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TMI Blog2014 (1) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... e following two questions would be comprehensive enough to cover the controversy: "A. Whether the ITAT erred in law in deleting the additions made U/s 68 on the basis of affidavits only, ignoring the provisions and spirit and aim of the legislature in formulating Section 68. B. Whether the ITAT was justified in assessing the income of the assessee by applying 7% net profit rate in place of 8% as provided U/s 44-AB, more so when the assessee could not prove at any stage the genuineness of its claim and neither the C.I.T. (A) or the ITAT have given any specific reason for doing so." The assessee filed a return of income of Rs.1.63 crores. The case was selected for scrutiny on the ground that Section 44AB of the Act applies and that the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lared by the assessee was 4.5%. Considering the totality of facts and circumstances, the CIT (A) held that a net profit rate of 7% would be fair, having regard to the rate adopted in the case of the assessee itself and the nature of the civil construction business. In appeal, the Tribunal has confirmed the order of the CIT (A). The Tribunal considered the presumptive rate of 8%, which is prescribed in Section 44AD of the Act in the case of civil construction business, but at the same time, while assessing the reasonableness of the net profit rate which was adopted by the CIT (A), the Tribunal has found that for AY 2005-06 where assessment was completed under Section 143 (3) of the Act, the Assessing Officer had adopted a net profit rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is always a certain degree of guess work but at the same time, the authorities should not act in an arbitrary manner and must make an effort to compute an honest and fair estimate of the income of the assessee. In the present case, on both aspects of the matter, the Tribunal cannot be regarded as having committed any error. As regards the rate of net profit, the course of business of the assessee for AY 2005-06 was also of relevance where a rate of 3.1% had been accepted in a proceeding under Section 143 (3) of the Act. For the year in question, where the assessee has declared a rate of 4.5%, the CIT (A) has adopted a rate of 7%. The CIT (A) furnished reasons why he believed that the Assessing Officer had not made a reasonable assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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