SH. ALOK GARG,NEW DELHI vs. DCIT, GHAZIABAD

Briefly stated the facts are that the assessee is an individual deriving his income as contractor and engaged in the business under the name and style of M/s Alok Builders and doing contract work mainly in Himachal Pradesh for NHPC Ltd., NTPC Ltd., Himuda Dharamshala and in Haryana for PWDB & R Branch Kaithal. For the A.Y. 2010-11 return was filed declaring the total income of Rs. 10,44,000/-. Ld. AO in his order dated 28/03/2013 observed that the books of account of the assessee are not reliable as such he assessed the income of the assessee at 41,09,614/- by estimating the profit at 8% of the total turnover. The appeal preferred by the assessee before the Ld. CIT (A) ended up in dismissal and in confirmation of the assessment order.

Aggrieved by the same the assessee is in appeal before us challenging the rejection of books of account and estimation of profit at 8% of contract receipts.

It is the argument of the ld. AR that in respect of the earlier years namely 2000-01, 2003-04, 2006-07, 2007-08 and 2009-10 assessment was completed u/s 143(3) of the Act accepting the profit ratio at 3.31, 1.60, 2.63, 2.39, 2.30 and 2.46 respectively, as such it is not open for the Revenue now to straightaway estimate the profit ratio at 8%. He prayed that it would be in the order of things if profit ratio is estimated at 2.46 which was accepted in the immediately preceding AY 2009-10. Per contra it is the argument of the Ld. DR that the AO has given the cogent reasons for rejection of the books and estimation of 8% of the profit ratio. He submitted that the profit ratio suggested by the assessee at 2.46 which is equivalent to the profit ratio of the AY 2009-10 is too low and cannot be accepted. According to the Ld. DR at the lowest the profit ratio could be around 4%.

At the outset we find that there is no denial of the completion of the assessment u/s 143(3) of the Act for the years 2000-01, 2003-04, 2006-07, 2007-08 and 2009-10 accepting the profit ratio at 3.31, 1.60, 2.63, 2.39, 2.30 and 2.46. Without going into the merits of the reasons assigned by the AO for rejecting the books of account of the assessee, we find that for all the years stated above the Department consistently accepted the profit ratio in the business of the assessee is between 1.60 and 3.31 and at no point of time any objection is taken by the AO on the ground that in the kind of business of the assessee average rate of profit would be anything around 8%. In the circumstances, we do not find any rational in the AO estimating the profit at 8% and the consistency of the net profit as was established by the accepted books of account in the business of the assessee was something between 1.60% and 3.31% as such taking a pragmatic view, we find that 3% of the profit ratio of the contract receipt would meet the ends of justice. With this view of the mater, we direct the AO to estimate the profit of the assessee at 3% of the total turnover.

In the result, the appeal is accordingly allowed in part.