AJAY KHANNAWALA,ROURKELA vs. ITO,WARD -2,ROURKELA, ROURKELA

Shri M.R.Sahu, M.R.Sahu, ld AR appeared for the assessee. Shri S.C.Mohanty the assessee. Shri S.C.Mohanty, ld Sr DR represented on behalf of the revenue. represented on behalf of the revenue.

At the time of hearing, ld AR has submitted that the legal At the time of hearing, ld AR has submitted that the legal At the time of hearing, ld AR has submitted that the legal issue raised in Ground No.1 of appeal raised in Ground No.1 of appeal is not pressed. Consequently, Ground No.1 is not pressed. Consequently, Ground No.1 of appeal is dismissed dismissed as not pressed.

In respect of other grounds, it was submitted by ld AR that originally an order u/s.263 had been passed by ld CIT, Sambalpur, wherein, the ld CIT had given the directions as follows:

It was the submission that these directions have been extracted by the Assessing Officer in his assessment order at page -1. It was the submission that consequential order has been passed by the Assessing Officer, wherein, the Assessing Officer has estimated the income of the assessee by applying net profit rate at 8% of the gross receipts. It was the submission that the Assessing Officer has not invoked the provisions of section 145(3) of the Act and the books of account of the assessee have not been rejected. It was the submission that in view of the decision of the Co- ordinate Bench (Indore Bench) in the case of Krishna Mohan Choursiya vs ITO (2021) 133 TAXMANN.COM 15 (Indore) and also the decision of Gauhati Bench in the case of Sayqul Islam vs ITO (2020) 118 TAXMANN.COM 347(Gauhati) without rejecting the books of account, the Assessing officer could not have estimated the income of the assessee.

In reply, ld Sr DR vehemently supported the order of the Assessing Officer and ld CIT(A). It was the submission by ld AR that the ld CIT(A) in para 5.10 has categorically held that the ld CIT, Sambalpur has in the order u/s.263 given a finding that if the books are rejected then the minimum profit has to be estimated @ 8%. It was the submission that this was what done by the Assessing Officer consequent to the order passed u/s. 263 of the Act. It was the submission that the Assessing Officer has complied with the order of the ld CIT, Sambalpur.

I have considered the rival submissions. A perusal of the assessment order clearly shows that the Assessing Officer has extracted the direction of the ld CIT, Sambalpur passed u/s.263 of the Act. Further, a perusal of the assessment order also clearly shows that the Assessing Officer has not rejected the books of account of the assessee nor has invoked the provisions of section 145(3) of the Act. Without rejecting the books of account of the assessee, there is no provision for estimation of the income of the assessee. In the present case, as it is clearly noticed that there is no finding of the Assessing Officer in rejecting the books of account of the assessee nor invoking the provisions of section 145(3) of the Act, the estimation of income as done by the Assessing Officer is unsustainable and consequently, the addition as made by the Assessing officer and as upheld by the ld CIT(A) at 8% of the gross receipts stands deleted. No other arguments have been advanced by ld AR of the assessee.

In the result, appeal of the assessee stands partly allowed.