Nagimouddin Laskar Vs ITO (ITAT Kolkata)
Books Rightly Rejected for Omitted Turnover, but 8% Profit Cannot Be Estimated Without Past History or Comparable Cases: Kolkata ITAT
The assessee, engaged in business, originally declared turnover of ₹3.34 crore and total income of ₹7.98 lakh. E-verification revealed cash deposits of ₹5.06 crore, substantially exceeding the turnover disclosed in the return.
During reassessment, the assessee admitted that certain sales and purchase invoices had been omitted from the original accounts and GST returns. Revised financial statements were furnished showing:
- turnover of ₹5.90 crore;
- purchases of ₹5.86 crore; and
- substantially the same gross and net profits as originally declared.
The AO rejected the books under section 145(3) and estimated net profit at 8% of the revised turnover, determining business income at ₹47.21 lakh and making an addition of ₹38,86,682. The CIT(A) confirmed the action.
The ITAT held that rejection of the books was justified because the original accounts had admittedly omitted both purchases and sales and therefore did not disclose the correct turnover. The subsequent revision, made only after detection of large cash deposits, also required proper verification.
However, the Tribunal found that the AO had given no objective basis for applying an 8% net-profit rate. Once books are rejected, profit estimation must ordinarily be based on:
