2011 (5) TMI 1057 - AT - Income Tax

Summary

Issues Involved:
1. Validity of ex parte assessment u/s 144 without show cause notice.
2. Justification of invoking provisions of section 145(3) and rejecting books of accounts.
3. Estimation of net profit by the CIT(A).
4. Limitation of assessment.
5. Levy of interest u/s 234B and 234C.

Summary:

1. Validity of ex parte assessment u/s 144 without show cause notice:
The assessee contended that the ex parte assessment finalized u/s 144 was invalid as no show cause notice was issued and served as required by the 2nd proviso to section 144(1). The Commissioner of Income-tax (Appeals) held that the assessment u/s 144 was justified as the assessee failed to comply fully with the terms of notices issued u/s 142(1) or 143(2). However, the Tribunal found that the assessee had provided information, albeit not satisfactorily to all queries, and thus, invoking section 144 was unjustified. The Tribunal concluded that non-satisfaction with the responses does not constitute failure to comply with notices, thereby partly succeeding the assessee on this ground.

2. Justification of invoking provisions of section 145(3) and rejecting books of accounts:
The Assessing Officer invoked section 145(3) and rejected the books of accounts due to discrepancies and lack of verification of purchases, closing stock, and labour payments. The Commissioner of Income-tax (Appeals) upheld this action, noting that the accounts were unreliable. The Tribunal agreed with the lower authorities, finding no credible material to interfere with the rejection of the trading results declared by the assessee.

3. Estimation of net profit by the CIT(A):
The CIT(A) estimated the net profit at Rs. 61.41 lakhs, while the Assessing Officer had estimated it at Rs. 91,46,674/-. The Tribunal found the estimation at 8% of contract receipts to be on the higher side and reduced it to 6%, considering the facts and circumstances. The Tribunal upheld the estimation for sub-contract and road roller hiring as adopted by the CIT(A).

4. Limitation of assessment:
Ground No. 4 regarding the assessment being barred by limitation was not pressed by the assessee's counsel during the hearing and was dismissed as not pressed.

5. Levy of interest u/s 234B and 234C:
Ground No. 5 relating to the levy of interest u/s 234B and 234C was deemed consequential and required no adjudication.

Conclusion:
The appeal of the assessee was partly allowed, with the Tribunal reducing the estimated net profit rate and finding the invocation of section 144 unjustified. The decision was pronounced on May 13, 2011.