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2019 (12) TMI 34 - AT - Income TaxEstimation of income - AO estimated the income at 9% of the total turnover - contention of the assessee is that it included reimbursement of expenditure which does not have any profit element in it - According to the AR re-imbursement amount is to be excluded from the total income credited in the P L account, so as to estimate the income of the assessee - HELD THAT - Assessee has to prove that the income credited in the P L account which includes reimbursement of expenses also. Before us, the assessee has not been able to substantiate the reimbursement of income included in the gross income credited in the P L account. In the interest of justice, this issue is remitted to the file of the Assessing Officer to examine afresh and then determine the income of the assessee. However, we make it clear that if the assessee is not co-operating with the Assessing Officer by producing the books of account before him, in that event, the Assessing Officer is at liberty to estimate the income to the best of his knowledge. With this observation, we remit this issue to the file of the Assessing Officer for fresh consideration. The grounds of appeal of the assessee are partly allowed for statistical purposes.
Issues:
1. Rejection of Books of Account under section 145(3) of the Act 2. Action of Assessing Officer under section 144 of the Act 3. Sustaining addition by estimating Gross Profit at 9% 4. Determination of income based on estimation Issue 1: Rejection of Books of Account under section 145(3) of the Act: The assessee, a clearing and forwarding agent, declared a total income of &8377; 1,02,650/-, but the Assessing Officer raised concerns regarding the claim of expenditure amounting to &8377; 12,55,13,091/-. The Assessing Officer found discrepancies in the audited accounts filed by the assessee and the actual turnover and expenses. The Assessing Officer rejected the books of account and completed the assessment under section 144 of the Income Tax Act, estimating the income based on the gross profit ratio of the previous year. Issue 2: Action of Assessing Officer under section 144 of the Act: The Assessing Officer estimated the income by applying a gross profit rate of 9% on the total turnover, resulting in an addition to the total income returned by the assessee. The CIT(A) adopted a turnover of &8377; 9 crores and estimated the gross profit at &8377; 81,00,000/-, sustaining an addition of &8377; 28,98,540/-. The assessee contended that the reimbursement of expenses should not be considered as part of the turnover for profit estimation. Issue 3: Sustaining addition by estimating Gross Profit at 9%: The assessee argued that the reimbursement credits and expenses should be excluded from the total income credited in the Profit and Loss account to arrive at the actual handling charges income. The Tribunal remitted the issue to the Assessing Officer for fresh consideration, emphasizing the need for the assessee to substantiate the inclusion of reimbursement income in the gross income credited. Issue 4: Determination of income based on estimation: The Tribunal partially allowed the appeal for statistical purposes, directing a re-examination of the income determination process by the Assessing Officer. The Tribunal highlighted the importance of cooperation from the assessee in producing necessary documents for accurate income assessment. In conclusion, the Tribunal remitted the issue to the Assessing Officer for reevaluation, stressing the requirement for proper substantiation of income components and cooperation from the assessee in the assessment process. The appeal was partly allowed for statistical purposes, with the Tribunal emphasizing the need for a fair and accurate determination of the assessee's income.
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