SUBHASH CHANDRA TRIPATHY,DELHI vs. DCIT, GURGAON

The brief facts of the case are that the assessee is a contractor and filed its return of income on 28.09.2010 declaring income of Rs.51,09,000/- out of total receipts of Rs.11,97,88,637/- at the profit rate of 4.26%. In the assessment proceedings, the AO gave more than sufficient opportunities to the assessee to furnish the requisite details, but the assessee failed either to furnish the requisite details or to produce any books of account before the AO. The details of opportunities given by different modes and the evidences/details called for are well enumerated in the assessment order itself. The AO, therefore, for want of any books of accounts/bills or vouchers rejected the version of the assessee and made the best judgment assessment by assessing the profit of assessee at Rs.95,83,090/- on declared gross receipts of Rs.11,97,88,637/- representing to 8% on presumptive basis as contemplated u/s. 44AD of the Act. Apart from the above, the AO also noticed from the profit and loss account of assessee that he has received a sum of Rs.5,38,020/-, which being not the part of contract receipts, was also separately added to the income of the assessee as income from other sources.

The appellant assailed the aforesaid order in appeal before the ld. CIT(A), where also several notices were issued to the assessee on 12.03.14, 18.07.14, 28.08.14, 10.10.14 and 22.12.2014 fixing the dates of hearing on 29.04.14, 31.07.14, 12.09.14, 21.10.14 and 13.01.2015 respectively. But the assessee did not attend at any of the aforesaid date. Therefore, keeping in view the non-cooperation on the part of the assessee before both the authorities below and for want of any details or books of account, the ld. CIT(A) affirmed the order of the AO vide impugned order. Aggrieved, the assessee is in appeal before the Tribunal.

During the course of hearing, the ld. AR of the assessee submitted that the accounts of the assessee are audited and audit reports were furnished before the AO and therefore, the Authorities below were not justified to apply the provisions of section 44AD of the Act. It was submitted that the authorities below have erred in justifying the profit rate of 8% ignoring the fact that in assessment year 2013-14, the Assessing Officer itself has assessed the profit of the assessee by applying the profit rate of 4.25% of the gross receipts of assessee. It was submitted that no comparable case has been cited by any of the authorities below. It was also submitted that the interest income shown in the credit side of profit and loss account was the business income of the assessee which has wrongly been treated as income from other sources.

On the other hand, the ld. DR relied on the orders of the authorities below and submitted that more than enough opportunities were given to the assessee by both the authorities below, but the assessee always chose not to cooperate with the department so as to verify the profit returned by the assessee. Therefore, for want of any books of account, the authorities below were justified to apply the profit rate of 8% on the gross receipts of the assessee.

We have considered the rival submissions and have gone through the entire material available on record. It is not in dispute that the assessee was given more than sufficient opportunities by both the authorities below, but the assessee always paid deaf ear to them. On a query by the bench to assign the reason for such a non-cooperation on the part of the assessee before the authorities below, the ld. AR firstly apologized the defaults of assessee and agreed to pay the cost of Rs.20,000/- for such defaults. It was, however, stated that all the books of account are maintained in ordinary course of business, but the same could not be produced before the AO for the reason that the accounts books were with the lady accountant, who had gone on long leave owing to her pregnancy. This reason, however, is not appealing to us, as the assessee has also failed to attend various dates given by first appellate authority and to produce the books of accounts before him. We, however, find that the application of section 44AD by the authorities below does not appear proper keeping in view the volume of gross receipts and the audit reports filed by the assessee before the AO. The Authorities below, therefore, were also not justified to apply the profit rate of 8% in view of section 44AD without examining the previous and subsequent history of the appellant and without referring to any comparable case in the line of assessee’s business. As a matter of fact, the best judgment assessment should not be based on simple presumption, but should have a reasonable basis, as held in several decisions. In the totality of facts and circumstances narrated above, we think it appropriate in the interest of justice to restore the matter back to the file of Assessing Officer for passing the assessment order de novo after giving one more opportunity to the assessee of being heard. The assessee is directed to render full cooperation to the AO and shall put up its case on merits with supporting evidences which he thinks appropriate to furnish alongwith books of account maintained by it. The assessee is also directed to pay cost of Rs.20,000/- to the department as agreed.

In the result, the appeal is allowed for statistical purposes, as indicated above.