Case Law Details
Sri Sivaram and Co Vs ACIT (ITAT Chennai)
ITAT Chennai held that rejection of books of accounts justified as transactions recorded in the books of accounts are not properly vouched or supported by proper documents. Further, expenses and related vouchers were also not found in accordance with books of accounts.
Facts- The only issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in rejecting the entire books of accounts in limited scrutiny case and restricting expenses by estimating the profit rate at 8% and also consequently making addition of interest received from banks and interest on income tax refund.
Conclusion- We noted that the assessee before us could not satisfactorily explain as to how the assessee’s books have been rejected without any basis. The assessee could not controvert the finding of the AO that there are bills and vouchers or receipts which are not debited properly or not vouched properly. Since the transactions recorded in the books of accounts are not properly vouched or supported by proper documents, the AO could not verify the genuineness of transactions and they are conscious that this case was selected for limited scrutiny purpose but to verify the closing cash balance as on 31.03.2016. For verification of cash balance i.e., closing cash balance, the AO has to verify the bills and vouchers and it found not correct, he has rightly rejected the books of accounts. We affirm the action of AO. However, going through the estimation of income from civil construction business, no other expenses are allowed and applied profit rate at 8% i.e., net profit on the total contract receipts. The total contract receipts of the assessee is Rs.8,10,78,364/- and in civil construction profit rate i.e., net profit rate at 8% is little higher. In our view, the fair profit rate should have been at 6% in the present facts and circumstance and hence, we direct the AO to apply the fair profit rate of 6% i.e., net profit rate to the total contract receipts and estimate the income accordingly. In our view, this will meet the ends of justice.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
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