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Income Tax Appellate Tribunal, ‘SMC’ ‘B’ BENCH, CHENNAI
Before: Shri A. Mohan Alankamony
आदेश / O R D E R
This appeal by the assessee is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals)-1, Madurai dated 19.11.2015 in for the assessment year 2008-09 passed U/s.250(6) r.w.s.143(3) & 147 of the Act.
The assessee has raised several grounds in his appeal, however the crux of the issue is that the assessee is aggrieved by the order of the Ld.CIT(A) who had erred in confirming the order of the Ld.AO with respect to:-
(i) addition made by estimating 8% of the total contract receipts of Rs.26,12,316/- which works out to Rs.2,08,985/- (ii) addition made by estimating the income of the assessee
U/s.44AE of the Act, for Rs.84,000/-.
The brief facts of the case are that the assessee is an individual engaged in the business as civil contract with Government departments and transport operator, filed his return of income for the assessment year 2008-09 on 14.11.2008 admitting total income of Rs.1,38,540/-. Initially the return was processed U/s.143(1) of the Act and subsequently the case was reopened U/s.147 of the Act by issue of notice U/s. 148 of the Act on 04.03.2010 since the assessee had disclosed less than 8% of total contract receipts as per Section 44AD of the Act.
Ground No.2(i) : Addition of Rs.2,08,985/- by estimating income U/s.44AD of the Act:-
During the course of scrutiny assessment proceedings, it was observed that the assessee had admitted income of Rs.92,022/- in respect of contract receipt of Rs.26,12,316/- which works out to only 3.52% of the turnover. During the course of assessment proceedings, the assessee produced audit report U/s.44AB of the Act to establish the genuineness of his income of Rs.92,022/-. The Ld.AR further explained that the audit report was not enclosed in the return of income since the return was e-filed wherein there is no scope for furnishing the audit report.
The Ld.AO rejected the submission of the assessee and estimated the income of the assessee at 8% of the total receipt in accordance with Section 44AD of the Act ignoring the provisions of Section 44AB of the Act because the assessee had not furnished the audit report within the due date. On appeal the Ld.CIT(A) upheld the view of the Ld.AO because the assessee had not filled the details with respect to audit report U/s.44AB of the Act in the return of income.
4.1 The Ld.AR submitted before us that the assessee had maintained the books of accounts and had drawn the profit & loss statement which works out to Rs.92,022/-. The Ld.AO had failed to examine the genuineness of his books and also rejected the audit report because it was furnished at the time of assessment and thereby estimated the income of the assessee at 8% as per Section 44AD of the Act, which is erroneous. He therefore pleaded that the addition made by the Ld.AO on this count may be deleted. The Ld.DR on the other hand relied on the order of the Ld.Revenue Authorities.
4.2 I have heard the rival submissions and carefully perused the materials available on record. The assessee had a genuine reason for not filing the audit report along with the return of income. Further, there were some omissions while filing the return of income. However the assessee at the time of assessment proceedings submitted the requisite audit report and furnished the books of accounts. Considering these facts I am of the view that the Ld.AO has grossly erred in not examining the books of accounts and simply estimated the income U/s.44AD of the Act ignoring the provisions of Section 44AB of the Act when the assessee had filed the audit report during the course of assessment proceedings. This act of the Ld.AO is not justified.
Since the addition made is nominal, it would not be also justifiable to remit back the matter for de-nova consideration.
Therefore in the interest of justice, I hereby direct the Ld.AO to delete the addition of Rs.2,08,985/- made by estimating the income U/s.44AD of the Act.
Ground No.2(ii) : Addition of Rs.84,000/- by estimating income U/s.44AE of the Act:-
The assessee owns two Lorries in his transport operations.
In his return of income, he had declared loss with respect to transport operations. Since the assessee had not filed the audit report U/s.44AB of the Act, the Ld.AO estimated the income of the assessee invoking the provisions of Section 44AE of the Act and thereby made addition of Rs.84,000/-. The Ld.CIT(A) for the reasons stated supra confirmed the order of the Ld.AO.
5.1 Since on similar issue, with respect to invoking the provisions of Section 44AD of the Act, I had held that the action of the Ld.AO is not justifiable and thereafter deleted the addition, following the same ratio, I hereby direct the Ld.AO to delete the addition made U/s.44AE of the Act for Rs.84,000/-.
In the result appeal of the assessee is allowed.
Order pronounced on 12th October, 2017 at Chennai.