TMI Blog2018 (1) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicants have duly disclosed their investment in share application to the assessee in their balance sheets and transactions were also appearing in their bank statements. We find that though the AO had observed that after going through the balance sheet of the share applicants he was not satisfied with the creditworthiness of the share applicants but could not give any cogent reasons in the assessment order for his above finding. DR also could not bring any material before us to show that what was the reason to arrive at the said finding. Thus such a non-speaking order is bad in law and unsustainable. The CIT(A) has returned a finding that the identity of share applicants, genuineness of the share transactions and creditworthiness of the share applicants were established by the various documents like bank statements, balance sheets etc. furnished by the share applicants to the AO in pursuance to the notice issued to them u/s.133(6) of the Act. - Decided against revenue Additions made on account of applying net profit rate - rejection of books of accounts u/s.145 - Held that:- As during the course of the assessment proceedings, the assessee has duly produced its books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,00,000/- for assessment year 2007-08, ₹ 2,30,00,000/- for assessment year 2008-09, ₹ 4,39,00,000/- for assessment year 2009-10, respectively. 4. We have heard rival submissions and perused the orders of lower authorities and materials available on record. The assessee is engaged in the business of contract work and transportation work. A search and seizure operation was conducted in the case of the assessee on 24th and 25th May, 2011. In pursuance to the same, notice u/s.153A of the Act was issued and impugned orders of assessments were passed. It is not in dispute that assessment for the assessment years 2006-07, 2007-08, 2008-09 and 2009-10, were completed prior to the date of search. In other words, the assessments for these assessment years were not abated. 5. We find that the above additions made by the AO in the impugned assessment years were not based on any incriminating material found during the course of the search. 6. The Revenue could not show any incriminating material, which was found during the course of the search on the basis of which above additions could have been made. It is a settled position of law that in an assessment made in pursuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Pvt. Ltd. 25,00,000 13 2009-10 Himadri Dealcom Pvt. Ltd. 55,00,000 14 2010-11 Himadri Deaicom Pvt. Ltd 15,00,000 15 2006-07 Hoogly Vinimay Pvt. Ltd 10,00,000 16 2006-07 JMO Mercantile Pvt. Ltd 20,00,000 17 2006-07 Kamroop Vinimay Pvt. Ltd. 30,00,000 18 2007-08 Mansarwar Dealers Pvt.Ltd 9,00,000 19 2006-07 Nandan Merchantile Pvt. Ltd. 30,00,000 20 2006-07 Nikhil Trexim Pvt. Ltd. 7,00,000 21 2011-12 Parijat Berter Pvt. Ltd. 5,75,50,000 22 2009-10 Perfect Tradecom Pvt. Ltd. 10,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also could not provide satisfactory explanation. In order to verify the identity and creditworthiness of the investors and genuineness of the transactions, notices u/s. 133(6) of the Act were issued. However, notices in respect of following were returned unserved:- Sl.No. A.Y. Name of Share Applicant Amount CRs.) 1. 2006-07 Shri Santosh Agrawal 2,00,000 2. 2009-10 M/s. Satyam Tradecom 45,00,000 3. 2009-10 M/s. Sravasti Nidhi Pvt. Ltd. 20,00,000 9. The AO on perusal of the balance sheets of the shareholder companies, found that they did not possess sufficient creditworthiness to invest the amounts shown against their names. It was held that such inflow of share application money has to be seen in the perspective of money laundering through share application route, in which unaccounted money available with the promoters/ developers/ family members and their associates is routed back to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Money U/S68 (Rs.) 2006-07 1,75,90,000/- 6,50,000/- 1,69,40,000/- 1,69,40,000/- 2007-08 9,00,000/- Nil 9,00,000/- 9,00,000/- 2008-09 9,90,000/- 9,90,000/- Nil NIL 2009-10 3,41,50,000/- Nil 3,41,50,000/- 3,41,50,000/- 2010-11 12,76,52,000/- 4,20,52,000/- 8,56,00,000/- 8,56,00,000/- 2011-12 10,29,20,000/- 65,00,000/- 9,64,20,000/- 9,64,20,000/- 2012-13 Nil Nil Nil Nil Total 28,42,02,000/- 5,01,92,000/- 23,40,10,000/- 23,40,10,000/- 11. Against the above order of AO, the assessee carried the matter befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ences without having any material on record. As many as 40 share applicants out of 43 share applicants have submitted their reply, as mentioned above, giving their Balance Sheet, audited accounts, Bank Statement etc., therefore, it cannot be said that they were non-existent or they have no capacity and purpose to make investment in share capital of the appellant. The observation is very cursory in nature and no adverse material has been found during operation u/s. 132 or at the time of assessment proceedings, therefore, provisions of Sec. 68 were not applicable. 13. With regard to share records, it was submitted by the assessee that no attempt was made by the search team to locate such records. There was no question made to Shri Rajendra Agrawal or Shri Rahul Singhal whose statements were recorded u/s.132(4). The share application forms were filed during assessment proceedings before the AO and other records such as Minutes books, shareholder register etc., were produced before him during assessment proceedings; that the fact is that share application money was received; that on the date of search operation the Accountant, namely Shri Som Veer was on leave to Haryana and his Mob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... query to the appellant company's representative with regard to maintenance of statutory records and that the appellant company's representative failed to produce the Statutory Records or registers or expressed their inability to produce the same or had admitted that no such records are being maintained. I find that on one hand, the A.O made the allegation, however, without bringing on record its basis, such an action of the A.O. has made the assessment order vitiated by one sided conclusion drawn by the A.O. Neither from the assessment order nor from the statements recorded during search proceedings, it is emerging that there was any attempt to locate such statutory records. 11. The discharge or otherwise of the onus u/s 68 has been independently evaluated and examined. It is also seen that the appellant was assessed in the past and case of assessment year 2008-09 and 2009-10 was under scrutiny assessment u/s 143(3) and in the said assessment-proceedings, the addition to share application / share capital was duly accepted as genuine. The present action of the A.O is not culminating from any specific finding against the appellant that it was a beneficiary of any racket ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed income of the appellant through money laundering process in the form of share application money. On the contrary, the A.O himself has stated in the assessment order that the investors have sent confirmatory letters, in the backdrop of these facts and documentary evidences, in my considered opinion, the identity and creditworthiness of the subscribers has been established and cannot be doubted, it is not justified on the part of the A.O to simply reject the documentary evidences on record and take an adverse view and clothing the case of the appellant with the judicial pronouncements which have been rendered on absolutely different facts and circumstances. 14. The appellant has relied upon various judicial pronouncements and correlated the facts in those decisions with the facts in the case of the appellant. 1 am convinced that the decisions relied upon by the appellant are certainly applicable in the case of the appellant as the facts are not only similar but identical. The appellant has also relied upon the decision of the Hon'ble Supreme Court and jurisdictional High Court which cannot be ignored. The A.O has referred to the notices issued under section 133(6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The subscription for the shares was received through cheques. The Investor-companies are duly registered with ROC. Those companies were also having their income tax PAN numbers and regularly filed returns of income. No material was brought on record by the A.O independently of the information received, if any, from the investigation wing of the Income Tax Department to show that the monies represented the appellant's undisclosed income. 16. The Hon'ble Supreme Court in CIT vs. Lovely Export, 216 ITR 198 SC and the Delhi High Court in Divine Leasing and Finance Limited, (2008) 299 ITR 268 have held that in the case of money received towards share capital only the identity of the share holders needs to be proved and once that is established and it is also shown that the money did in fact come from them, it is not for the assessee to prove as to how the share applicants came to be in possession of the money. In the light of the above discussion, I am inclined to agree with the arguments and evidences provided by the appellant to substantiate that the transaction regarding Share Application Money received by it were genuine transactions and the same were not accommodation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed accommodation entry providers , whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the assessee in such modus operand! is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such entry providers . The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre~ mediiated plan - a smokescreen -conceived and executed with the connivance or involvement of the assesses excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assesses has discharged the burden placed upon him under sec.68 to prove and establish the identity and creditworthiness of the share applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2010] 327 1TR 560 (DELHI); (s) Commissioner of Income-tax-I v, Himatsu Bimet Ltd. [2011] 12 taxmann.com 87 (Guj.); (t) Commissioner of Income-tax - 1, Jaipur v. A.L. Lalpuria Construction (P.) Ltd. [2013] 32 taxmann.com 384 (Rajasthan); (u) Luminant Investments (P.) Ltd. v. Deputy Commissioner of Income-tax, Central Circle 40, Mumbai [2014] 42 taxmann.com 14 (Mumbai - Trib.); 20. I am convinced that the appellant has been able to establish the identity and creditworthiness of the subscribers as also the genuineness of the transactions. In my considered opinion, the ratio of the aforesaid judgements of the Hon'ble Supreme Court in Lovely Exports and that of jurisdictional High Court are certainly binding in nature on all the revenue authorities and courts etc. and further, the judgement of the jurisdictional High Court as well as that of the Hon'ble Supreme Court in Lovely Exports has been rendered on identical facts. Hence, it is impermissible to deviate from the ratio laid down therein and against the law of judicial precedents. In view of the above and respectfully following the ratio of the binding judgements, the addition of share application/ capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee company was not genuine. The DR could not demonstrate before us the relation between the absence of statutory registers and genuineness or otherwise of the share application money received during the year. 18. Further we find that it is not in dispute that all the share applicants had responded to the notice issued by the AO to them and have affirmed the fact of their investing money as their share application with the assessee company. The above fact at least demonstrates that all the share applicants were identifiable. 19. Further, it is not in dispute that the entire share application money of ₹ 8,56,00,000/- in the assessment year 2010-2011 and ₹ 9,64,00,000/- in the assessment year 2011-2012 were received through banking channel and the share applicants have duly disclosed their investment in share application to the assessee in their balance sheets and transactions were also appearing in their bank statements. We find that though the AO had observed that after going through the balance sheet of the share applicants he was not satisfied with the creditworthiness of the share applicants but could not give any cogent reasons in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F.Y. F.Y. 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Turnover (Rs Cr.) 29.90 59.76 67.41 112.19 110.64 118.46 121.21 Profit before tax (PBT) (Rs. Cr.) 0.89 1.33 3.29 5.00 4.29 0.00 4.85 PBT/Turnover % 2.97% 2.22% 4.87% 4.45% 3.87% - 4.01% The AO observed that the quantum of sundry creditors is higher than the quantum of sundry debtors. As per AO, higher sundry creditors is result of suppression of actual profit. The observation of the AO in rejecting the books of accounts and adoption of flat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts have been again produced during proceedings before the AO u/s 153A. During search operation, which was carried-on on 24/05/2011, a Trial Balance dated 24/05/2011 (by default mentioned as 10/06/2011) was found by the authorized officer in the computer and without maintaining regular books of accounts, Trial Balance cannot be prepared. There was difference of ₹ 10,31.29,861/- because opening balance as on 01/04/2011 was not incorporated in the books of accounts for F.Y. 2011-12 as the books of accounts for F.Y.2010-11 were under finalization. The difference of ₹ 10,31,29,861/- was explained before the Assessing Officer during assessment proceedings by filing a reconciliation statement and a written submission was also made. The figures of Balance Sheet and Profit Loss Account were filled in the Income Tax Return for A.Y. 2006-07 to 2012-13 from time to time and barring A.Y. 2006-07, all the Income Tax Returns were filed electronically, the accounts were audited and the Audit Reports were also filed during original assessment proceedings as well as during proceedings u/s.153A and the auditors have categorically stated about of maintenance of books of accounts. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. It was explained by way of a compilation that Current Ratio was 1.17 at the lower side and 1.77 at the higher side in all the concerned years. The learned ARs argued that the AO should have considered all the Current Assets and Current Liabilities instead of only debtors and creditors. The Current Assets and Current Liabilities fluctuate on each transaction of purchase or sale. It was accordingly submitted that the accounts should not be rejected and flat rate should not have been applied on the basis of lower profit and higher creditors. 29. The assessee further submitted that with regard to creditors, their complete address for all the years exceeding ₹ 1,00,000/-, as asked by the AO, was filed along with their confirmations. A compilation of status of various creditors as at the end of all the years was also filed. Thus, there was no reason to doubt the creditors amount. It was also submitted by the assessee that, without prejudice, that each year is independent year and finding of any particular year cannot be applied to all the years unless there is any cogent reason and evidence to do so. It was argued that the Trial Balance as on date of search cannot be prep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.04 3.43 5.19 9.41 9.25 7.65 10.68 5. (-) Depreciation as per IT Act 0.94 1.13 1.61 3.20 4.05 4.63 5.33 6. NP as per I.T. Act 1.10 2.30 3.58 6.21 5.20 3.02 5.35 7. % of NP over Turnover after taking Depreciation as per I.T.Act 3.68% 3.51% 5.30% 5.54% 4.70% 3.35% 4.99% Receipts from both segments of business are as below: Assessment Year Civil work (Rs.) Other work (Rs.) Total receipts (Rs.) 2006-07 234,133,596 44,906,214 279,093,810 2007-08 535.601.243 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for non-availability of books of accounts at the time of search, given by Shri Rajendra Agrawal and Shri Rahul Singhal in their statements recorded during search operation on 24/05/2011, are satisfactory. 28. In COMMISSIONER OF INCOME TAX vs. JAIN CONSTRUCTION CO. ORS. (2000) 245 ITR 527 (Raj) it was held that In case of working partners, payments of salary, bonus, commission or remuneration by whatever name it called in terms of the partnership deed is allowable as deductions to the extent of limit provided under s. 40(b). In this group of cases, the Tribunal after examining the partnership deed in all individual cases found that-the claim of assessees for interest on capital contribution by the partners and salary to working partners was allowable deductions to the extent of limit provided under s. 40(b). The Tribunal was justified in doing so. The finding of fact does not give rise to question of Iaw. It is clearly provided that the amendment to s. 40(b) will take effect from 1st April, 1993, and will, accordingly, apply in relation to asst. yr. 1993-94 and the subsequent years thereto- It is also provided that it pertains to the payment to the partner during the prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the fixed net profit of 8 per cent subject to the conditions and limits specified in cl. (b) of s.40. Thus, there is further simplication and certainty in computation of income. Instructions contained in para 2 of the circular of the year 1965 have been brought in the statute, thereby the doubts, if any, with respect to subject circular have been settled. The Tribunal while allowing the appeal has directed the assessing authority to recompute the total income as estimated by him and allow relief on account of payment of interest and claim of depreciation. The finding recorded by the Tribunal is purely a finding of fact, based on proper appreciation of material on record and the evidence produced by the assesses. As no question of lav? arises out of the order passed by the Tribunal, there is no fault with the order of the Tribunal declining to refer the question. -ClT vs. SM Bhatia Associates (1998) 144 CTR (Raj) 378 : (1998) 226 ITR 675 (Raj) applied. 29. In SHYAM BIHARI vs. COMMISSIONER OF INCOME TAX ANR. (2012) 345 ITR 283 (Patna) it was held that The question of law actually falling for consideration would be whether- the authorities under the Act including t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was not even suggested that he was fixing the net profit rate at 10 per cent after allowing the claim for depreciation. In this situation, it cannot be said that the AO had taken all the material into consideration as required under s. 144. Sec. 119 authorises the Board to issue orders, instructions and even directions to the IT authorities for the proper administration of the Act. The authorities are required to observe and follow such orders, instructions and directions of the Board . It is apparently in exercise of this power that the Board had issued the circular dt. 31st Aug., 1965. In this circular, it has been inter alia, provided that the mere fact that net profits had been estimated could not be a ground for saying that depreciation claimed in the returns had been duly allowed as provided under the Act . Thus, the Board had instructed the authorities that where it is proposed to estimate the profit and the prescribed particulars have been furnished by the assessee, the depreciation allowance should be separately worked out. Still further, it was directed that even where best judgment is made, the above procedure should be adopted provided the required partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered. It has to be separately taken into account provided the prescribed, particulars have been furnished by the assessee. -Saraya Engineering Works Vs. CIT (1987) 60 CTR (All) 51 : (1987) 168. ITR 455 (All) dissented from; CIT vs. Bishambhar Dayal Co. (1994) 210 ITR 118 (All) :-TC54R. 1118 concurred with. 31. In MS. SHY AM LATA KAUSHIK vs. ACIT (2008) 114 TTJ (Del) 940 it was held that Sec. 144 empowers the AO to take into account all relevant materials, which he has gathered and after giving an opportunity of being heard to the assessee, to make the assessment of total income to the best of his judgment. In the present case, the AO in coming to the conclusion that the income of the assessee from buffing and polishing was at ₹ 5,50,000 has not brought any material on record. In fact it has been a wild guess on the part of the AO. The addition having been made without any reference to either the past history in assessee's case or any special circumstances suggesting earning of higher income, by the assesses, or any comparative case, the addition deserves to be deleted and the same is directed to be deleted. 32. In the light of facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profit declared by the assesses company over the years is very low as compared to Civil Contractors who have been working in the region. The financial statements and books of accounts have been verified by the A.O. but nothing adverse has been mentioned warranting estimation of income. The A.O. has also not mentioned any reason so as to disregard the book profit and to estimate the net profit at 8% and 10% respectively from construction business and transportation business. In past, the then A.O has assessed the net profit at 4.87% and 4.46% (profit after depreciation as per books) in A.Y. 2008-09 and A.Y. 2009-10. It is not the case of the A.O that any expenditure was considered to be bogus, excessive or any shortcomings in the bills/vouchers in this regard were observed. In my considered view, the provisions of section 145(3) can be invoked for rejecting the books if the AO gives a finding that (i) the appellant is not following regularly any accounting standard notified by the Central Government in pursuance of Section 145(2) or (ii) the AO is not satisfied about the correctness or completeness of the account, or (iii) where the appellant is not following any method of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some guess-work, emphasized that he must exercise his judgment after taking into consideration the relevant material. Identical observations made by the Judicial committee in CST v. H.M. Esufali H.M. Abdulali (1973) 90 ITR 271 (SC) as follows: The assessing authority while making the best judgment assessment, no doubt, should arrive at its conclusion without bias and on rational basis. That authority should not be vindictive or capricious. 35. A best judgment assessment is not by way of penalty of non-compliance as held in Jot Ram Sher Singh v. CIT (1934) 2 ITR 129 (All). Even though the ITO is not bound by the strict judicial principles, while making the best judgment assessment, he should be guided by rules of equity, justice and good conscience as held in CIT v. Ranichhera Tea Co. Ltd. (1994) 207 ITR 979 (Cal). 36. As emphasized by the Hon'ble Supreme Court in State of Kerala v. C. Veiukutty (1966) 60 ITR 239 (SC) that though there is an element of guess-work in best judgment assessment, it should not be a wild one and should have a reasonable nexus to the available material and the circumstances of each case . Likewise, it has been laid down by the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal for estimation of profit from the business. However, given the fact that the A.O has applied uniform rate of 8% and 10% in al! these years, I am inclined to drawn an inference that all these vital facts have been overlooked by the A.O. 41. As far as higher creditors as compared to turnover, being another reason to reject book results, is concerned, it is seen that, the A.O has considered the trade creditors and turnover of the appellant at Para Nos. 8.2, 8.3 8.4 which are re-produced below: 8.2 The following chart shows the data of Turnover and Profit before taxes: FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 Turnover [Rs Cr.) 29.90 59.76 67.61 1 12.19 110.64 118.46 121.21 Profit before tax (PBT)[Rs.Cr.) 0.89 1.33 3.29 5.00 4.29 0.00 4.85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt etc., are also considered. Working of Current Ratio has been filed before me with detailed working. The Net result is reproduced below: Particulars Assessment Year 2012-13 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 Current Liabilities (Rs.) 316899325 273125375 234046331 249379231 252578066 108964583 57649929 Current Assets (Rs.) 559634260 486S06272 412360684 347017504 294615264 150777665 72622924 Current Ratio 1 : 1.77 1 : 1.78 1 : 1.76 1 : 1.39 1 : 1.17 1 : 1.38 1 : 1.26 43. It is also a matter of common knowledge that the Financial Institutions and Banks consider the Current Ratio of 1 : 1.33 as sound proportion of Current Liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusively indicates that the addition has been made out of some lurking suspicion based either on rumours or on something less serious than that. 45. As stated supra, the non availability of books of accounts during search proceedings may well be the basis of suspicion, however, these cannot per se constitute the basis of the addition, though it can very well be a starting point for further investigation. In Lalchand Bhagat Awbic_Ram vs. CIT: (1959) 37 ITR 28S, the Supreme Court disapproved the practice of making additions in the assessment on mere suspicion and surmises or by taking note of the notorious practice prevailing in trade circles. 46. The significance of tangible evidence has been emphasized in various judicial pronouncements. I am convinced that there was no tangible material before the A.O nor has the A.O brought any such evidence on record to corroborate his suspicion. The case of the appellant finds support from the decision in Income Tax Officer vs. W.D. Estate P. Ltd. (1993) 46 TTJ (Bom) 143 : 45 ITD 473. 47. Similar ratio was laid down by the Hon'ble High Court of Delhi in Commissioner of Income Tax Vs. Discovery Estates Pvt. Ltd. vide ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd complete or that the A.O was of the opinion that the income could not be deduced from the accounts maintained by the appellant. 51. The A.O. has not brought any material on record to disbelieve the book result shown by the appellant. If there is no suppression of material facts, the authority cannot- embark upon a speculative assessment-'of notional profits. The assessment should be based on cogent facts and there should be no vindictiveness or arbitrariness in passing the assessment order. The estimated additions made by the A.O. do not bear any relationship with the specific defects in books of accounts and the A.O. cannot be permitted to make arbitrary addition. 52. I find that no margin for estimation of suppressed sales and income has been allowed even in those cases where instances of suppression of sales has been found on the basis of incriminating material except for the period for which suppression has been unearthed based on cogent and documentary evidence, undisputedly, in the case of the appellant, nothing incriminating has been found, therefore, as held in Deputy Commissioner Of Income Tax Vs. Royal Marwar Tobacco Product (P) Ltd. (2009) 120 TTJ (Ahd) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be decided by the A.O. on mere surmises or probabilities (Northern Bengal Jute Mills Trading Co. Ltd. v. CIT (1968) 70 ITR 407 (Cal.). The mere existence of reasons for suspicion would not tantamount to evidence (Cal. HC in Narayan Chandra Baidya v. CIT (1951) 20 ITR 287 (Cal.). 54. Looking to the facts and circumstances of the case are also decisions cited above, the addition made by the AO 31. We have heard rival submissions and perused the orders of lower authorities and materials available on record. In the instant case, the assessee is engaged in the business of contract work and transportation work. It is not in dispute that the assessee has produced its books of accounts before the AO along with bills and vouchers during the course of assessment proceedings. The AO rejected the books of accounts because of three reasons :- i) books of accounts were not found during the course of search; ii) the profit shown by the assessee in the returns of income were on the lower side; and (iii) the sundry creditors were more than the sundry debtors. Thereafter the AO estimated the net profit of the assessee @8% of contract receipts and @8% on transportation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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