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Facts
The assessee, engaged in civil contract business, filed its return declaring income of ₹1,31,21,770/- on total receipts of ₹30,03,06,603/-. The Assessing Officer (AO) estimated the income at 8%, which was confirmed by the CIT(A). The assessee appealed against this estimation.
Held
The Tribunal held that for estimating income under Section 145 of the Act, it is compulsory to invoke the provisions of Section 145 and reject the books of account. In this case, the AO did not reject the assessee's books of account, making the estimation unsustainable.
Key Issues
Whether the estimation of income by the AO is sustainable without rejecting the assessee's books of account as per Section 145 of the Income Tax Act.
Sections Cited
145, 80G
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Income Tax Appellate Tribunal, “CUTTACK” BENCH, CUTTACK
O R D E R PER PENCH:
This is an appeal filed by the assessee against the order of the ld. CIT (A), National Faceless Appeal Centre, Delhi in appeal no. ITBA/NFAC/S/250/2024-25/1066723603(1) dated 15.07.2024 for A.Y. 2017-18.
Shri P.K. Mishra & B.N. Behera represented on behalf of the assessee and Shri Nishanth Rao B, represented on behalf of the Revenue.
It was submitted by the ld. AR that the assessee is in the business of doing civil contract. The assessee had filed its return of income on 04.11.2017, declaring an income of ₹1,31,21,770/- on a total receipts of ₹30,03,06,603/-. It was the submission that the ld. AO has estimated the income of the assessee at 8%. It was further submission that the said 8% was estimated after depreciation. It was the submission by the
In reply, the ld. Sr. DR submitted that the ld. AO has mentioned the reasons for his estimation in para 3 of the assessment order at pages 2 and 3 of his order. It was further submitted that the ld. CIT (A) has categorically brought out the reasons for the estimation and rejection in para 6 of his order at page 14 of the appellate order. It was the submission that the reasons given by the ld. AO for the estimation should be considered as the books of the assessee having been rejected. It was further submission that the assessee has also not produced the details in regard to the deduction u/s 80G of the Act. It was the submission that the assessee was not in a position to substantiate its return and therefore, the estimation as made by the ld. AO was liable to be upheld.
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
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 17.07.2025.