INCOME TAX ACT, 1961

Section 145

Accounting Method - Estimation of profit - Rejection of books of accounts - Assessing officer estimated net profit @ 10% as against 5% declared by assessee

Assessee was engaged in the business of Civil Contractor. Case selected for scrutiny through CASS followed by serving of notices under section 143(2) & 142(1). During the course of hearing though assessee submitted complete details of contracts executed and the relevant work records but regular books of accounts were not maintained. Thus, financial statement remained unaudited. AO rejected the incomplete book records under section 145(3), and estimated net profit @ 10% as against 5% declared by assessee. Held: Provisions of section 44AD relates to 'special provision for computing profits and gains of business on presumptive basis'. Undoubtedly, the provisions of section 44AD do not apply directly on the case of assessee since total turnover is exceeding the limit prescribed under section 44AB. Drawing inference from provision of section 44AD and looking to the fact that assessee was not engaged in business of plying, hiring or leasing goods carriages and also not maintaining regular books of accounts, were of the considered view that applying of 8% of net profit rate on the undisputed total business turnover disclosed by assessee shall be justified and fair to both the parties. Accordingly, revenue was directed to sustain the addition in the hands of assessee only to the extent of applying net profit rate of 8% on total turnover and assessee's appeal is partly allowed.

REFERRED :

FAVOUR : Partly In assessee's favour

A.Y. :

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