2018 (9) TMI 1404 - AT - Income Tax

Validity of issue of notice u/s 148 and the subsequent completion of assessment - Held that - We notice that the assessment completed u/s 143(1) and not u/s 143(3) and there was no opportunity for the AO to form an opinion. Subsequently, it was noticed by the AO that the income was escaped assessment. Accordingly, notice was issued and assessment was completed u/s 143(3) r.w.s. 147. We do not see any issue with the completion of assessment or issue of notice u/s 148. Therefore, ground raised by the assessee is dismissed. Estimated the income - assessee, an individual, deriving income from business in purchase and sale of liquor - AO rejected the audited books of account of the assessee and completed the assessment by estimating the income from business @ 8% of cost of goods put to sale in case of Bar and Restaurant and @ 5% in case of wine business - Held that - We direct the AO to adopt 3% of the cost of goods sold as the income of the assessee relating to Wine business. As regards estimation of income @ 8% of cost of sales in the case of Bar & Restaurant, we confirm the findings of AO as the same was in line with the provisions of section 44AD.

Summary

Issues:
Estimation of income from business, validity of notice u/s 148, rejection of audited books of account.

Estimation of Income from Business:
The assessee, engaged in the liquor business, challenged the AO's estimation of income at 8% and 5% of cost of goods sold for the Bar & Restaurant and Wine business, respectively. The assessee argued for a lower estimation based on the business's location in a mofussil area. Citing precedents, the assessee contended that 3% for wine business and 8% for Bar & Restaurant would be more reasonable. The CIT(A) upheld the AO's estimation. The ITAT noted that 3% estimation for wine business was consistent with previous tribunal decisions. Referring to specific cases, the ITAT directed the AO to adopt 3% of the cost of goods sold for the wine business income. However, for the Bar & Restaurant income, the ITAT affirmed the AO's 8% estimation in line with section 44AD provisions.

Validity of Notice u/s 148 and Rejection of Audited Books:
The assessee raised concerns about the validity of the notice u/s 148 and the rejection of audited books of account. The ITAT observed that the assessment was completed under section 143(3) r.w.s. 147 after issuing a notice as income was found to have escaped assessment. The ITAT dismissed the issue raised by the assessee regarding the notice u/s 148. Regarding the rejection of audited books, the ITAT did not find any error in the AO's decision, thereby confirming the rejection.

In conclusion, the ITAT partially allowed the assessee's appeal by directing the AO to adopt 3% of the cost of goods sold for the wine business income and confirming the 8% estimation for the Bar & Restaurant income. The ITAT dismissed the concerns raised by the assessee regarding the notice u/s 148 and upheld the rejection of audited books of account.