2018 (8) TMI 843 - AT - Income Tax

Estimation of income from contract receipt - rejection of books of accounts - CIT(A) estimated the income @10% as against 15% estimated by the AO - Held that - Both the sides are unanimous in stating that the facts in the assessment year under appeal are similar to earlier assessment years i.e. assessment years 2008-09 to 2011-12. Following the decision of Coordinate Bench, we estimate net profit of the assessee @ 9% of the total gross contract receipts in the assessment year under appeal as well. - Decided partly in favor of assessee.

Summary

Issues:
Estimation of net profit at 10% by Commissioner of Income Tax (Appeals) against 15% estimated by Assessing Officer; Assessee's appeal against estimated addition; Revenue's appeal against Commissioner of Income Tax (Appeals) findings; Comparison with earlier assessment years; Tribunal's decision to estimate net profit at 9% for total gross contract receipts.

Estimation of Net Profit at 10%:
The dispute revolved around the estimation of net profit at 10% by the Commissioner of Income Tax (Appeals), differing from the 15% estimated by the Assessing Officer. The assessee contested this estimation, arguing for the deletion of the estimated addition. The Revenue challenged the Commissioner's decision, citing defects highlighted by the Assessing Officer and incriminating material found during a survey. The Tribunal, considering past assessments, noted that the issue was consistent across various years. Ultimately, the Tribunal upheld the estimation of net profit at 10%, in line with the Commissioner's decision.

Comparison with Earlier Assessment Years:
The Tribunal referenced previous assessment years where net profit was estimated at 9%. The Tribunal highlighted irregularities in financial transactions and unexplained expenditures, leading to a reduction in the estimated net profit. By following the decision of the Coordinate Bench, the Tribunal maintained the estimation of net profit at 9% of the total gross contract receipts for the current assessment year.

Judgment and Decision:
After hearing arguments from both sides and reviewing previous orders, the Tribunal concluded that the net profit for the current assessment year should be estimated at 9% of the total gross contract receipts. As a result, the appeal of the assessee was partially allowed, while the appeal of the Revenue was dismissed. The judgment was pronounced on August 8, 2018, aligning with the Tribunal's decision to maintain the net profit estimation at 9% for the assessment year in question.