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2013 (11) TMI 893 - AT - Income TaxUndisclosed income - Unaccounted turnover - Held that:- In estimating any escaped turn, it is inevitable that there is some guess work. The AO while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation - AO was justified in arriving at the said turnover of Rs 167.23 Cr following the formula of 35:65 of accounted and unaccounted sales turnovers. As such assessee gave in writing in favour of adopting Rs 167.23cr as the gross turnover too. Thus, the exercise of extrapolation is justified and reasonable. Therefore, the determination of the unaccounted sales turnover at Rs 108.70 cr is proper and it does not call for any interference - Decided against assessee. Best Judgement assessment - Held that:- AO/CIT(A) must have some material/data to support the estimation of the Net profit of the Project. Other side of determination of material based net profit is obviously granting of relief on account of the hidden expenditure for earning of said net profit of the project. Scope of Reasonable Expenditure - Held that:- The underlined logic is that the unaccounted expenditure is always unevidenced and never maintained. Therefore, transferring onus on to the assessee in matters of this kind is not approved. Ex consequenti, it is for the AO allow necessarily reasonable deduction towards such unaccounted expenditure without demanding evidences, considering the nature of industry and also evidences relating to extents of net profits earned by the assessee. Considering the above legal position on the matter, we are of the clear-cut opinion, the AO’s conclusions on this issue are certainly erroneous. Reasonableness of 40% adopted by the CIT(A) - Held that:- the search material based-NP percentage stands on higher pedestal and hence superior and credible in quality and acceptability vis a vis the 40% picked up by the CIT(A) from nowhere and without any basis. In that sense, the basic requirements relating to best judgment assessments are out of their mind when they considered both Rs 108.70 cr or 40% of Rs 167.23 cr as the assessable income of the project –Prime Mall. Therefore, we have no hesitation in rejecting the estimation of NP adopting the said baseless 40%. Various available percentages of net profit - Held that:- What is fair and reasonable estimation of profits of the project than what is based on the assessee’s own books of account on one hand and the assessee’s seized documents on the other? Ex consequeinti, we restrict ourselves to the data pertaining to the assessee’s own case ie average NP 13.735% ie data emanating from the returns filed u/s 153A of the Act and NP of 23.99%. Thus, we are of the opinion, the reasonable percentage of profits of the project – Prime Mall lies somewhere in the range of said NPs ie 13.735%-23.99%. - the average of the 13.735% and 23.99% must give rise to a reasonable percentage of NP ie 17.08%. It is directly linked to material gathered in search on one side and audited books of course in respect of accounted sales of Rs 58.53cr on the other. - AO directed to work out the taxable profits of the project–Prime Mall accordingly. - Decided in favor of assessee.
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