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TMI Blog2015 (3) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion that estimate of profit at the rate of 9% would meet the ends of justice in this case and, therefore, we set aside the order of Ld. CIT(A) and estimate the net profit at 9%. - ITA Nos. 244 & 245/Chd/2015 - - - Dated:- 31-3-2015 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER For the Petitioner : Shri Parikshit Aggarwal For the Respondent : Shri Harjit Singh ORDER PER T.R.SOOD, A.M. Both the appeals filed by the assessee is directed against the order dated 10.12.2014 of CIT(A), Chandigarh 2. In this appeal the assessee has raised the following grounds:- 1. That on the facts, circumstances of the case and in law, the Worthy CIT(A)-I through his order dated 10.12.2014 has erred in passing that order in contravention of the provisions of S. 250(6) of the Income Tax Act, 1961. 2. That on the facts, circumstances of the case and in law, the Worthy CIT(A) has erred in confirming the action of Ld. AO of applying net profit rate of 10% on turnover of the appellant even when books were not rejected by Ld. AO but the CIT(A) held that the books have been rejected and on considering the totality of facts, the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was noticed by the Assessing Officer that sundry creditors were shown to the tune of ₹ 75,69,505/- and, therefore, assessee was requested to file confirmation from such sundry creditors particularly where amount exceeds ₹ 1 lakh. No such details were filed and it was replied as under:- Please note that some of the creditors are brought forward from the previous years, for which scrutiny proceedings have already been conducted by the department. However , for the creditors which came into existence in the current year the assessee is in the process of producing the account confirmation of parties whose balance exceeds ₹ 1,00,000/- and this shall be submitted shortly. The assessee was also asked to file details of sundry debtor which was ₹ 1,83,30,016/- and confirmation whether debts exceeded ₹ 1 lakh. In response to this, the assessee replied as under:- list of sundry debtors have already been given to your goodself along with balance account confirmation in a desired format who s amount exceeds ₹ 1 lac as on 31.03.2007 and keeping in view some are already in dispute and the other who have declined are being served with legal no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the books of account. He further submitted that in any case profits have been estimated on a very high side which is not justified. He referred to the decision of Hon'ble Punjab Haryana High Court in the case of Telelinks v CIT in ITA No. 269 of 2014 (dated 20.11.2014) wherein it is clearly observed that only reasonable rate of profit can be applied and the estimation has to be on judicious basis. On an enquiry by the Bench he admitted that assessee had not filed any return before the issue of notice u/s 148 and it was engaged in the business of construction of private houses. 10. On the other hand Ld. DR strongly supported the order of the Assessing Officer and CIT(A). 11. We have considered the rival submissions carefully. Before us the issue of rejection of books was not seriously pressed but it is clear from the material available on record that assessee is a firm and was having two permanent account numbers. It was admitted before us that there was a firm with the same name but the partners were different and the firm was again started with the same name with different partners. Since this issue is not before us we are not going into the details. Further, it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the profits. This clearly shows that books have been rejected. 13. Now the question is once books of account are rejected , what rate of profit should be applied. We agree with the contention of Ld. Counsel that profit should be estimated on the basis of various facts of as particular case. Even the Hon'ble Punjab Haryana High Court in the case cited by Ld. counsel in the case of Telelinks vs CIT (supra) has observed that while discussing the nature of power to be exercised for determining the net profit, it was observed as under:- The first question relates to the nature of the power exercised while determining a net profit rate. The question must necessarily be answered by holding that where books of accounts are rejected or not produced, the Assessing Officer would be well within the limits of his jurisdiction to access income by applying a fictional net profit rate. The power so conferred is quasi-judicial and , therefore, no unbridled as it must be guided by reason and though it may involve a degree of guesswork, must be based upon a rational analysis of facts. The first question of law is answered accordingly. 14. While discussing the second question, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut not to the extent assessed by the Commissioner of Income-tax (Appeals). Applying net profit rate on the basis of best judgment assessment in a given situation will be a question of fact unless such an assessment is shown to be arbitrary or perverse. In the present case, it cannot be held that any substantial question of law arises. Assessment of 12 per cent. of net profit rate of contract receipt is not shown to be arbitrary or perverse. Thus, wherein in a case wages were found not verifiable, 12% profit reached was held to be reasonable. 16. Now in the case before us we have already noted that assessee did not file even the return unless the same was detected during search made in the case of M/s Talwar Group. Anyway the most relevant factor in the case before us was that assessee is engaged in the business of construction of house for private parties. It is a common knowledge that rate of profit in construction of a private houses is much higher than in comparison to the mass construction contracts for government or other government authorities. This is so because the construction of a private house involves superior quality of work, fancy items for which generally th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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