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TMI Blog2017 (12) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer in rejecting the books of account and in resorting to estimation of income. 3. The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing Officer in estimating the net income at 2% of the gross receipts". Ground No. 4 is general in nature. 3. Briefly stated, assessee is an individual deriving income from processing and trading in cotton. For the AY. 2013-14, assessee sold cotton of the value of Rs. 22,14,91,192/- and the gross profit derived was Rs. 66,48,208/-. The net profit after claiming the expenditure was Rs. 5,58,607/-. Proper books of account stated to have been maintained and assessee got the books of account audited through a Chartered Accountant for the purpose of Sec.44AB of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Assessing Officer. Without prejudice to the above, the appellant submits that the AO is not justified in estimating the net income at 2%. In so far as trading in cotton is concerned, the rates would not be consistent and would be varying too often. The purchases made by assessee are verifiable and the sales are also verifiable. The gross profit derived by assessee is about 3%. Therefore, the Assessing Officer ought not to have rejected the books of account and resorted to estimation of income at 2%. The Assessing Officer ought to have seen that the details of the stocks were properly maintained and the said details were also filed along with the return of income. Therefore, the Assessing Officer is not justified in rejecting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g for furnishing information, documents, evidence, books of accounts etc., best judgment assessment can be made under section 144 [L. Hiralal vs. CIT (1942) 10 ITR 148 (All) and BansiDhar & Sons vs. CIT (1980) 17 CTR (Del) 216J]. The wordings in the section are quite clear when they say "fails to comply with all the terms of the notice issued under sub-section (1) of section 142 .... ".Hence the partial compliance also entails a best judgment assessment. In NARINDER KUMAR & ORS. vs. CIT (2014) 369 ITR 0049 (Delhi) it was held that where the assessee failed to produce books of accounts and details, AO is justified in completing assessment u/s 144. The facts of the case and the conduct of the appellant before the AO clearly indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available with him. The AO rejected books result and made additions on estimation. Once the books of rejected are rejected then profit has to be estimated on the basis of available material. [Dabros Industries Company (P) Ltd Vs CIT (1977) 108 ITR 424 (Cal), Navneet R Jhanwar Vs ITO (2004) 1 SOT 541 and ITO Vs Kundanmal Surana (2004) 3 SOT 632 followed] I hold that the Assessing Officer is justified in rejecting the book results and finalizing the assessment u/s. 144. The AO estimated the profit @2% of the turn-over. Even though the AR argued that as far as trading in cotton is concerned, the rates would not be consistent and would be varying too often. But, the AR did not submit any comparable cases. Hence I hold that profit estimati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is also a fact that assessee has not appeared before AO and so he has no option than to reject the books of account. Therefore, to the extent of rejection of books of account, I agree with the findings of Ld.CIT(A). However, the AO as well as CIT(A) have not given any comparable cases for estimation at 2%. As assessee has not furnished the books of account for verification and in earlier years, the return of income was accepted u/s. 143(1) and not scrutinized, I am of the opinion that the income can be estimated at 1% of the turnover given in the facts of the case. Therefore, the AO is directed to modify the order restricting the profit estimation to 1% of the turnover. The grounds are accordingly, partly allowed. 10. In the result, appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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