2009 (1) TMI 97 - HC - Income Tax

Whether Tribunal is right in concluding that AO has committed a mistake in rejecting the books of account and estimating the net profit @ 8% u/s 44AD - Whether Tribunal is justified in confirming the order CIT (A) though the assessee has failed to discharge the onus of burden of proof by proving various claims made by the him in his return of income as well as books of account - What should be the rate of net profit is question of fact - findings of Tribunal are factual require not interference

Summary

Issues:
1. Rejection of books of account and estimation of net profit under Section 44AD of the Income Tax Act.
2. Failure to discharge the burden of proof by the assessee regarding various claims made in the return of income and books of account.

Analysis:
Issue 1:
The appellant, engaged in Mechanical and Labour Supply Contract Work, filed a return of income for Assessment Year 2000-2001, showing a net profit rate of 3.10%. However, the Assessing Officer rejected certain expenses due to lack of vouchers and estimated the net profit at 8% under Section 44AD of the Income Tax Act. The Commissioner (Appeals) partially allowed the appeal, directing the net profit rate to be applied at 4%. Both the assessee and the revenue filed Cross Appeals before the Income Tax Appellate Tribunal, which were dismissed. The appellant contended that the Tribunal erred in rejecting the books of account and in limiting the income estimation to 4%. The High Court noted that the Tribunal did not find any mistake in rejecting the books of account and that the estimate of net profit was revised based on consideration of all expenses. The Court upheld the Tribunal's decision, stating that the Commissioner (Appeals) had considered the evidence on record in detail.

Issue 2:
Regarding the failure to discharge the burden of proof by the assessee, the appellant argued that the Tribunal wrongly reversed the Assessing Officer's decision to estimate the net profit rate at 8%. The Court observed that both the assessee and the revenue failed to provide any material to challenge the Commissioner (Appeals)'s order. The Tribunal found no reason to interfere with the Commissioner (Appeals)'s decision based on the evidence on record. The Court emphasized that the determination of the net profit rate is a factual issue based on evidence, and variations in estimates do not necessarily raise legal questions. The findings of the Tribunal were deemed factual and supported by the available record material. Therefore, the Court dismissed the appeal, stating that no substantial question of law arose for consideration.