KARTAVYA CONSULTANTS PRIVATE LIMITED,BHUBANESWAR vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), BHUBANESWAR, BHUBANESWAR

At the outset, it is found that the appeal of the assessee is barred by 36 days. In this regard, the assessee has filed an affidavit stating sufficient reasons for condonation of delay, which are plausible and not found to be false. Ld.Sr. DR also did not raise any serious objection to condone the delay. Accordingly, the delay of 36 days in filing the appeal by the assessee is condoned and the appeal of the assessee is admitted for hearing.

It was submitted by the ld. AR that the assessee is in the business of meter reading, bill distribution and revenue collection work for the electricity distribution in the state of Orissa. The assessee has shown contractual business receipts under the head other income for Rs.18,84,20,952/- which is in effect the electricity bill revenue collection. It was the submission that the AO estimated the income of the assessee at 8% without rejecting the books of accounts of the assessee. It was the submission that no estimation can be done without rejecting the books of accounts. It was a prayer that in view of the decision of the Honorable High Court of Madras in the case of Marg Limited, reported in 396 ITR 580, the Hon’ble Madras High Court has categorically held that the income on estimation basis cannot be done without rejecting the books of accounts. This principle has been laid down by the Hon’ble Madras High Court by following the decision of the Hon’ble Supreme Court in the case of Janardhan Rao, reported in 273 ITR 50. It was the submission that as the books of accounts of the assessee has not been rejected, the addition as made by the AO is liable to be deleted. The learned AR has also placed reliance on the decision of the Coordinate Bench of this Tribunal in the case of Sat Inder Construction Pvt. Ltd. in ITA 511/CTK/2024, dated 17-07-25 wherein in Para 5, the Coordinate Bench has held as follows :- 05. We have considered the rival submissions. A perusal of the facts in the present case clearly shows that there is no mentioned by the ld. AO in the assessment order that the books of account are to be rejected. The ld. AO admittedly pointed out various errors in the assessment order such as the payment claimed under the head labour charges appeared to be bogus. Similarly, the ld. AO mentioned that the assessee did not have sufficient plant and machinery to execute the civil construction work of such huge magnitude and there was no claimed of plant and machinery of hire charges in the Profit and Loss account. The ld. CIT (A) in para no.6 of his order also brought the various points which has been mentioned by the ld. AO but no where in the assessment order the ld. AO has mentioned that the provisions of Section 145 have been invoked or that the books of accounts of the assessee have been rejected. For the purpose of estimating the income of an assessee, one of the compulsory requirements are that the provisions of Section 145 of the Act have to be invoked and the books of account of the assessee have to be rejected. As the ld. AO has not rejected the assessee’s books of accounts, we are of the view that the estimation has done by the ld. AO and has affirmed by the ld. CIT (A) is unsustainable and consequently, we direct the ld. AO to delete the estimation of income as done by him.