The Tax Publishers2021 TaxPub(DT) 0510 (Pune-Trib)


Sections 44AD & 144

Where AO had not pointed out any discrepancies in the seized material on the basis of which he rejected assessee's business result and also did not provide any reason for estimating income @10% besides what the assessee stated in his statement under section 133A, which had no evidentiary value; the CIT(A) was justified in applying rate of 8% as per section 44AD to the income of the assessee considering its area of business.

Presumptive taxation under section 44AD - Rate of tax - Assessee sub-contractor of construction of civil works -

Assessee was a sub-contractor executing civil works. A survey operation under section 133A was conducted in business premises of the assessee. It was found that the assessee did not maintain regular books of account and did not get its accounts audited. It kept only self-made vouchers for expenses and few files showing bills raised and payments received. Those files, documents and vouchers were impounded under section 133A. AO noted that as per section 44AD, income of the assessee should be 8% of the turnover; however, he found that in none of the four assessment years under consideration, the assessee returned the income at 8% or more. Thus, the cases were taken up under scrutiny by issuing of notices under section 148. Assessee did not reply to various notices issued by the AO whereupon the AO resorted to estimate the assessee's income under section 144 through best judgment assessment. He has found that in statement recorded under section 133A, the assessee offered income @10% on receipts and stated that taxes would be paid on that amount. Therefore, AO adopted a rate of 10% in all the years under consideration and assessed the income accordingly. Further, CIT(A) reduced the said rate from 10% to 8%. Aggrieved, assessee was in appeal. Held: CIT(A) observed that AO had not pointed out any discrepancies in the seized material while rejecting the assessee's business result. Further, the AO had also not given any specific reason for estimating the income at the rate of 10%, besides what the assessee stated in his statement. There was no justification for taking the profit rate of 10% on the basis of statement under section 133A that had no evidentiary value. AO should have used such statement as a starting point and collected further facts from impounded materials to justify the rate of 10%, which he failed to do. That further, the assessee was also not given copy of the statement recorded in the course of survey and neither, the copy of seized material was provided to assessee. That similarly, the figures of income returned by the assessee were also not reliable as his books of account were not audited. CIT (A) further noted that as per section 44AD, the prescribed rate as a thumb rule in the assessee's line of business is 8% of turnover. Therefore, the CIT (A) was justified in applying the rate of 8% as per section 44AD to the income of the assessee considering its area of business.


FAVOUR : Against the assessee

A.Y. : 2008-09 to 2011-12



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