Mediboyana Venkata Appala Surya Prakash Vs ACIT (ITAT Visakhapatnam)
Books Rejection Upheld; 12% NP Estimate Removed—Weighted Average NP Lower Than Declared, ₹65.08L Addition Deleted
The Tribunal noted that the case was selected for “limited scrutiny” to verify “Large other expenses claimed in the Profit & Loss A/c”, and the AO, on perusal of the material, found serious infirmities such as self-made vouchers, unsigned bills and purchase ledger entries showing vehicle numbers of Motorcycles, Two-Wheelers and Auto Rickshaws for transporting huge construction material. The AO was thus not satisfied about the correctness and completeness of the accounts and rightly rejected the books. However, the estimation of profit @12% of total receipts was without any basis, and the Ld. Sr. DR could not justify the rate adopted. The Tribunal held that estimation cannot go “wild and baseless” and must rest on a reasonable basis. As the net profit rates of the preceding scrutinised years, 4.83% and 3.18%, resulted in a weighted average of 4.01%, which was lower than the assessee’s disclosed 5.02%, no addition was warranted. The addition of Rs.65,08,444/- was therefore vacated and the appeal allowed.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 17/06/2025, which in turn arises from the order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (for short, “the Act”), dated 31/10/2017. The assessee has assailed the impugned order on the following grounds of appeal:
1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) is not justified in upholding the action of the assessing officer in rejecting the books of account.
3. Without prejudice to the above, The learned Commissioner of Income Tax (Appeals) is not justified in upholding the addition of Rs.65,08,444 made by the assessing officer by estimating the profit at Rs.1,11,60,959 @12% of the total receipts as against profit of Rs.46,52,515 admitted by the appellant.
4. The learned Commissioner of Income Tax (Appeals) ought to have held that the rate of profit adopted by the assessing officer is on much higher side.
5. Any other ground may be urged at the time of hearing.”
2. Succinctly stated, the assessee who is engaged in the business of Civil Contract works had filed his return of income for AY 2015-16, on 29/09/2015 declaring an income of Rs.50,01,800/-. The return of income filed by the assessee was processed as such under section 143(1) of the Act. Subsequently, the case of the assessee was selected for “limited scrutiny” under CASS for verifying “Large other expenses claimed in the Profit & Loss A/c”.
