AO cannot reject the income estimated by the assessee by following the profit margin method, without first rejecting the books of accounts: ITAT Ahmedabad

ITA No. 1923/Ahd/2019
DCIT, Circle-4(1)(1), Ahmedabad
(Appellant)
Sylvannus Builders and Developers Ltd (Respondent)

Facts:
1. The respondent assessee is a Private Limited Company engaged in the business of Real Estate Developers and Construction.

2. For the Assessment Year 2016-17, the assessee filed its Return of Income on 28.09.2015 declaring a total income of Rs. 3,11,94,560/-.

3. The case was selected for scrutiny and assessment was completed u/s. 143(3) wherein the Assessing Officer held that the assessee in principal accepted Percentage Completion Method (PCM) and returned profit of Rs. 3,11,94,560/- whereas the Assessing Officer estimated the profit at 9.31% under Profit Margin Method (PMM) as per earlier assessment Year 2015-16 and accordingly made an addition of Rs. 2,76,69,223/-.

4. The assessee has relied upon the decision in the case of CIT v. Shakti Industries (2013) 217 taxman 77 (Gujarat) in support of the proposition that additions made without rejecting the books of accounts would not be justifiable. In the case of the appellant company, the AO has not rejected the books of accounts.

ITAT Ahmedabad held as under:
1. Following the decision of the coordinate bench above, the ground raised by the revenue is devoid of merits.

2. The appeal of the department is dismissed and the addition is deleted.

The copy of order is as below-

1683544741-ITA No. 1923-Ahd-2019