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TMI Blog2014 (8) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... m/2010 - - - Dated:- 18-7-2014 - Shri Sanjay Arora, AM And Dr. S. T. M. Pavalan, JM,JJ. For the Appellant : Shri Jivanlal Lavidiay For the Respondent : Shri Vipul Joshi Shri Abhishek Tilak ORDER Per Sanjay Arora, A. M.: This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-26, Mumbai ( CIT(A) for short) dated 10.03.2010, partly allowing the assessee s appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ( the Act hereinafter) for the assessment year (A.Y.) 2007-08 vide order dated 11.12.2009. 2. The only issue arising in the instant appeal is the maintainability in law of estimation of net profit at 4.25% of the turnover by the ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount by the A.O. in arriving at his estimation. The rate of profit for the current year, prior to the mandatory charges by way of depreciation; interest on borrowings, including on partner s capital; remuneration to partners, is at 14.14% (of the turnover), which is, rather, better than for any year, either earlier or subsequent. The return under Fringe Benefit Tax (FBT) had also been accepted by the A.O., ostensibly validating the claim of expenses covered thereby. A comparative case, i.e., Shyam Jewellers, which firm was in fact much older, enjoying higher goodwill, was cited, disclosing net profit at 4.45% for the current year. The ld. CIT(A) was of the view that the A.O. had, in proceeding to frame the assessment u/s.144, acted in has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained without the documentary evidences which the assessee has failed to produce. 4. Before us, the Revenue s case was that the books of account, bills and vouchers, had not been produced and, thus, examined at any stage of the proceedings. The ld. CIT(A) had drastically reduced the net profit (NP) rate by relying on materials furnished by the assessee before him, and without reference to the A.O. The ld. Departmental Representative (DR) was, however, unable to answer us as to the basis that informed the estimation (of net profit) by the assessing authority; his order being completely silent in the matter. He was, however, agreeable to the matter being restored back to the file of the A.O. to examine those evidences. The ld. AR, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring hearing, would deny the same. We cannot agree. The jurisdiction to make estimate, whether in the first instance, or in modification thereof in appeal, would stand assumed only upon the assessment being confirmed for being a best judgment assessment. Where not so assumed, the Revenue cannot proceed to make an estimate in respect of the assessee s income except by invoking section 145(3), i.e., by inter alia, showing reasons for non-satisfaction with the correctness or completeness of the assessee s accounts. This also explains the interface or the link between sections 144 and 145(3); the latter section also enabling the assessing authority to, under the circumstances specified therein, make an assessment in the manner provided in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis or the material that informs the A.O. s estimate. The assessee, when it tabulates its trading (gross) profit for the year, as well as the earlier and subsequent years (PB pg.26A), or speaks of the reasonability of its operating margin (i.e., prior to the charge of interest, depreciation and partner s remuneration), is only referring to the data on the record of the Revenue, and which the A.O. ought to have consulted or taken into account. The result of another firm, rather than being an aberration, liable for being discounted, is to be commended inasmuch it further shores up and validates the estimate adopted by the ld. CIT(A). An estimate assuming existence of grounds for the exercise of that power by the assessing authority has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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