INCOME TAX ACT, 1961

Section 145

Accounting Method - Estimation of income - Bogus purchases - Rejection of books of accounts

Assessee was a builder and civil contractor. AO had made an addition on account of bogus purchases made by assessee on the ground that transaction entered with the LPPL was bogus, and the said company did not exit. Assessee had suppressed the income by getting bogus contract, which was utilized for black money generation. AO accordingly rejected the books of account of assessee as the same were not reliable and did not reflect true and fair picture of assessee's business. He estimated the net profit @40%. CIT(A) restricted the addition by taking average estimated net profit at 7%. Held: In terms of documentation, assessee might have fulfilled all necessary ingredients, but still it failed to bring any evidence apart from these peripheral documents to demonstrate actual work done by LPPL. Though it could have recommended for carrying out a fresh investigation in order to prove whether the assessee got this work done actually from the sub-contractor or from some third person, but considering the fact that the actual contract was completed to the satisfaction of the contractee in the present transaction routed through the LPPL, assessee might have earned a little more profit than actually shown by it in its books of account in earlier years or this year. Therefore, no error in the finding of CIT(A) for rejection of the books of account as well as estimation of profit at 7% on the total turnover and there was no justification at the end of AO to estimate profit at 40% of the turnover, which was merely based on some illogical consideration of facts and figures.

REFERRED :

FAVOUR : Against the assessee

A.Y. : 2013-14

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