INCOME TAX ACT, 1961

Sction 145(3)

Accounting method - Rejection - Estimation of profit at higher rate -

AO rejected assessee's books of account on the ground that some purchase bills were not available and some payments were paid in cash and consumable goods, site expenses were supported by self made vouchers, etc. Accordingly, AO made addition while estimating income by applying N.P. rate of 6.5% instead of net profit rate delared by assesse at 5.18%. Assessee submitted that after rejection of books AO had applied N.P. rate of 6.50% without any proper and reasonable basis. As per AO, 6.50% NP rate for estimating income of assessee while framing assessment under section 144 read with section 145(3) was very reasonable and proper in view of presumptive tax under section 44AD which provides rate of profit at 8%. Held: AO while estimating income of assessee applied Net Profit rate of 6.50% had not made any efforts to find out comparable rate of NP in identical business or otherwise prevailing rate in the business as carried out by assessee. Even AO had not considered assessee's own Net Profit declared in preceding year which was not disputed by the department, accordingly the adoption of NP rate @ 6.5% without any basis or comparative instances was not justified.

Followed:Dynamic Engineers v. ACIT [ITA No. 856, 857 & 858/JP/2019 vide Order, dated 31-12-2019] : 2020 TaxPub(DT) 0566 (Jp-Trib)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11, 2012-13 & 2013-14

INCOM TAX ACT, 1961

Section 145(3)

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