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2016 (1) TMI 631 - AT - Income TaxEstimation of business income - books of account have not been produced - tax audit report filed before him for the first time is marred with serious discrepancy like; securing of loan and deposit in cash are in question contravention of provisions of section 269SS and 269T of the Act - CIT(A) CIT(A) estimated the income @ 5.3% - Held that:- From the audit report, it is not known whether the assessee had maintained any daily stock register for raw material and WIP and even if the same is maintained whether the valuation of the stock was done in accordance with accepted accounting standard and practices is not known. In the backdrop of error of such magnitude as observed by the CIT(A), we hardly find any justification to scale down the estimation made by the Assessing Officer. The statutory provision as per section 44AD of the Act entitles the assessee of relatively smaller size engaged in the eligible business including the impugned business to compute profits and gains of business of presumptive being equal to 8% of the total turnover or gross receipts. This is a provision of beneficial nature which seeks to reduce hardships and tax hassles. It overrides the normal provisions of section 28 to section 43C of the Act to unable the assessee to avail this alternative route for computation of taxable business income. The statutory percentage estimated at 8% of the total turnover or gross receipts though made available to the assessee of the smaller size i.e. having a turnover of ₹ 40,00,000/- is presumed to be based on empirical studies and analysis of sample of statistical datas to arrive at the fair estimate. The percentage prescribed cannot be deemed to be arbitrary or without any rational basis. Therefore, adopting a rate of 8% of the contract receipts, in our view, is in harmony with the statutory percentage which acts as a fair benchmark. There is no justification to adopt the profit percentage declared by the assessee himself in the preceding year in preference to the statutory percentage. - Decided in favour of revenue.
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