S.P TRAVELS AND LOGISTICS,CHENNAI vs. ACIT NON CORPORATE CIRCLE-22, CHENNAI

Brief facts of the case are that the assessee filed its return of income for the assessment year 2015-16 on 30.09.2015 declaring total income of 2 ₹.47,81,870/-. The return filed by the assessee was selected for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 [“Act” in short] was issued. The notice returned unserved. Then notice under section 142(1) of the Act was issued. The said notice also returned unserved stating that the assessee left the location. Thereafter, notice under section 142(1) r.w.s. 129 of the Act was issued with a direction to produce the documents, but there was no response from the assessee. Despite various notices issued, there was no proper response from the assessee and finally, the assessee was given pre-assessment notice intimating the assessee for completing the assessment on an estimate basis at an income of ₹.78,93,143/- @ 8% of the gross receipts of ₹.9,86,64,287/-. Without any supporting bills and vouchers, expenses incurred by the assessee could not be verified and since the correctness of the accounts of the assessee could not be verified, the Assessing Officer proceeded to complete the assessment under section 144 of the Act at the total income of ₹.78,93,143/- @ 8% of the ₹.9,86,64,287/-. On appeal, since the assessee could not responded/ represented his case, the ld. CIT(A) dismissed the appeal.

On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that without adopting any reasonable basis, the Assessing Officer simply estimated the total income of the assessee at 8% of the gross receipts arbitrarily and prayed for suitable directions. On the other hand, the ld. DR strongly supported the orders of authorities below.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. On perusal of the assessment order under section 144 of the Act, we find that the Assessing Officer has concluded the assessment by simply estimating the current income of the assessee without any basis at 8% of gross receipts as total income on the ground that the expenses incurred by the assessee could not be verified with any supporting bills and vouchers and thereby income of the assessee could not be arrived at correctly, which was also confirmed by the ld. CIT(A). When the assessee has not provided with any supporting bills and vouchers for verification of its expenses, the Assessing Officer should have estimated the income of the assessee on some reasonable basis for which comparable case and history of the assessee could be taken as guide. The estimation of income at 8% of the gross receipts was without any basis and materials on record. Under these facts and circumstances, we set aside the orders of authorities below and direct the Assessing Officer to estimate the total income by applying an average rate of earlier three years gross receipts as income after affording an opportunity of being heard to the assessee.