Meena Jewellers Extension Private Limited Vs ACIT (ITAT Hyderabad)
ITAT Hyderabad held that resorting to estimation of profit in case of best judgement assessment without rejection of books of accounts is unjustifiable. Accordingly, matter set aside to the file of the lower authorities for reconsideration of the issue.
Facts- The assessee is into the business of trading in jewellery. Due to non-response and compliance from the assessee, the AO has completed the assessment u/s 144 of the Act on 29.12.2019 and determined total loss of the assessee under normal provisions at Rs.9,61,29,444/-, by making addition of Rs.27,70,67,789/- towards estimation of income @10% on sales turnover of the assessee under the head ‘income from business and profession’. Further, the AO had also made addition of Rs.2,25,17,243/- u/s 68 of the Act towards non-current liabilities as unexplained cash credits. Similarly, the AO had made addition of Rs.10,83,99,500/-u/s 69A of the Act as unexplained money towards cash deposited in the bank account during the demonetisation period.
CIT(A) upheld the additions. Being aggrieved, the present appeal is filed.
Conclusion- In our considered view, unless the Assessing Officer reject the books of accounts with valid reasons, he cannot resort to estimation of profit even in case of best judgement assessment. Thus, although no evidences have been filed to justify its argument that the net profit adopted by the AO is on higher side, in our considered view, since the AO has not given any reasons for rejection of books of accounts and also estimated 10% net profit on turnover without any basis, the matter needs to be set aside to the file of the lower authorities for reconsideration of the issue.
