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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: DR. MANISH BORAD, HON’BLE & SHRI SONJOY SARMA, HON’BLE
O R D E R
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The present appeal is directed at the instance of the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter the “ld. CIT(A)”) dt. 18/07/2023, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2010-11.
Through the grounds of appeal, the assessee has challenged the fining of the ld. CIT(A) confirming the addition made at Rs.12,89,720/- towards disallowance of sand purchase, disallowance of rent paid at Rs.3,72,000/-. Further additional grounds have also been raised by the assessee stating that the ld. Assessing Officer erred in disallowing various items instead of estimating net profit even when the books of accounts were treated as bogus.
Assessment Year: 2010-11 Vijay Agarwal 3. At the outset, the ld. Counsel for the assessee submitted that the ld. Assessing Officer has rejected the book results and the only option available with the ld. Assessing Officer was to estimate the profits. However, the ld. Assessing Officer erred in making disallowance of sand purchase and rent paid which is not justified. He also submitted that the assessee declared net profit rate (NPR) of 7.24% which is quite good in the civil constructions business. On the other hand, the ld. D/R, supported the orders of the lower authorities and she further added that the ld. Assessing Officer had carried out specific investigation and examination of the ledger account of the assessee and has found discrepancies for which the alleged additions have been made.
We have heard rival contentions and perused the material placed before us. We observe that the assessee is carrying out the civil construction business under the sole proprietorship concern, namely, M/s. Sinhotia Earth Movers. Income of Rs. 45,24,500/- declared in the return for Assessment Year 2010-11 furnished on 18/09/2011. Gross turnover during the year declared at Rs.6,35,22,045/- and net profit rate works out to 7.24%. After the case being selected for scrutiny after necessary approval and issuing of valid notices, during the course of hearing, assessee furnished cash book and ledger account books. The ld. Assessing Officer has carried out the scrutiny proceedings examining all the records including books of accounts and was not satisfied with the explanation offered by the assessee in regard to the queries and concluded that the four ledger accounts showing credit entries are vague and considered the ledger account as bogus. This observation of 3 Assessment Year: 2010-11 Vijay Agarwal the ld. Assessing Officer is sufficient enough to indicate that he has rejected the book results. Even after arriving at this conclusion that books of accounts are liable to be rejected, he had completed the assessment proceedings making specific disallowance of civil material purchases and rent expenses. 4.1. It has been judicial settled in plethora of judgments that if the books of accounts are rejected, then the option available with the assessing authority is to make a best judgment assessment and estimate the reasonable profits but in no case after rejecting the book results, the additions can be made for the items of profit and loss account.
We notice that the assessee is offering net profit rate of 7.24% and during the course of hearing, reference was made to various decisions of Tribunal including that in the cases of Dilip Kumar Das & Sons in ITA No. 2514/Kol/2019 & ors. dt. 14/12/2023; Madan Mohan Bhattacharjee vs. ACIT in ITA No. 397/Kol/2019, order dt. 24/07/2019; ITO vs. M/s. Apex Goods Pvt. Ltd. in ITA No. 504/Kol/2012, order dt. 01/07/2015; wherein considering similar type of issue where books of accounts were rejected, this Tribunal has estimated the profits of the civil construction business @ 6.75%, 5.25% and 6% respectively. Considering the decisions referred by the ld. Counsel for the assessee, we under the given facts and circumstances and also considering the discrepancy observed by the ld. Assessing Officer in the books of accounts, deem it proper to estimate the net profit of the assessee @7.50% as against 7.24% declared by the assessee and sustain the addition of Rs.1,89,653/-. Accordingly, the finding of the ld. CIT(A) is set aside and additional ground raised by the assessee is partly allowed.