TMI Blog2021 (8) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... x 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. Estimation of net profi t - When similar gross profit and net profit from the same business is accepted by the revenue in earlier years, the revenue cannot increase the net profit of the assessee without specifying any cogent reason or bringing evidence of comparable instances of assessee s engaged in similar trade or business. The AO estimated the net profit @ 12.5% which was though reduced to 11.5% by the ld. CIT(A), in our view, the estimation is without making any investigation or bringing comparable case on record, estimation made by the AO is not justified. Our view further strengthened by the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout 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. 2. Brief facts of the case are that the assessee is a partnership firm, engaged in civil contract work, filed its return of income for assessment year (AY) 2014-15 on 16/09/2014 declaring income of ₹ 27,66,790/-. The case was selected for scrutiny. The assessment was completed under section 143(3) on 23/12/2016. The assessing officer (AO) during the assessment noted that assessee has shown turnover of ₹ 26.41 Crores and shown gross profit (GP) of ₹ 2.22 Crores only (appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 additions made @ 12.5% granted partial relief to the assessee by reducing it to 1%. The ld. CIT(A) while affirming the rejection of books of account, held that in absence of complete muster rolls, books of account cannot be treated as complete. Further, the payment made by the assessee is more than the proportion of PF ESI contributed by the laborers. On estimation of net profit, the ld. CIT(A) granted partial relief and upheld the addition to the extent of 11.5% of net pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed 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 net profit @ 2.94%. In A.Y. 2013-14, the assessee declared gross profit @ 8% and net profit @ 3.13%. The assessment in A.Y. 2012-13 was completed under section 143(3) and only a partial disallowance on account of labour expenses was made. This year the GP declared by the assessee is 8.44% and NP is 3.35%, which are better than the earlier years. The ld.AR further submits that contract work awarded to the assessee was relates to irrigation contract which is labour in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessee. During the assessment, the AO rejected the books of account. We have perused the order sheet entry dated 19/12/2016 as recorded by the AO. The AO during the assessment recorded that the assessee produced the books of account which were examined. It was seen from the various documents that the contract and agreement amount are below the SOR. Muster rolls were produced but were not up to the mark and were not completely produced. Bills/voucher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord. 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. Considering the peculiar facts and the circumstances of the case, when similar gross profit and net profit from the same business is accepted by the revenue in earlier years, the revenue cannot increase the net profit of the assessee without specifying any cogent reason or bringing evidence of comparable instances of assessee s engaged in similar trade or business. The AO estimated the net profit @ 12.5% which was though reduced to 11.5% by the ld. CIT(A), in our vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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