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2017 (7) TMI 823 - HC - Income TaxEstimation of profit - Held that - There is no legal position which is debatable. Equally no settled position of law has been misapplied by the authorities in answering the material questions either. Therefore we have no hesitation whatsoever in coming to the conclusion that no substantial question of law arises in the instant appeal. As stated supra we have tested the questions proposed by Revenue in the backdrop of the factual matrix of the instant case. As a matter of abundant caution we also applied our minds independently and examined / searched if any other substantial question of law arises but in vain. Owing to all that have been stated supra there is no merit whatsoever in the appeal filed by the Revenue as the addition of income on estimate basis for certain projects has admittedly / concededly (as admitted / conceded by the Revenue before ITAT) been done without scrutiny and without rejecting the Books of Accounts. Equally no substantial question of law arises.
Issues Involved:
1. Addition of estimated income by the Assessing Officer (AO). 2. Disallowance of certain amounts under Section 14A of the Income Tax Act, 1961 (IT Act). Issue-Wise Detailed Analysis: 1. Addition of Estimated Income by the Assessing Officer (AO): The Assessee, a public limited company engaged in civil construction, filed its return for the Assessment Year 2012-13. The AO, during scrutiny, added an estimated income of ?21,40,00,000/- for certain projects. The power to make such an addition on an estimate basis is available to the AO under Section 144 of the IT Act, which can be invoked when conditions in Section 145(3) are satisfied. Section 145(3) requires the AO to be unsatisfied with the correctness or completeness of the accounts or the method of accounting followed by the Assessee. However, in this case, there was no reference in the AO’s assessment order about rejecting the Books of Accounts maintained by the Assessee. The CIT (A) and ITAT both noted this fact and held that the accounts of the Assessee cannot be rejected merely based on the AO's perception of low profit margins. ITAT confirmed that the AO could not estimate profits without rejecting the Books of Accounts. The Assessee's diverse projects, including those for government agencies and NGOs, could naturally have lower profit margins. The Revenue’s appeal to the High Court raised two substantial questions of law: whether the ITAT was right in deleting the estimated profit addition and whether the ITAT erred in not following the Supreme Court's decision in CIT Vs. British Paints India Ltd. The High Court, applying the principles laid down by the Supreme Court in Sir Chunilal V. Mehta & Sons Ltd. vs Century Spg. & Mfg. Co. Ltd. and Hero Vinoth Vs. Seshammal, concluded that no substantial question of law arose. The legal position was not debatable, and no settled position of law had been misapplied. 2. Disallowance of Certain Amounts under Section 14A of the IT Act:The AO disallowed ?2,61,96,790/- under Section 14A of the IT Act. The CIT (A) confirmed this disallowance, and the Assessee accepted this order, giving it legal quietus. Therefore, this issue was not contested further and was put to rest. Conclusion:The High Court concluded that the Revenue’s appeal lacked merit as the addition of income on an estimate basis was done without scrutiny and without rejecting the Books of Accounts. No substantial question of law arose for consideration under Section 260-A of the IT Act. Consequently, the appeal was dismissed at the admission stage without costs. Decision:The appeal by the Revenue in T.C.A.No.302 of 2017 is dismissed as bereft of merits and as one in which no substantial question of law arises for being entertained under Section 260-A of the IT Act. No costs as this Appeal is being dismissed at the admission stage.
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