT(A) was deemed justified. This judgment emphasizes the importance of providing clear justifications for rejecting books of account and the necessity of evidence to support estimations of income. The decision underscores the need for assessing officers to adhere to legal requirements and provide valid reasons for their actions in accordance with the law.
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