2015 (5) TMI 267 - HC - Income Tax

Estimation of net profit rate - CIT(A) estimated the income of the assessee at 8 per cent. of the turnover - assessee's grievance that the estimation by the Commissioner of Income-tax (Appeals) should have been at best at 6.5 per cent - Held that - Tribunal concluded that the net profit rate had varied from 2.93 per cent. to 9.96 per cent. These are big concerns, who maintain proper accounts and also maintain quality standards. In the case of the assessee, as held earlier, accounts are not reliable and, hence, the estimation of net profit rate of 8 per cent. is justified. No reason to entertain this appeal, when pure findings of fact are being assailed by the Revenue. This court cannot reappreciate and reappraise the said findings of fact. The Tribunal's exercise in upholding the order of the Commissioner of Income-tax (Appeals) and his estimation cannot be interfered with by us at the behest of the Revenue without any perversity being demonstrated. The Revenue's estimation on the higher side and based on the Assessing Officer's order was rightly termed as abnormal and unreasonable. No substantial question of law. - Decided against revenue.

Summary

Issues:
Challenge to order passed by Income-tax Appellate Tribunal regarding estimation of income without substantial basis.

Analysis:
The appeal before the Bombay High Court challenged the order of the Income-tax Appellate Tribunal regarding the estimation of income for the assessment year 2007-08. The Revenue contended that the Tribunal erred in accepting the income estimation without a substantial basis, as it rejected the reliability of the books of account and the evidence supporting purchases. The Revenue argued that the Tribunal should not have confirmed the estimation of 8% of turnover as the income of the assessee without considering the Commissioner of Income-tax (Appeals) estimation or inviting comments from the Assessing Officer. However, the Court, after examining the Tribunal's and Commissioner's orders, disagreed with the Revenue's contentions. The Court noted that the assessee was a contractor working for a public body and had filed a return declaring income. The Assessing Officer had found discrepancies in loans, purchases, sub-contracts, and payments made by the assessee, treating certain amounts as income due to lack of confirmation and genuineness. The Commissioner of Income-tax (Appeals) estimated the income at 8% of turnover, considering irregularities but also deleting certain additions. The Tribunal upheld the Commissioner's estimation, rejecting the Revenue's argument for a lower estimation. The Court found no grounds to interfere with the Tribunal's decision, as it was based on factual findings and without any demonstrated perversity. Therefore, the appeal was dismissed, stating it did not raise any substantial question of law.

This case highlights the importance of factual findings and the limitations of challenging such findings on appeal. The Court emphasized that it cannot reevaluate factual determinations made by lower authorities unless there is perversity in the decision. The judgment underscores the significance of maintaining reliable accounts and documentation to support income declarations, especially in cases involving assessments and estimations. The Court's decision to dismiss the appeal signifies the adherence to established principles of law and the need for concrete evidence to challenge income estimations in tax matters.