TMI Blog2022 (9) TMI 1017X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2017-18 at 4.5% and pointed out that the net profit declared by the assessee for the year under consideration in the line with the net profit prevailing business / trade as well as net profit declared by the assessee in the subsequent year. AO has adopted the net profit of 8% without any reasonable and proper basis however, the assessee has also not brought on record any comparable cases in respect of the net profit declared by the assessee at 4.37%. Hence where neither the AO nor the assessee has brought on record a reasonable and proper basis for estimation of the income after rejection of books of accounts the Income of the assessee is estimated to bring to the end of the litigation by adopting the net profit of 5.5%. As clarifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees. The assessee filed a return of income for the year under consideration on 17.10.2016 declaring total income of Rs. 3,81,100/-. The case was selected for scrutiny through CASS. During the scrutiny assessment, the Assessing Officer asked the assessee to produce complete books of accounts and vouchers claimed in profit loss account. The Assessing Officer observed that there was no compliance on the part of the assessee however, the audited financials were uploaded on the systems but in the absence of any compliance, nothing could be verified. The Assessing Officer accordingly rejected the books of accounts of the assessee by invoking the provisions of section 145(3) of the Income Tax Act. The Assessing Officer proceeded to estimate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable in the case of the assessee when the books of accounts of the assessee were duly audited and the turnover of the assessee is much more higher than the limit the prescribed under section 44AD. The learned AR has thus submitted that the net profit declared by the assessee is very reasonable having regard to the fact that this is a first year of the business of the assessee and the books of accounts were duly audited. The Assessing Officer has not brought anything on record to justify the net profit at 8% except taking the support of the provisions of section 44AD. He has also referred to the paper book containing the audited financials of the assessee including trading, profit loss account and balance-sheet. He has further contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guiding factor. 5. I have considered the rival submissions as well as relevant material on record. Since the issue of rejection of books of accounts is not raised before the Tribunal, therefore, I do not propose to go into the correctness of the decision of the Assessing Officer on this point. However, once the books of accounts of the assessee are rejected, the Assessing Officer is required to estimate the income of the assessee on some reasonable and proper basis as guidance. It is settled proposition on this point that the past history of NP/GP declared by the assessee can be a proper guidance for estimation of the income after rejection of books of accounts. In the case in hand, since it is a first year of a business therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at 4.37%. 6. Hence, in the peculiar facts and circumstances of the case, where neither the Assessing Officer nor the assessee has brought on record a reasonable and proper basis for estimation of the income after rejection of books of accounts the Income of the assessee is estimated to bring to the end of the litigation by adopting the net profit of 5.5%. It is clarified that the estimation of the income being reasonable and proper is made in the peculiar facts and circumstances of the case for the year under consideration and therefore, the same would not apply as precedent for the other assessment years of the assessee or in any other case. Hence the Assessing Officer is directed to re-compute the income of the assessee on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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