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2016 (11) TMI 1250 - AT - Income TaxInitiation of revision proceedings u/s 263 - estimation of income - non maintenance of proper books of account - Held that:- While giving a finding that income is to be estimated on the basis of the survey, the AO has accepted the income returned which is at 1.97% of the gross receipts. The reasons for accepting the income returned on the basis of the books of account are not forthcoming from the order. Therefore, we are of the opinion that Ld. Pr.CIT exercised his jurisdiction u/s. 263 validly as there is an error in the order itself as can be seen on the face of it. This is certainly an order erroneous and prejudicial to the interest of Revenue. However, we are not convinced with the direction of the CIT to adopt 5% of the gross receipts, without giving an opportunity to assessee. In fact, assessee’s submission is that it had maintained books of account. Therefore, in our opinion, the veracity and correctness of the books so maintained should have been examined by the AO afresh. Thus we modify the order of CIT directing the AO to enhance the income, to set aside the impugned order of the AO and restore the entire assessment proceedings to the file of AO to examine assessee’s contentions in detail a In case of rejection of books of account, however, we make it clear that any estimation of income should not exceed 5% as determined by the Pr.CIT/or admitted by assessee in the course of survey. Consequently, the direction to initiate penalty proceedings also stands modified. AO is free to consider whether to initiate penalty proceedings or not on the basis of examination of assessee’s business affairs. He is directed to pass a detailed order so that there will be no confusion, as arising in this case on the impugned assessment order. Assesse should be given due opportunity in the consequential assessment proceedings. With these directions, while upholding initiation of proceedings on 263, the grounds of assessee are partly allowed.
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