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TMI Blog2015 (3) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... gment assessment under s. 144 of the Act, which in fact, has not been made. AO proceeded to make assessment under s. 143(3) of the Act on the premise that the assessee has submitted some details and explanations called for which in fact have not been furnished is a matter of record. Such assessment made under s. 143(3) is liable to be quashed. We accordingly, direct the AO to quash the assessment so made by the AO. Even if the assessment has been made under s. 143(3) or in a manner provided under s. 144 of the Act, the AO should have invoked the provisions of s. 145(3) of the Act, which has not been done. In the facts and circumstances of the case also, the assessment made by the AO is bad in law and is directed to be quashed. - Decided against revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the case are that in the return of income filed by the assessee it has been stated that the books of account have not been maintained and the profit has been estimated @ 4 per cent on contract receipts. During the course of assessment proceedings, Sh. Darshan Lai Nagpal, counsel submitted that no books of account have been maintained by the assessee for the asst. yr. 2006-07 and, therefore, the net profit has been estimated at 4 per cent of the contract receipts. He also submitted that no evidences for the purchases and other expenses attributable to the business of the assessee can be furnished in the absence of the books of account. During the course of assessment proceedings on 8th Dec, 2008 attention of Sh. Nagpal. counsel was drawn towards the provisions of s. 44AD of the Act whereby the books of account are not maintained by the assessee, the net profit from the contract business is to be computed at 8 per cent of the total contract receipts. Although the said provisions are applicable to a case where contract receipts are less than ₹ 40 lakhs, the provision can provide guidance in order to determine the correct rate of profit in a case where the contract receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in J & K would earn 4 per cent of the contract receipts as income. In any case, the assessee has not brought out any material on record which would suggest that a firm in Ludhiana would make at least 10 per cent of its gross receipts as income while a firm in J & K would make only 4 per cent of its gross receipts as its income. 2. The contention of the assessee that comparable cases related to asst. yrs. 1999-2000, 2000-01 and 2001-02 but the case of the assessee relates to asst. yr. 2006-07 and the prevailing rates for the asst. yrs. 1999-2000, 2000-01 and 2001-02 for raw materials and expenses would be much less as compared to asst. yr. 2006-07 also does not help the case of the assessee. Even if the prevailing rates for raw materials and expenses during those years would be less compared to asst. yr. 2006- 07, the contract rates would also be less during those years. The rates of raw materials and expenses are always taken into consideration while quoting a price for contract. Hence, if the cost of raw materials and expenses were more, the rates at which contracts were taken by the assessee would also be more. Therefore, the higher rates of raw materials and expenses would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of account have been maintained, they have not even undergone any audit. The assessee has no supporting evidences in favour of the net profit declared by it. The assessee's case for the asst. yr. 2005-06 cannot be binding for all the years to come since every assessment year is separate and independent. Every assessment has to be completed based on the materials and evidences produced before the AO in support of the return of income filed. During the asst. yr. 2005-06, the books of the assessee were audited and the assessee produced the details called for by the AO from time to time. Based on the test check of the accounts, assessment for the asst. yr. 2005-06 has been completed. However, this does not give the assessee blanket right to declare the income as per its own calculation and wish without any backing in the form of books of account and evidences in support of such income. The income declared by the assessee can be accepted only if it is able to substantiate the correctness of such income. The assessee, by its own admission, is not in a position to do so. Although the income of the assessee for the asst. yr. 2005-06 was assessed at a rate lower than 10 per cent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business and is not in business for charity. It would like to make maximum profits from its business activities and would take the contract only if it is profitable after taking all factors into consideration. Assessee has not given any material to show that the rate of profit in these two contracts at Jindrah was much lower than the average. (vii) Assessee has placed reliance on certain case laws in the case of assessees engaged in civil construction. These would, however, not help the case of the assessee. (a) CIT v. J.V.L. Builders (P.) Ltd. (2006) 203 CTR (Mad) 303 In this case, the facts of the case are not given. The Hon'ble High Court has dismissed the appeal on the ground that the Tribunal's finding is merely a finding of fact and no question of law arises. The above decision, therefore, does not help the assessee to prove that the profit declared by it is correct. (b) Sahyog Shakari Sharam Samvida Samiti Ltd. v. Asstt. CIT (2007) 111 TTJ (Luck) 540 The issue in this appeal was whether penalty under s. 271(l)(c) can be levied when the profit has been determined on estimate basis and not as to what would be the rate of profit in the case of civil contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has not maintained any books of account, has not got his books audited in view of non-maintenance of books and has also not furnished any evidence in support of the various expenses attributable to the business, I apply a net profit rate of 10 per cent of the contract receipts of ₹ 14,53,27,930 declared in the revised return of income for working out the total income of the assessee in view of the decision of Tribunal in the case of Shivam Construction Co. Ltd. and affirmed by the Hon'ble P & H High Court in their order in IT Appeal No. 183 of 2007, dt. 14th May, 2007. Profit of the assessee from the contract business is accordingly determined at 10 per cent of (Rs. 14,53,27,930) = ₹ 1,45,32,793. As against this, the assessee has disclosed profit of only ₹ 58,13,117. Hence, the balance profit of ₹ 87,19,676 is added to the total income of the assessee. It is also pertinent to mention here that in the case of Shivam Construction Co. the Hon'ble Members have observed that there are several decisions of the Chandigarh Bench of the Tribunal where the net profit has been estimated at 10 per cent." 6. Before the learned CIT(A), the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al which he has gathered, make an assessment and determine the sum payable and refund, if any amount due to the assessee on the basis of such assessment. Whereas in the best judgment assessment under s. 144, if any person fails to make any return required under s. 139(1) or 139(4) or 139(5) on one hand or fails to comply with all the terms of notices under ss. 142(1) and 142(2A) and thirdly fails to comply with all the grounds of notices issued under s. 143(2) of the Act, then the AO after giving show-cause notice to the assessee or by issuing notice under s. 142(1) of the Act, shall proceed to make best judgment assessment under s. 143(3) (sic) of the Act. In spite of the fact, the assessee does not maintain books of account and has filed return of income only on estimated basis of the contract receipts and has not furnished details relating to contract business. Therefore, the AO is not justified in making assessment under s. 143(3) of the Act and prayed to quash the same. 12. The learned Departmental Representative, on the other hand, relied upon the order of the AO and opposed the arguments made by the learned counsel for the assessee. 13. We have heard the rival contentions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portance of proviso to s. 144 is in requiring any opportunity to the assessee by a notice calling upon the assessee to show-cause why assessment should not be made to the best of judgment. In the absence of such notice, the default by itself in complying with statutory notice will not be sufficient. The clear import of the abovementioned provisions is that, on the assessee's committing any one of the above defaults, the AO is bound to make an assessment to the best of his judgment. It was so held by the Hon'ble Supreme Court, in the case of CIT v. Segu Buchiah Setty [1970] 77 ITR 539 in the context of analogous provisions of s. 23(4) of 1922 Act. 16. In the present case, the assessee has filed the return of income only on estimated basis and the AO has also observed that the assessee was not maintaining books of account and has not produced any evidence of the purchases and expenditure relating to contract business. These facts are reproduced in the order of the AO at p. 2. However, the AO mentioned that the details and explanations called for were furnished by the assessee and the case was discussed with the assessee at p. 1 of the order. Probably, the AO is confused and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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