2021 (9) TMI 5 - AT - Income Tax

Estimation of income - Rejection of books of accounts - estimation of profit rate @ 8% on contract turnover in civil construction business - HELD THAT - Foremost argument against estimating the assessee s income @ 8% in issue, is not sustainable since the assessee s turnover pertains to sub-contract business only. He fails to dispute that the assessee had not given full details of the sub-contract receipts right from scrutiny till date. We, thus, find no reason to accept his technical as well as factual arguments regarding to books rejection resulting in the impugned profit estimation. We accordingly decline the assessee s substantive ground to this effect. Addition u/s. 40(a)(ia)in view of the rejections of books of accounts - We are of the opinion that the same has no legs to stand once the assessee s books stood rejected as per hon ble jurisdictional high court s decision in Indwell Constructions vs. CIT 1998 (3) TMI 121 - ANDHRA PRADESH HIGH COURT that no disallowance could be made once an assessee s profits are estimated at the fixed percentage of it s turnover. We, thus, accept the assessee s instant third substantive grievance. Addition u/s 68 - unexplained cash credits - share application / premium and unsecured loan - only plea is that no such amounts had been collected in the relevant previous year so as to form subject matter of section 68 addition - HELD THAT - Faced with this situation, we are of the opinion that the same requires afresh factual verification at the Assessing Officer s end as per law. We order accordingly. The assessee or its learned authorised representative shall appear before the Assessing Officer on or before 30/09/2021 with all the relevant details to be followed by three effective opportunities of hearing at its own risk and responsibility.

Summary

Issues Involved:
1. Delay in filing the appeal
2. Estimation of profit rate in civil construction business
3. Disallowance under section 40(a)(ia)
4. Unexplained cash credits addition

Delay in filing the appeal:
The appeal in question involved a delay of 344 days in filing. The reasons for the delay were attributed to the company's employee failing to inform higher officials about the order received from the CIT (A). Despite acknowledging that the reasons for the delay were not acceptable, the Tribunal decided to condone the delay in the interest of justice to proceed with the adjudication on merits.

Estimation of profit rate in civil construction business:
The appellant contested the estimation of income at 8% in the civil construction business, arguing that the turnover was related to sub-contract business only. However, the appellant failed to provide complete details of sub-contract receipts. Consequently, the Tribunal rejected the appellant's arguments regarding the rejection of books leading to the profit estimation, declining the appellant's substantive ground on this issue.

Disallowance under section 40(a)(ia):
Regarding the disallowance of ?17,88,70,742 under section 40(a)(ia), the Tribunal held that once the appellant's books were rejected, no further disallowance could be made. Citing a decision by the jurisdictional high court, the Tribunal ruled in favor of the appellant on this issue, accepting the appellant's grievance related to section 40(a)(ia).

Unexplained cash credits addition:
The Tribunal addressed the appellant's concern regarding the addition of ?1,43,67,992 for unexplained cash credits related to share application premium and unsecured loans. The appellant argued that no such amounts were collected in the relevant previous year. The Tribunal deemed it necessary for the Assessing Officer to conduct a fresh factual verification in this regard, directing the appellant to provide all relevant details and appear before the Assessing Officer by a specified date for further proceedings.

In conclusion, the Tribunal partially allowed the appeal, ruling in favor of the appellant on the disallowance under section 40(a)(ia) and directing further verification for the unexplained cash credits addition. The judgment highlighted the importance of timely filing of appeals and the need for complete and accurate documentation in tax-related matters.