2018 (3) TMI 469 - AT - Income Tax

Estimating the income of the assessee u/s 145(3) - Held that - Where expenses are unverifiable, and keeping in mind the huge quantum of unverifiable nature of expenses, rejection of the books of accounts was a just and logical conclusion and no fault could be found for invoking Section 145(3) of the Act. As far as the assessment of income of the assessee is concerned, the law is well settled that once the books of accounts of the assessee are rejected the best way to assess the income of the assessee is to go by the past history in the assessee s own case. CIT(A), in our view, has taken note of the past history in the assessee s own case and has rightly come to a conclusion that the estimation of profit at 14.5 per cent of the receipts would be just and proper in the facts and circumstances of the case.

Summary

Issues: Appeals filed by revenue against orders of CIT (A) for Assessment Years 2010-11 & 2011-12 regarding rejection of books of accounts and estimation of income under Section 145(3) of the Income Tax Act.

Analysis:
1. Rejection of Books of Accounts: The Assessing Officer rejected the books of accounts of the assessee for both years due to unverifiable expenses claimed without supporting evidence. The CIT (A) upheld this decision without challenge from the revenue. The rejection under Section 145(3) was deemed just and logical given the circumstances of unverifiable expenses.

2. Estimation of Income: The CIT (A) estimated the income of the assessee at 14.5% of the turnover for both years based on the past history of the assessee's case. The CIT (A) considered the percentage of profit in previous years and found the estimation reasonable in the current scenario. The Tribunal agreed with this approach, stating that once books of accounts are rejected, relying on past history is a valid method to assess income.

3. Judgment and Dismissal of Appeals: The Tribunal dismissed the revenue's appeals, finding no grounds to interfere with the CIT (A)'s reasoning. The decision to reject books of accounts and estimate income at 14.5% of turnover was upheld as just and proper based on the circumstances and past history of the assessee's case.

In conclusion, the Tribunal upheld the CIT (A)'s decision regarding the rejection of books of accounts and the estimation of income for the Assessment Years 2010-11 & 2011-12. The dismissal of the revenue's appeals signifies the acceptance of the CIT (A)'s reasoning and the application of past history in determining the income of the assessee.