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2022 (9) TMI 1017 - Income Tax
Estimation of income - NP/GP estimation - estimation the income of the assessee by adopting the net profit rate at 8% as provided under section 44AD - HELD THAT:- AO has not disputed the fact that books of accounts of the assessee have been audited and audit report was available with the AO - The adoption of net profit without bringing any comparable case of net profit as prevailing in the same trade / business is highly arbitrary and excessive. CIT(A) has accepted and confirmed the addition made by the AO based on net profit of 8%. AR has referred to the net profit declared by the assessee for the subsequent year i.e. assessment year 2017-18 at 4.5% and pointed out that the net profit declared by the assessee for the year under consideration in the line with the net profit prevailing business / trade as well as net profit declared by the assessee in the subsequent year. AO has adopted the net profit of 8% without any reasonable and proper basis however, the assessee has also not brought on record any comparable cases in respect of the net profit declared by the assessee at 4.37%.
Hence where neither the AO nor the assessee has brought on record a reasonable and proper basis for estimation of the income after rejection of books of accounts the Income of the assessee is estimated to bring to the end of the litigation by adopting the net profit of 5.5%.
As clarified that the estimation of the income being reasonable and proper is made in the peculiar facts and circumstances of the case for the year under consideration and therefore, the same would not apply as precedent for the other assessment years of the assessee or in any other case. Hence the AO is directed to re-compute the income of the assessee on the basis of the net profit @ 5.5%. Appeal of the assessee is partly allowed.