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Facts
The assessee, an individual engaged in construction business, had their case reopened under Section 147 of the Income Tax Act, 1961. The Assessing Officer estimated the net profit at 8% of total receipts, which was confirmed by the CIT(A). The assessee contested this estimation, arguing it was erroneous.
Held
The Tribunal noted that the assessee could not produce certain statutory documents, leading the AO to estimate profit at 8%. While the assessee claimed their net profit was between 3-5% and provided ledger accounts and cash vouchers, the CIT(A) doubted the audit report's genuineness. The Tribunal directed the CIT(A) to re-verify the audit report and decide the profit estimation afresh.
Key Issues
Whether the estimation of net profit at 8% by the revenue authorities is justified, given the assessee's submission of accounts and digitally signed audit report.
Sections Cited
147, 144B
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Before: Shri S.S. Viswanethra Ravi & Shri Manoj Kumar Aggarwal
Year: 2017-18 Kali Manickam, Vs. Income Tax Officer, 2/4 Nangathur, Easwaran Koil Street, Ward 1, Villupuram 605 602, Tamil Nadu. Villupuram. [PAN:CFWPM8941P] (अपीलाथ�/Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Shri M. Rajesh Kumar, CA ��थ� की ओर से/Respondent by : Shri R. Raghupathy, Addl. CIT सुनवाई की तारीख/ Date of hearing : 17.12.2024 घोषणा की तारीख /Date of Pronouncement : 31.12.2024 आदेश /O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
This appeal by the assessee is directed against the order dated 08.08.2024 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi for the assessment year 2017-18.
The assessee raised 9 grounds of appeal amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in confirming the estimation of net profit at 8% in the facts and circumstances of the case.
Brief facts leading the case are that the assessee is an individual and no return of income filed. The case of the assessee was reopened under section 147 of the Income Tax Act, 1961 [“Act” in short] and in response to which, the assessee filed his return of income declaring the income at ₹.25,45,530/- on the total receipts of ₹.7,41,67,973/-. The Assessing Officer completed the assessment under section 147 r.w.s. 144B of the Act dated 27.03.2022 assessing total income of the assessee at ₹.59,33,435/- being the profit estimated at the rate of 8% on the total business receipts. The ld. CIT(A) confirmed the assessment order.
The ld. AR Shri M. Rajesh Kumar, CA submits that the ld. CIT(A) rejected the tax audit report by ignoring the fact that the tax audit report was digitally signed by auditor. He further submits that the assessee is engaged in construction business and the expenses like wages/salary, purchase of materials, etc. are made in cash. It was submitted that the total income from business of the assessee is only between 3 to 5% and erroneously estimated the same at 8%. Since the Assessing Officer has not rejected the books of accounts of the assessee, the ld. AR prayed that the addition confirmed by the ld. CIT(A) may be deleted.
The ld. DR Shri R. Raghupathy, Addl. CIT supported the order passed by the ld. CIT(A).
Heard both the parties and perused the material available on record. In this case, the assessee is engaged in construction business. However, since the assessee could not produce salary register, GPF details, identity cards, Aadhar of employees, payments to labours, etc., the Assessing Officer estimated the net profit at 8% of the total receipts shown by the assessee. We note from para 5.4 of the impugned order that the assessee furnished ledger accounts in respect of salary/wages paid, purchases, transportation charges, vehicle maintenance charges, staff welfare, etc. and also furnished vouchers for the expenses incurred in cash. We note from para 5.5 of the impugned order that the ld. CIT(A) doubted the genuineness of the particulars filed in the audit report since the same was not signed by the CA. Before us, the ld. AR contended that the audit report was digitally signed by the auditor and the estimation of net profit of business income at 8% is at higher side. We find nothing was brought on record to show the net profit estimation at 8% is at higher side nor showing net profit of earlier years. Under the above facts and circumstances, we direct the ld. CIT(A) to verify the audit report and decide the issue of estimation of net profit afresh in accordance with law. The assessee is at liberty to furnish evidences, if any to substantiate his claim before the ld. CIT(A). Thus, the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 31st December, 2024 at Chennai.