ACIT, TIRUNELVELI vs. S.ARUNACHALAM, KADAYANALLUR

[PAN:AATPA 2354 C] (अपीलाथ&/Appellant) ('(यथ&/Respondent) Assessee by : Mr.K.Balasubramanian, Adv. Tax Consultant. Department by : Mr.AR.V.Sreenivasan, CIT : सुनवाई क* तार�ख/Date of Hearing 17.08.2017 : घोषणा क* तार�ख /Date of Pronouncement 17.08.2017 आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER:

Order of Commissioner of Income Tax (Appeals)-3, Madurai, in dated 31.01.2017 for the AY 2013-14.

ITA No.918/Mds/2017 :- 2 -: came to be taken up for scrutiny. It was a submission that as the assessee was unable to prove the correctness of the wages/salary expenditure which constituted a major part of the total expenditure incurred by the assessee, the AO invoked the provisions of Sec.145(3) of the Act and had consequently completed the assessment u/s.144 by estimating the assessee’s income at 8% of the turnover. It was a submission that the AO had adopted @8% by applying the statutory provisions as provided u/s.44AD of the Act. It was a submission that on appeal, the Ld.CIT(A) had held that the AO had not rejected the assessee’s books of accounts and had consequently reduced the addition to Rs.20.00 lakhs to the returned income holding that it would justify the disallowance in respect of labour wages and salary disallowances. It was a submission that the AO having invoked the provisions of Sec.145(3) and show cause notice having been issued to the assessee, informing the assessee, the intention to estimate the income of the assessee at 8%, the same amounted to the rejection of the assessee’s books of accounts. It was a submission that the order of the Ld.CIT(A) was liable to be reversed.

Salary Register for Site Engineers, Supervisors and Site-In-Charges. He also produced vouchers in respect of labour charges for perusal. It was noticed that the some of the vouchers were not in order and were self- made and hence, the books were rejected and income estimated at 8%”.

It was a submission that this is not a case where the assessee has not produced the books of accounts. It was a submission that the vouchers were disbelieved by the AO. It was a submission that in the Assessment Order, there is no mention of the rejection of books of accounts. It was a submission that the order of the Ld.CIT(A) was liable to be confirmed.

the relevant assessment year would not be a valid method. It is known fact that as the turnover increases the percentage of profit reduces. For the purpose of estimation of assessee’s net profit, the best method is the assessee’s own past and later records. In the present assessee’s case, the assessee has disclosed the net profit varying between @6.18% for the AY 2011-12 to @5.22% for the AY 2014-15. Considering the assessee’s own records, we are of the view that the net profit of the assessee is liable to estimated at 6.18%, which is the net profit declared by the assessee for the AY 2011-12. In these circumstances, the AO has directed to adopt the net profit @6.18% as against @8% adopted by him in the course of the assessment.

Order pronounced in the Open Court on August 17, 2017, at Chennai.