2023 (5) TMI 1353 - AT - Income Tax

NP estimation - income disclosed in survey proceedings - HELD THAT - In the absence of regular books of accounts of the assessee, the assessments as per survey report are very high. The ld. CIT(A) has allowed some relief as proposed by the Assessing Officer in his second remand report, which has no basis for arriving such higher figures. Considering the previous years comparison, we are of the considered opinion that the net profit ratio at 18.40%, which was highest among the three previous years, would be very reasonable to meet the ends of natural justice. Accordingly, we direct the Assessing Officer to recompute the income of the assessee by adopting the net profit ratio at 18.40% for all three assessment years under appeal.

Summary

Issues involved:
1. Delay in filing the appeal and condonation of delay.
2. Assessment of undisclosed income in real estate business.
3. Addition made by the Assessing Officer based on survey admission.
4. Net profit ratio comparison and re-computation of income.
5. Additional ground raised regarding reopening of assessment.

Analysis:
1. The appeals filed by the assessee were delayed by 114 days, and a petition for condonation of delay was filed. The delay was condoned as the assessee showed sufficient cause, and the appeal was admitted for adjudication.

2. The assessee, engaged in real estate business, admitted undisclosed income during a survey. The Assessing Officer completed assessments for the relevant years based on impounded materials and lack of proper books of accounts. The Assessing Officer arrived at a higher total net profit than admitted by the assessee, leading to an appeal.

3. The assessee contended that additions were made solely based on survey admission without any incriminating material. The Department argued that the assessee lacked proper books of account, relying on a note book for the addition.

4. The Tribunal considered the net profit ratio comparison for previous years and directed the Assessing Officer to recompute the income by adopting a reasonable net profit ratio of 18.40% for all the assessment years under appeal, based on natural justice principles.

5. An additional ground raised by the assessee regarding the reopening of assessment under section 147 r.w.s. 148 of the Act was dismissed as not pressed, resulting in the appeal being partly allowed for statistical purposes.

This judgment highlights the importance of maintaining proper books of accounts, the significance of justifying income additions, and the application of reasonable profit ratios for fair assessments. The decision emphasizes the need for adherence to legal procedures and the principles of natural justice in income tax matters.