Income cannot be estimated without rejection of books of account. ITAT quashed revision order passed u/s 263 enhancing net profit rate.
ABCAUS Case Law Citation:
936 2016 (06) ITAT
Brief Facts of the Case:
The present appeal was filed by the assessee against the order passed u/s 263 of the Income Tax Act, 1961 by the CIT for AY 2008-09. The assessee was an individual engaged in the business of sale of power to UP Asbestos Ltd. and civil contract work for Turbine installation, boiler installation and husk yard at Lucknow and Dadri sites of UP Asbestos. He filed its return of income declaring income of Rs.6,44,780/-. The assessment was completed u/s 143(3) by making an addition of Rs.1 lacs on the ground that certain expenses claimed by the assessee were not properly supported by evidence.
However, The CIT revised the assessment by his order passed u/s 263 holding that the assessee being a civil contractor had shown negligible net profit in the year as compared with the net profit declared in the preceding two assessment years. Accordingly CIT held that in the interest of justice, net profit rate of entire declared results including interest be taken by the AO at 4%.
Aggrieved, with the order of CIT u/s 263, the assessee went before ITAT.
Important Excerpts from ITAT Judgment:
After hearing the rival contentions, we find that the order of the ld.CIT(A) is bad in law for the reason that books of account have not been rejected either by the AO or by the ld.CIT. Income cannot be estimated without rejection of books of account. The AO made an ad hoc disallowance of certain expenses without rejecting the books of account. In fact, the books of accounts are audited. Under these circumstances, we squash the order passed by the ld.CIT u/s 263 of the Act.
download Full Judgment
