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2023 (4) TMI 36 - AT - Income TaxEstimation of profits - Estimation of income @8% on main contracts and 4% on sub-contracts - non rejection of books of accounts - HELD THAT:- . In the present case on hand, if the AO is not satisfied with the explanation given by the assessee, he should have rejected the books of accounts and estimated the profit, according to the facts of the case. The AO ought to have disallowed the quantum of expenditure for which the assessee failed to produce documentary evidence. But the AO failed to do so and he simply without rejecting the books, estimated the profit @8% on main contracts and 4% on sub contracts, which is not permissible under the law. CIT(A) has erred in confirming the order of the AO and arriving at a conclusion that if some vouchers / evidence pertaining to the claim of the assessee are not satisfactorily established before the AO, the AO is not empowered to estimate the profits of the assessee without rejecting the books of accounts. AO ignoring the established provision u/s 145(3), estimated the profit without rejecting the books. Decided in favour of assessee.
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