2023 (5) TMI 1112 - AT - Income Tax

Estimation of profit - Disallowance of expenses (operational cost and administrative expenses) for want of complete documents - HELD THAT - CIT(A) goes to prove that since the assessee company has merged with Exterio and Interio Pvt. Ltd by the order passed by the Hon ble Bombay High Court which was subsequently merged with Azura Projects Pvt. Ltd by NCLT despite numerous opportunities the assessee company could not produce the complete evidence so the ld CIT(A) proceeded to assess the profit of the company qua the receipt in question @3% on the basis of profit earned by it in the earlier years i.e. FY 2008-09 to 2010-11 wherein profit was @2.27% 3.85% and 3.26% respectively which was subject to verification by the AO. Moreover the ld CIT(A) proceeded to estimate the percentage of profit after rejecting the books of account of the assessee. CIT(A) has taken a plausible view in the interest of justice and fair play. Decided against revenue.

Summary

Issues Involved:
The judgment involves issues related to the justification of allowing the assessee's claim on profit assessment, directing verification of expenses, and assessing profit based on past performance.

Issue 1 - Profit Assessment:
The Assistant Commissioner of Income Tax (the revenue) appealed against the order directing to assess the profit of the company at 3% of the shown receipts. The revenue contended that the CIT(A) was not justified in allowing the claim without sufficient evidence.

Issue 2 - Verification of Expenses:
The CIT(A) directed the Assessing Officer (AO) to verify and allow further relief on expenses claimed by the assessee. The revenue challenged this direction, arguing that the expenses were not adequately supported by documentation.

Issue 3 - Assessment Based on Past Performance:
The CIT(A) assessed the profit of the company at 3% of the shown receipts based on the company's historical profit ratios. The revenue objected to this approach, emphasizing the lack of complete evidence from the assessee.

Summary:
The judgment addressed the appeal filed by the revenue against the CIT(A)'s order regarding profit assessment, expense verification, and historical profit assessment. The assessee failed to produce complete evidence for expenses, leading to disallowances by the AO. The CIT(A) partially allowed the appeal, directing verification of expenses and assessing profit at 3% of the shown receipts. The Tribunal upheld the CIT(A)'s decision, considering it reasonable in the interest of justice and fair play. The revenue's appeal was dismissed, and the order was pronounced on 25.05.2023.