RANGANATHAN PAVADAI NATTAR NAGARAJAN,CUDDALORE vs. ITO,WARD-1, CUDDALORE

Upon perusal of the assessment order, it could be seen that Ld. AO was not satisfied with the Business Receipts of Rs.57.27 Lacs as reflected by the assessee. The receipts arose out of sale of iced fish trade. The income was offered on presumptive basis u/s 44AD @8%. The assessee also reflected commission income of Rs.6.95 Lacs as Income from other sources. However, noticing that there was huge credit of Rs.934.26 Lacs in the bank accounts, Ld. AO rejected the income offered by the assessee. Considering the factual matrix, Ld. AO estimated income of 4% against gross receipts of Rs.934.26 Lacs and allowed depreciation and expenses against the same. Finally, the returned income of Rs.9.99 Lacs was assessed at Rs.17.63 Lacs.

Subsequently, upon perusal of case records, Ld. Pr.CIT invoking the provisions of Sec.263, held the order to be erroneous and prejudicial to the interests of revenue. The assessee was show caused wherein it was stated that the income should have been computed by adopting profit rate of 8% of gross receipts. No deduction was to be allowed against the same u/s 30 to 38. Though the assessee opposed the said estimation, Ld. Pr. CIT set aside the assessment order and directed Ld. AO to estimate the income @8% on entire turnover without allowance of any expenses. This was in view of the fact that the assessee did not maintain books of account u/s 44AA and did not get it audited as per Sec.44AB. Aggrieved, the assessee is in further appeal before us. 5. Upon perusal of assessment order, it could be seen that Ld. AO rejected the income offered by the assessee and treated the entire bank credit of Rs.934.26 Lacs as business receipts. The profit element 3 - on turnover was estimated @4% and deduction of expenditure was allowed. It could be seen that the provisions of presumptive rate u/s 44AD would not apply in such a case since the business receipts far exceed the threshold limit of Rs.2 Crores. The Ld. AO, in its own wisdom, made an estimation of the profit and arrived at assessed income of Rs.17.63 Lacs. We are of the opinion that the estimation made by Ld. AO was one of the possible views.

The Ld. CIT(A) invoked revisional jurisdiction on the ground that the profit should have been estimated @8% without any allowance of expenditure. This rate is nothing but presumptive rate as prescribed u/s 44AD. However, as noted by us in para-5, this presumptive rate would not apply since the turnover far exceeds the threshold limit of Rs.2 Crores. Alternatively, assuming that Pr. CIT held an independent opinion that the profit rate should have been estimated @8% as reflected by the assessee, we find that the said rate is also without any basis. The estimation remains an estimation. The Ld. AO estimate the rate of 4% which in the opinion of Ld. CIT(A) should have been 8%. In such a case, the revision is nothing but substitution of judgment of Ld. AO. The view of Ld. AO was one of the possible views and the same was not contrary to any law. Therefore, the order could not be held to be erroneous merely on this account. In the result, the prime condition to invoke the revisional jurisdiction u/s 263 remains unsatisfied. Therefore, we quash the impugned order passed by Ld. Pr. CIT u/s 263. We order so.

The appeal stands allowed.