In case of rejection of the books of accounts, Estimation cannot be straight 8% or 6%

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In case of rejection of the books of accounts, Estimation cannot be straight 8% or 6% 
SS Builders Vs ACIT
ITA No. 1200/Del/2012
ITA No. 1199/Del/2020
ITA No. 1201/Del/2012
ITA No. 869/Del/2012
ITA No. 867/Del/2012
:Short overview of the case:
– The assessee is engaged in the business of civil construction.
– Original assessment was completed u/s 143(3)/144 determining the income at Rs. 31.6 0 lakh by applying the profit rate of 8% on the gross contractual receipts.
– The appeal of assessee was dismissed by the CIT(A).
– The assessee preferred appeal before the Tribunal and the Tribunal remanded the matter back to the file of AO for passing the order afresh.
– The AO asked the assessee to produce books of account supported by complete bills and vouchers.
– The AO noted that assessee produced bills for diesel and bitumen. No other bill was produced.
– The AO therefore, concluded that books of account are not verifiable for want of bills and vouchers for all the expenses. Hence, books were rejected.
–  The AO again computed the business income of assessee by applying the N.P. rate of 8% on the gross receipts and again made addition of Rs. 31.60 lakh.
–  The CIT(A) confirmed the application of N.P. rate of 8%.
– The CIT(A), however, directed that sales tax of Rs. 16.7 0 lakh deducted by the various Departments was not excluded from gross contract receipts for working out the N.P. rate of 8%, since no profit element was involved in sales tax deducted, therefore, AO was directed to deduct sales tax from the gross receipts and thereafter, apply N.P. rate of 8%.
– The CIT(A) also granted relief to the assessee of rebate u/s 88.
On appeal, the question before Tribunal was –
Whether in case AO may not be satisfied with the book results of the assessee, he should not estimate the profit of the assessee by applying N.P. rate of 8% and he should restrict the profit at 2% only in case of rejection of the book results?
ITAT observed as under:
– Though the assessment order at Delhi was later on set aside by the CIT-13, New Delhi, vide Order Dated 23.03.2009 u/s 263, but, on the date of passing the order at Karnal on 30.12.2008 the AO should have looked into the assessment order passed at Delhi in respect of the same assessee for the same AY.
These peculiar facts clearly entitle the assessee that matter should be remanded back to the file of AO for fresh consideration in accordance with law.
 In view of the above circumstances and background of the case, particularly, when in preceding three years, court have directed the AO to apply N.P. rate of 2% only as against the N.P. rate of 8% determined by the AO and that contradictory Orders have been passed at Delhi and Karnal, interest of justice requires that entire matter should be reconsidered by the AO at Karnal in accordance with Law.
 Court set aside the Orders of the authorities below and direct the AO to pass the assessment order de novo in accordance with Law, by giving reasonable, sufficient opportunity of being heard to the assessee.
Court make it clear that in case AO may not be satisfied with the book results of the assessee, he should not estimate the profit of the assessee by applying N.P. rate of 8% in view of court directions given in A.Ys. 2003-04, 2004-05 and 2008-09 above, the AO should restrict the profit at 2% only in case of rejection of the book results.

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