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2020 (9) TMI 244 - HC - Income TaxEstimation of income @ 25% - advances received from its customers - Reopening of assessment u/s 147 - ITAT deleted the addition - whether assessee has worked as a contractor only and therefore revised provisions of AS-7 would apply for estimation of matching income on proportionate completion method? - HELD THAT - We take notice of the fact that the AO in the assessment order has not discussed anything or rather has not been able to justify in any manner the addition of ₹ 3,38,44,000/- to the total income being 25% of the total receipts of ₹ 13,53,76,000/- as the business profit of the assessee for the year. No reason worth the name has been assigned by the AO in this regard. This exactly weighed with the CIT (A) while partly allowing the appeal of the assessee. The Tribunal ultimately concurred with the findings recorded by the CIT(A) and dismissed the appeal preferred by the Revenue. We are at one with the Tribunal in taking the view that the AO wrongly determined the profit at the rate of 25%, without any basis or credible material. No questions of law as proposed by the Revenue
Issues:
Appeal against ITAT order on addition of estimated income @25% and advances received from customers. Analysis: 1. The Tax Appeal under Section 260A of the Income Tax Act, 1961 was filed by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT) for the Assessment Year 2009-10. The original assessment was completed on 16th December 2011, with total income at ?1,32,140. Subsequently, the case was reopened under Section 147 of the Act, resulting in additions of ?3,38,44,000 as business profit estimated at 25% and ?3,76,496 under Section 40 A (3) of the Act. 2. The CIT(A) partially allowed the appeal by deleting the addition based on estimated profit at 25% of total receipts. The Revenue then appealed to the Tribunal, which upheld the CIT(A)'s decision. Dissatisfied, the Revenue brought the matter to the High Court through the present Tax Appeal. 3. The Assessing Officer (AO) justified the addition of ?3,38,44,000 as 25% of total receipts, initiating penalty proceedings under Section 271(1)(c) for inaccurate income particulars. However, the CIT(A) found that the AO's determination lacked a proper basis, especially as no registered sale deed was executed during the relevant year, and the actual construction cost was significantly lower than the estimated profit. 4. The Tribunal concurred with the CIT(A)'s findings, emphasizing that no registered sale deed was executed in the relevant year, and the actual area sold was less than initially agreed upon. The AO's determination of profit at 25% without substantial basis or material was deemed unsustainable in law, leading to the deletion of the addition by the CIT(A). 5. The High Court observed that the AO failed to provide any justifiable reasons for the addition of ?3,38,44,000 as business profit, echoing the CIT(A) and Tribunal's stance. It was concluded that the questions of law proposed by the Revenue were not substantial, resulting in the dismissal of the Tax Appeal. 6. In conclusion, the High Court upheld the decisions of the CIT(A) and Tribunal, emphasizing the lack of credible basis for the AO's estimated profit addition. The Tax Appeal was dismissed based on the insubstantial nature of the proposed questions of law.
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