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2018 (12) TMI 1387 - AT - Income TaxN.P. rate determination - rejection of books of accounts - Held that - The assessment order and submissions of the appellant show cause was issued vide order sheet entry dated 13.01.2015, to the appellant as to why his book results should not be rejected and profit rate of 8% not be applied. After considering his reply have no option but to reject the books of accounts of the appellant and determine income at 8% of the total turnover . The order of CIT(A) is silent on what reply was furnished to her by the assessee; and why it did not find favour with her. CIT(A) has also not explained why she has selected 8% as the net profit rate. As the order of CIT(A) is silent on these important aspects, we are of the view that the entire issue requires fresh consideration by CIT(A) for a denovo order. Accordingly, we restore the issues in dispute to the file of the CIT(A) for a fresh denovo order. CIT(A) is directed to pass a speaking order, after giving opportunity of being heard to the assessee. - Decided partly in favour of assessee for statistical purposes.
Issues:
1. Disallowance of expenses claimed as unverifiable purchases 2. Rejection of books of account and estimation of net profit rate at 8% Issue 1: Disallowance of expenses claimed as unverifiable purchases: The appeal was against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2010-11. The Assessee had disclosed additional income during a survey under Section 133A of the Income Tax Act. The Assessing Officer made an addition of ?99,25,000 on account of unverifiable expenses, leading to a total income assessment of ?2,39,93,740. The Commissioner observed deficiencies in bill production and lack of evidence for certain expenses. The Commissioner rejected the books of account and estimated net profit at 8%. The Assessee contended that the contract rates included material supplied by the contractee, and submitted ledger accounts and contra credits. However, deficiencies in bill details and lack of evidence for expenses were noted. The Commissioner upheld the addition of ?99,25,000 and determined the income at ?1,81,43,333, partly covering the Assessing Officer's addition. The appeal challenged this decision, emphasizing the acceptance of the disclosed additional income and disputing the rejection of books and the 8% net profit estimation. Issue 2: Rejection of books of account and estimation of net profit rate at 8%: The Tribunal noted deficiencies and discrepancies in the Assessee's books of account, leading to the rejection of the books by the Commissioner. However, the Tribunal found the Commissioner's order lacking in explanation for adopting a net profit rate of 8%. The Commissioner's order did not provide details on the Assessee's response or reasoning behind selecting 8% as the net profit rate. As a result, the Tribunal deemed the order insufficiently reasoned and directed a fresh consideration by the Commissioner for a denovo order. The Tribunal instructed the Commissioner to pass a speaking order after giving the Assessee an opportunity to be heard. Consequently, the appeal was partly allowed for statistical purposes, and the issues were remanded to the Commissioner for a fresh decision. This detailed analysis outlines the key aspects of the judgment, addressing the disallowance of expenses and the rejection of books of account with an estimation of the net profit rate, highlighting the deficiencies in the original order and the directions for a fresh consideration by the Commissioner.
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