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TMI Blog2021 (8) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(A) erred in confirming the rejection of audited books of accounts u/s 145(3). In absence of any ingredients of this section, the action is warranted. 3. That the ld. CIT(A) erred in law as well as on facts in sustaining net profit @ 11.5% (before interest & depreciation) without giving any basis and without considering the past history of the Assessee. This is arbitrary and uncalled for. 4. That the ld. CIT(A) erred in sustaining the addition in total income by Rs. 1,87,45,159/- without any cogent reasons but only on the basis of estimations. The book results be accepted. 5. The appellant reserves the right to add, alter and omit all or any of the grounds of appeal with the permission of the Hon'ble appellate authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd maintenance of muster rolls is very difficult. The assessee tried to maintain all the bills/vouchers which have been produced for examination. The assessee further explained that nature of work of irrigation contracts where use of machinery is limited and labour intensive work. The assessee further explained that majority of labour expenses were paid through banking channel and prayed not to reject the books of account. The contention of the assessee was not accepted by the AO. The AO rejected the books of account under section 145(3) of the Act. The AO by referring certain case-laws made the addition of net profit @ 12.5% of turnover. 3. On appeal, ld. CIT(A) upheld the action of the AO in rejecting the books of accounts, however, on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount, if any expense is found to be unverifiable, then it may be a ground for disallowance of expenses, but cannot be a basis for rejection of audited accounts. 5. On estimation of net profit, the ld.AR of the assessee submits that the AO after rejecting the books of account estimated the net profit @ 12.5% of gross receipts, however, on appeal before the ld. CIT(A) the same was reduced to 11.5% thereby addition was sustained to the extent of 1.87 Crores. The AO failed to consider that in previous years, the assessment was completed under section 143(3) and the assessing officer accepted similar gross profit and net profit in A.Ys. 2012-13 and 2013-14. The ld.AR submits that in A.Y. 2012-13, the assessee declared gross profit @ 6.03% and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 1%, thereby affirming 11.5% of the gross profit. The ld. DR for the revenue submits that the ld. CIT(A) after considering the complete facts and circumstances of the case, granted a reasonable relief and the assessee is not entitled for further relief. 7. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. We have also deliberated on various documents furnished by the ld.AR of the assessee. We have also considered the audited report for the relevant financial year 2013-14, copy of note sheet (order sheet of AO) and copy of written submissions furnished before the first appellate authority. We have also deliberated on various case-laws relied on by the ld.AR of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deficiency. In our view, the books of account were rejected without any basis. If there was violation of section 36(1)(va) of Income tax Act, the AO could disallow the same as per law. Therefore, we set aside the order of the AO in rejecting the books of accounts. 9. On merits, we find that the case of the assessee was selected for scrutiny in A.Y. 2012-13 & 2013-14. Copy of assessment orders for both these years, passed under section 143(3) are placed on record. A similar gross profit was shown for A.Y. 2012-13 @ 8% and net profit @ 3.3%, further in A.Y. 2013-14 gross profits @ 6.3% and net profit @ 2.9% was accepted, however only some percentage of labour charges were disallowed to avoid the possibility of revenue leakage. 10. Consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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