Guhana Educational Society Vs ITO (ITAT Hyderabad)
Rejection of Books Upheld but Profit Estimation Reduced to 5% – Self-Made Vouchers Expense Defects Not Fully Reliable – ITAT Hyderabad
The assessee-society challenged rejection of books and estimation of income at 8% of gross receipts. ITAT observed that though accounts were audited, several discrepancies existed such as heavy reliance on self-made vouchers, inconsistent signatures, unsupported celebration and travel expenses, and inadmissible traffic penalty payments. The Tribunal noted from the ledger extracts and vouchers that some explanations of the assessee were valid, particularly regarding cumulative asset balances, but overall deficiencies justified rejection of books.
However, considering the nature of educational activities and partial acceptance of explanations, estimation at 8% was held excessive. ITAT restricted profit estimation to 5% of gross receipts and partly allowed the appeal
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal is filed by Guhana Educational Society (“the assessee”), feeling aggrieved by the order passed by the Learned ADDL/JCIT(A)-3, Mumbai (“Ld. First Appellate Authority”) dated 13.03.2025 for the A.Y.2017-18.
2. Assessee has raised the following grounds of appeal:
“1. The order of the learned CIT (A) is erroneous both on facts and in law;
2. The learned CIT (A) erred in confirming the action of the Assessing Officer in rejecting the books of account and in resorting to estimation of income at 8% of the receipts of Rs.2,58,90,677/-;
3. The learned CIT (A) erred in determining the total income at Rs.20,71,254/- by estimating the same at 8% of the gross receipts without considering the fact that the books of account have been properly recorded and the income is correctly arrived at;
4. Any other ground/grounds that may be urged at the time of hearing.”
3. The brief facts of the case are that the assessee is a society registered under the Andhra Pradesh Societies Act, which filed its return of income for the Assessment Year 2017–18 on 28.10.2017, declaring Nil income after claiming exemption under section 10(23C)(iiiab) of the Income Tax Act, 1961 (“the Act”). The case of the assessee was selected for limited scrutiny through CASS, and accordingly, notices under sections 143(2) and 142(1) of the Act were issued by the Learned Assessing Officer (“Ld. AO”) to the assessee. During the course of assessment proceedings, the Ld. AO observed that the assessee did not possess registration under section 12A of the Act nor approval under section 10(23C) of the Act. Accordingly, the assessee was assessed in the status of an Association of Persons. The Ld. AO further noticed that the assessee had claimed various administrative and other expenses on the basis of self-made vouchers without producing proper supporting bills or third-party evidences. On account of these deficiencies, the Ld. AO rejected the books of account of the assessee and estimated the income at 8% of the gross receipts of Rs.2,58,90,677/-, resulting in an assessed income of Rs.20,71,254/-. The assessment was completed by the Ld. AO under section 143(3) of the Act vide order dated 12.12.2019.
