2015 (10) TMI 1422 - AT - Income Tax

Estimation of the income @ 4% of turnover - CIT(A) confirmed estimate of the income without rejecting the books of account - Held that - It is undisputed fact that the order of the learned CIT(A) is deficient on the issues relating to the rejection of the books of account. Insofar as the adopting the flat rate of 4% of the total receipts as income of the assessee is concerned, there is no justification and the orders of the learned CIT(A) / Assessing Officer have not provided any basis to support the same. In our considered opinion, there is a need to remand all the issues to the file of the Assessing Officer for want of issue based adjudication of all the grounds by passing a speaking order. Accordingly, we set aside the impugned order passed by the learned CIT(A) and restore all the grounds raised by the assessee to the file of the Assessing Officer for denovo adjudication. Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Rejection of books of account and estimation of income at 4% of turnover.
2. Double taxation issue due to subcontracting work.
3. Addition of bank interest received.

Analysis:

Issue 1: Rejection of books of account and estimation of income at 4% of turnover
The assessee, a joint venture awarded a contract for road widening, filed a return declaring total income as nil. The Assessing Officer rejected the books of account and estimated profits at 4% of total receipts, resulting in an addition to the declared income. The CIT(A) upheld this decision. The appellant contended that the rejection lacked adequate reasons and the 4% estimation was unjustified. The Tribunal found the CIT(A) order deficient in addressing the rejection of books of account and the income estimation rationale. Consequently, the Tribunal set aside the CIT(A) order and remanded the case to the Assessing Officer for a comprehensive review and issuance of a speaking order, considering all available decisions relevant to the issue.

Issue 2: Double taxation issue due to subcontracting work
The appellant raised concerns about double taxation arising from subcontracting work to a partner of the joint venture. They argued that both partners had paid taxes on the joint venture income, leading to double taxation of the same income. However, this issue was not conclusively addressed in the judgment, as the focus was primarily on the rejection of books of account and income estimation.

Issue 3: Addition of bank interest received
The Assessing Officer made an addition on account of bank interest received by the assessee. While this issue was mentioned in the grounds raised by the appellant, the judgment did not provide detailed analysis or discussion on this specific addition. The Tribunal allowed the appeal for statistical purposes, indicating that all grounds raised were remanded for fresh adjudication by the Assessing Officer.

In conclusion, the Tribunal's decision highlighted the importance of providing adequate reasons for rejecting books of account and justifying income estimations. The case was remanded for a thorough review, emphasizing the need for a speaking order addressing all issues raised by the appellant.