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TMI Blog2015 (6) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... st judge of the situation, then, ld. CIT cannot interfere with such decision of AO to substitute his own opinion on the rate of profit adopted by exercising power u/s 263 of the Act. Moreover, once the books of account are found to be unreliable and rejected resulting in estimation of profit, AO is not required to enquire or examine the individual items of expenditures or other issues as pointed out by ld. CIT since estimation of profit usually takes care of such deficiencies in the books. In the aforesaid circumstances, ld. CIT cannot hold the assessment order to be either erroneous and prejudicial to the interests of revenue so as to revise the same u/s 263 of the Act. Accordingly, we set aside the impugned order of ld. CIT and restore th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd sand and fabrication work, however, almost all these expenses were incurred in cash and supported by self-made vouchers only. As the expenditures incurred were not totally verifiable, AO was of the view that books of account have to be rejected and income has to be estimated by applying a reasonable rate. On verifying the P L A/c, AO noticed that assessee has shown net profit of ₹ 12,26,224 before deduction u/s 40(b) on gross contract receipts of ₹ 1,97,42,368, which works out to 6%. However, AO was of the view that the rate of profit in case of main contract business has to be adopted at 10% and that in case of sub-contract receipt has to be adopted at 7% and thereafter deduction u/s 40(b) of the Act is to be allowed. Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s vis-a-vis projects for which the assessee filed agreement copies. 4. The bank statements also show huge number of withdrawals by way of self-cheques and the AO has not verified them with reference to the applicability of provisions of section 40A(3). Further, he has also not examined the adequacy of drawings, etc. of the partners as is shown in their capital current account. Accordingly, he issued a notice to assessee to show cost as to why assessment order shall not be revised/set aside. In response to the notice issued by ld. CIT, assessee objected to the proceeding u/s 263 by stating that once assessment was completed by estimating the profit after rejecting the books of account, there is no reason for AO to either enquire in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m but also failed to make enquiry which on the facts and circumstances indicated in above was warranted in this case. Hence, the assessment order made by the AO u/s 143(3) of Act, dt. 13/05/2011 is set aside for redoing the assessment denovo on the lines indicated in para 5, supra and after giving the assessee a reasonable opportunity of being heard. Being aggrieved, assessee is before us. 4. Ld. AR more or less reiterating the submissions made before ld. CIT at the time of revision proceeding, submitted that as AO having found the books of account unreliable has rejected the same and proceeded to estimate the profit, ld. CIT cannot hold the assessment order to be erroneous and prejudicial to the interests of revenue either on the al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee by applying the rate of 10% of the gross receipts on main contract and 7% on gross receipts from sub-contract. On a perusal of the order of ld. CIT, it appears, though he has raised a number of issues to hold the assessment order to be erroneous and prejudicial to the interests of revenue, but, the major issue on which ld. CIT has considered the assessment order to be erroneous and prejudicial to the interests of revenue appears to be the rate of profit adopted by AO, which according to ld. CIT, should have been 12.5% on main contract and 8% on sub-contract works. In our view, when AO is of the opinion that books of account are unreliable, the discretion is with him to reject the books of account and estimate the profit at a rate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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