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TMI Blog2021 (5) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... gement assessment there is an element of guesswork but it should not be arbitrary. While completing the assessment under best judgement assessment, the AO has to bring on record certain material to support his finding with regard to rate of profit admitted for estimation of profit with some comparable cases of similar nature or the profit declared in the similar industry. In this case, although the AO has adopted 5% net profit on gross receipts, but failed to bring on record any comparable case of similar nature nor give reasons for adopting such rate of net profit. On the other hand, the assessee has agreed for estimation of 3% profit on gross receipts considering the nature of business and place of work. Further in the civil construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hy the Appellate Authority has conveniently chosen not to respond to any of the submissions consequently the appellant humbly submits that the order is not complete in all respects and is considered not to be a speaking order in itself. 2. With reference to the action of the AO in rejecting the books of accounts, the appellant would like to check whether the AO had in letter and spirit followed a due diligent process before proceeding to reject the books of accounts. This is accentuated by the fact that the order of the AO does not mention of any efforts taken to find out the bonafide of transactions either by calling for an explanation from the qualified accountant who had carried out tax audit for the relevant AY nor trying to examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per which income chargeable to tax had escaped assessment, on account of lower profit from business. Therefore, notice u/s.148 of the Act was issued and served on the assessee. In response to notice, the assessee has filed return on 08.11.2017, declaring total income as admitted in the original return of income filed u/2.139(1) of the Act. The case was taken up for scrutiny and during the course of assessment proceedings, the AO called upon the assessee to furnish books of accounts and other evidences to justify various expenditures debited into the profit loss account. Since, the assessee failed to produce relevant documents and has also filed a letter stating that in absence of bills and vouchers in support of expenditures, net profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unable to get satisfied about the correctness and completeness of the accounts of the assessee and hence could not place reliance on the financials and the audit report filed. The undersigned is therefore construed to invoke the provisions of sec 145(3) and proceed to make an assessment in the manner provided in sec. 144. As the correctness and completeness of the accounts is not substantiated by the assessee, the books of accounts are hereby rejected u/s.145(3) and accordingly, a best judgement as per the provisions of section 144 of the Act comes into operation. 7. Taking into account all relevant material which have been gathered during the course of the reassessment proceedings, I hereby find it reasonable to estimate the total inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be reasonable having regard to the nature of business of the assessee. In this case, the assessee is into civil contracts, where net profit varies from 2 to 3% depending upon the nature of contracts and place of contracts, where the assessee has undertaken works. Therefore, without any basis, no adhoc estimation can be made towards profit from business. 6. The ld.DR on the other hand strongly supporting order of the CIT(A) submitted that once books of accounts are rejected u/s.145(3) of the Act, then the AO is empowered to pass best judgement assessment as per the provisions of section 144 of the Act, having regard to nature of the business of the assessee. Therefore, there is no merit in the arguments of the assessee that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under best judgement assessment, the AO has to bring on record certain material to support his finding with regard to rate of profit admitted for estimation of profit with some comparable cases of similar nature or the profit declared in the similar industry. In this case, although the AO has adopted 5% net profit on gross receipts, but failed to bring on record any comparable case of similar nature nor give reasons for adopting such rate of net profit. On the other hand, the assessee has agreed for estimation of 3% profit on gross receipts considering the nature of business and place of work. Further in the civil construction work, the rate of profit varies from nature of contract executed by the assessee and place of such contracts. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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