ACIT, CHENNAI vs. MARG LIMITED, CHENNAI

This appeal of the assessee is directed against the order of CIT(A) -8, Chennai dated 29.02.2016 and pertains to assessment year 2012-13.

No one appeared for the assessee inspite of service of notice.

Shri M.M.Bhusari, the learned department representative submitted that the only issue arises for consideration is addition of Rs.21,40,00,000/- on estimate basis. According to the learned department representative, the assessee engaged itself in the business of construction. During the year under consideration, the assessee constructed residential projects for the Government and other governmental agencies across the country. The assessee has not produced the bills and vouchers either for the expenditure claimed for carrying out the contract work. In the absence of bills and vouchers, the assessing officer found that the correct income of the assessee could not be ascertained from all the projects done by the assessee. The assessing officer has also found that the assessee has returned less than 5% of the gross receipt as profit. If we consider the interest paid by the assessee and the depreciation claimed, the profit declared by the assessee would go below 5%. Therefore, the assessing officer estimated the profit at 5% and found that there was a deficiency of Rs.21.39 crores. Accordingly, the assessing officer estimated the income as Rs.21.40 crores on estimate basis at 5% on all the projects.

On a query from the bench, whether the assessing officer rejected the books of account during the course of assessment proceedings, the learned department representative very fairly submitted that there is no reference in the assessment order in the rejection of books of account. Referring to the order of CIT(A), the learned department representative submitted that when the assessing officer could not compute the correct taxable income for want of bills and vouchers, it is for the assessing officer to decide to what extent the books of account can be relied upon.

We have considered the submissions of the learned department representative and also perused the relevant material available on record. A bare reading of the assessment order shows that the assessing officer estimated the profit ignoring the books of account at the rate of 5% on the ground that the income disclosed for some of the projects are less than 5%. The assessing officer has also observed in the assessment order that the income earned by the assessee in some of the projects are reasonable in relating to the regular contract business. The question arises for consideration is, can the profit of the assessee be estimated without rejecting the books of account? Admittedly, the books of account of the assessee was not rejected. This Tribunal is of the considered opinion that when the asssessee is not maintaining the books of account properly and the correct income of the assessee could not be computed on the basis of the books of account maintained in the course of business, the books of account can be rejected. The assessing officer can estimate the profit on the basis of the material available on record. In the case before us, the books of account of the assessee are not rejected by the assessing officer. Merely because, the assessee has disclosed the profit less than 5% in some of the project, that alone cannot be a reason for the assessing officer to estimate the profit uniformly at 5% for all the projects. It is for the assessing officer to examine the books of account and find out why he could not accept profit of the assessee on the basis of books of account maintained. Since such an exercise was not done and the books of account of the assessee was not rejected, this Tribunal is of the considered opinion that the CIT(A) has rightly allowed the claim of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly, the same is confirmed.

In the result, the appeal of the revenue is dismissed.