Case Law Details
Shri Lakshmanan Vs ITO (ITAT Chennai)
It is an admitted fact that the ld. AR for the assessee has filed a letter dated 14.11.2017 and expressed his inability to produce supporting bills and vouchers for various expenditures debited into the profit & loss account. It is also an admitted fact that the ld.AR for the assessee agreed for estimation of profit on gross receipts. Therefore, based on the inability of the ld.AR for the assessee to produce necessary bills and vouchers, the AO has rejected books of accounts u/s.145(3) of the Act and resorted to best judgement assessment as per provisions of section 144 of the Act. It is an admitted fact that if books of accounts maintained by the assessee are incomplete or not supported by necessary evidences then the AO is empowered to complete assessment in the manner provided in section 144 of the Act. But fact remains that still in the best judgement assessment, the AO has to bring on record material on the basis of which he has arrived at the conclusion with regard to rate of profit for estimation of income from the business. No doubt, under the best judgement assessment there is an element of guesswork but it should not be arbitrary. Therefore, 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 construction work, the rate of profit varies from nature of contract executed by the assessee and place of such contracts. Therefore, no uniform yardsticks can be applied for estimating net profit. Therefore, considering the fact that the assessee is into civil construction business and also the AO has not given any reasons for adopting 5% net profit rate, we are of the considered view that a reasonable profit of 3% on total receipts would meet the ends of justice. Therefore, we direct the AO to estimate 3% profit on total gross receipts received by the assessee for the year.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the assessee is directed against order of learned Commissioner of Income Tax (Appeals)-2, Chennai, dated 22.07.2019 and pertains to assessment year 2012-13.
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