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TMI Blog2017 (4) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. It filed return of income of Rs. 45,54,920/- for AY 2012-13 on 01/10/2012. In the scrutiny assessment, the income was determined at Rs. 1,75,87,884/- by estimating the profits at 15% of gross sales. 2.1 The reasons given by the AO for rejecting the books of accounts and estimating the profits at 15% of turnover are as under: (a) That there was increase in payment of commission to Rs. 81,36,945/- during the present year against similar payment of Rs. 26,66,844/- in immediate previous year even though there was decrease in sales during the year. The assessee did not produce any supporting evidence, did not file details of agents, and did not submit basis of commission payment, as to what percentage of commission was paid. (b) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Assessing Officer in the assessment order. The same were subjected to audit by Chartered Accountant, based on which financial statements were prepared and return of income was filed. (b) The Assessing Officer made only general observations with regard to maintenance of accounts and did not specify the deficiencies or inconsistencies in the books of accounts. (c) The Hon'ble Supreme Court in the case of indore Malwa United Mills Ltd. Vs State of Madhya Pradesh (10 ITR 41) observed that when an assessee produced before the authority all the registers, it was not open to the department to pick and choose some of the registers which were more favourable to the revenue in the absence of finding of unreliability of any of the entries o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n immediate previous year, and also stating that most of the expenses were in cash and supported by self made vouchers, no specific or serious lapse in maintaining the accounts is quoted by the Assessing Officer. The CIT(A) was of the view that self made vouchers are unavoidable as the works are carried out with unskilled and illiterate labour. It appears that the Assessing Officer resorted to estimation of income at 15% only on the ground that even for earlier years, the income was estimated at the same percentage. 5.1 In view of the above observations and following the decision of the ITAT in assessee's own case for AY 2000-01 to 2006-07, the CIT(A) directed the Assessing Officer to estimate the profits at 8% of sales. 6. Aggrieved by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reliance and reliability of information adopted by the special auditor is the main grounds of appeal by the assessee. There is no dispute that the special auditor had to rely on the information available with him & with the AO which were acquired due to search and seizure operation. The assessee also expressed in one of the communication with the special auditor that due to efflux of time, the assessee was not in a position to submit the relevant bills and vouchers either because of seizure or not in a position to submit due to the fact that the passage of time, shifting of premises etc. 13.3 We are in agreement with the assessee that the reliability of the special audit report and recasting of P&L A/c were computed based on the infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 crores (As per special audit report accepted by the assessee) b) Income assessed by ACIT 21.20 crores (21.07%) c) Income assessed by CIT(A) 11.64 crores (11.57%) d) Income computed by special auditor 9.71crores(9.65%) While analyzing the above values, we are of the view that income assessed by ACIT is ruled out as it is at 21.07% as the above % is more than 15%, which was already rejected by ITAT and also the profit arrived were before special audit. Similarly, the assessee had submitted & relied on the case law in the case of Madhav Propcon Pvt. Ltd., of Delhi ITAT, wherein it was held that the income of the assessees at 2.24% of the total gross receipts, who are engaged in the business of land development activities. We canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 44AD. 13.7 On the other hand, the provisions of section 44AD proposed to adopt 8% of the total turnover or gross receipts of the assessee shall be deemed to be profits & gains of the business chargeable to tax. This section prescribes a thumb rule or presumptive net profit rate applied for those assessees whose turnover are less than one crore. No doubt, the turnover of the assessee is more than the prescribed limit in the section 44AD but it gives thumb rule to estimate the income of the assessee. When the books are not maintained or rejected, flat rate of 8% can be adopted as decided by the Hon'ble Delhi High Court in the case of CIT Vs. Subodh Gupta, ITA N 80 of 2014, dated 09/12/2014. 13.8 The above decision is relevant partic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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