2024 (9) TMI 784 - AT - Income Tax

Best judgement Assessment u/s 144 - applying the net profit rate at 8% on gross turnover - Counsel submits that the assessee has shown average GP at 5.03% and average net profit at 0.08% for the assessment years 2014-15 to 2016-17 and, therefore, there is no justification in estimating the profit at 8% applying section 44AD - HELD THAT - Best judgment assessment was made under 144 of the Act as assessee could not file the requisite details. The assessee contends that the action of the AO for estimating the income at 8% of turnover as per provisions of section 44AD since the provisions of section 44AD are not applicable on the assessee having turnover more than 1 crore. It is also the contention of the assessee that non maintenance of stock register cannot be the only basis for rejecting the books and estimating the profits at 8%. The turnover shown by the assessee for the assessment year under consideration is Rs. 2,14,36,475/- and, therefore, the AO could not have applied provisions for 44AD and estimated profit at 8%. It is also the finding of the AO that since the books and vouchers were not produced before him the income was estimated especially as stated by the auditor in column no.5 in 3CB report that maintenance of stock register is not plausible. Therefore, AO is directed to estimate the income at 5% of gross turnover as against 8% and re-compute the income accordingly. Appeal of the assessee is partly allowed.

Summary

The appeal was filed against the order of the Ld.CIT(A) for AY 2015-16. The assessee challenged the assessment made under section 144, applying 8% net profit rate. The assessee's firm was closed, and the partner had passed away. The assessee argued for a lower profit rate due to historical data. The AO was directed to estimate income at 5% of gross turnover instead of 8%. The appeal was partly allowed. (TMI)