INCOME TAX ACT, 1961

Section 144

Best judgment assessment - Estimation of income - Assessee engaged in providing accommodation entries - Only commission to be added

Assessee was engaged in the business of construction, road contractor etc. and had undertaken work contracts from a company. As per information, the said company had claimed bogus development expenditure and assessee had received a sum as land development charges from the said company. Case of assessee was selected under scrutiny by issuing of notice under section 143(2). AO had verified the work agreement of assessee company with the said company and the work carried out by assessee through the sub-contractors. AO noticed that there was no detail of location of land, area of land, survey no of land etc. in agreement of work contract. AO asked the subcontractors to furnish copy of return of income, balance sheet, P & L A/c account, capital account of the proprietary, etc. None of the sub-contractors have made compliance with the notices, therefore, assessee was asked to furnish the location of the land and details of work carried out through sub-contractors. Assessee failed to make compliance, thus, AO completed assessment under section 144 and amount of land development expenses was added to the total income of the assessee. Held: CIT(A) was unjustified in treating the entire contract receipt as a taxable income of the assessee without disproving the material fact that assessee was indulged in facilitating accommodation entries. Assessee had not carried out any development work for company and provided accommodation entries to the said company and on similar basis accommodation entries were provided by the subcontractor to the assessee. Assessee had failed to furnish the description of land and other details where land development work was carried out and the sub-contractors have also admitted in their statements and affidavits they have only provided accommodation entries. Assessee have not executed any work except providing accommodation entries, it would be reasonable to estimate the commission income earned by the assessee @ 4%.

Relied:ITO v. Maheshbhai Tulsibhai Patel [ITA No. 2284/Ahd/2015/SRT & C.O. No. 167/Ahd/20l5/SRT, ITA No. 2285/Ahd/20l5/SRT & C.O. No. 168/Ahd/20l5/SRT, dated 7-9-2018], Rahee Infratech Ltd. v. D.C.I.T. [IT(SS)A Nos. 05/Ahd/2015 06/Ahd/2015,07/Ahd/2015 dated 4-7-2018] : 2018 TaxPub(DT) 4444 (Kol-Trib) and ITO v. Rupa Promoters Pvt. Ltd. & Ors. [ITA Nos. 2640/Ahd/2011, 2641/Ahd/2011, 2642/Ahd/2011 & 2643/Ahd/2011, dated 31-7-2012].

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2012-13

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