2014 (1) TMI 854 - AT - Income Tax

Addition made on account of sundry debtor/receivable not taken into account - Appeal partly allowed Income to be assessed at 8% NP Held that - The assessee has not provided the books of accounts and vouchers and also not produced the confirmations of balances of creditors / as well as debtors - Assessing Officer has made certain additions by picking up certain figures from the assessee s balance sheet and profit and loss account - The basis of addition as observed by the Ld. Commissioner of Income Tax (A) is not coherent - the individual addition made by the Assessing Officer are on estimate basis and cannot be sustained the Assessing Officer should have applied the provision of section 144 of the Act and should have restored to best judgement assessment - Assessing Officer is directed to assess the income of the assessee using 8% NP which would substitute all the additions made by the Assessing Officer Decided against Revenue.

Summary

Issues:
1. Disallowance of expenses and additions made by the Assessing Officer.
2. Application of best judgment assessment under section 144 of the Act.
3. Direction to assess income using 8% NP.

Analysis:
1. The case involved the disallowance of expenses and additions made by the Assessing Officer. The assessee, a contractor, did not produce books of account or vouchers during assessment. The Assessing Officer made additions for sundry debtors, vehicle expenses, and telephone expenses on an estimate basis. The Ld. Commissioner of Income Tax (A) found the Assessing Officer's additions not coherent and observed that best judgment assessment should have been applied. The Ld. Commissioner directed the Assessing Officer to assess income using 8% NP, which would replace all the additions made by the Assessing Officer.

2. The application of best judgment assessment under section 144 of the Act was a crucial issue in the case. The Ld. Commissioner of Income Tax (A) noted that the assessee did not provide books of accounts or vouchers for verification. Due to the lack of proper documentation, the Ld. Commissioner opined that best judgment assessment should have been applied by the Assessing Officer. It was observed that the basis of such best judgment assessment would be the provisions under section 44AD of the Act. The Ld. Commissioner directed the Assessing Officer to assess the income using 8% NP based on earlier assessment years.

3. Another significant issue was the direction to assess income using 8% NP. The ITAT Delhi upheld the order of the Ld. Commissioner of Income Tax (A) in directing the Assessing Officer to assess the income of the assessee using 8% NP, which would substitute all the additions made by the Assessing Officer. The ITAT agreed that 8% NP would serve the end of justice in this case and dismissed the appeal filed by the Revenue.

In conclusion, the judgment focused on the disallowance of expenses, the application of best judgment assessment, and the direction to assess income using 8% NP. The ITAT Delhi upheld the Ld. Commissioner's order, emphasizing the importance of proper documentation and the application of relevant provisions for determining the income of the assessee.