Dwaraka Pershad Radhey Ramanlal Vs ACIT (ITAT Hyderabad)
ITAT Hyderabad held that profit estimation cannot be arbitrary or without any basis. Accordingly, estimation of profit @6% on total contract receipts is reduced to 4%. Accordingly, appeal of the assessee allowed.
Facts- The assessee-firm is a civil contractor. This appeal has been filed by the Assessee against the order dated 26.07.2024, of the CIT(A)-National Faceless Appeal Centre, Delhi, relating to the assessment year 2017-2018. The sole substantive ground raised by the assessee in the instant appeal is estimation of income @ 6% by rejecting the books of accounts of the assessee by the lower authorities.
Conclusion- Held that the Assessing Officer also failed to make-out a case for rejection of books of accounts and estimation of profit @ 6%. Assuming for a moment, the Assessing Officer is right in rejection of books of accounts and resorted for estimation of profit @ 6%, in our considered view, the profit estimation cannot be arbitrary or without any basis. Although, the Assessing Officer has estimated 6% profit, but, could not give any reasons as to why 6% profit is justifiable with reasons in the given facts of the present case or with any comparable cases of similar nature of business. On the other hand, the assessee has filed a chart showing gross contract receipts and net profit declared for assessment years 2014-2015 to 2016-2017 which is ranging from 4.1% to 5%. In our considered view, in the course of estimation, the Assessing Officer should either follow the financial results declared by the assessee for earlier assessment years or bring some comparable case of similar nature. In the present case, the Assessing Officer without any valid reasons, simply estimated 6% profit on total contract receipts even though the assessee’s financial results shows the profit in this line of business ranging from 4.1% to 5%. Since the assessee’s own financial results is acceptable and in fact the Assessing Officer has accepted the financial results of assessee for earlier assessment year, in our considered view, the Assessing Officer should have adopted the assessee’s financial results for earlier years to estimate the profit for the impugned assessment year. Thus, we direct the Assessing Officer to estimate 5% profit on total contract receipts, including other receipts and interest income which is equal or similar to the profit declared by the assessee for earlier assessment years. Accordingly, the appeal of the assessee is allowed.
