COMMISSIONER OF INCOME TAX Vs. SUBODH GUPTA

JUDGEMENT

(1.) THIS appeal by the Revenue under Section 260A of the Income Tax Act, 1961 ('Act' in short) relates to assessment year 2009 -10.

(2.) THE assessee had filed return for the said year on 28.09.2009 declaring income of Rs.35,21,970/ -.

(3.) THE Commissioner of Income Tax (Appeals) noticed that the disallowance of Rs.10.61 crores had resulted in an abnormal conclusion, as the net profit rate had jumped to 59.60% on the total turnover of Rs.18.43 crores. This was illogical and could not be accepted. Relying upon Rule 6DD(g) of the Rules and after making reference to several decisions, he observed that the assessee should partly succeed. He observed that the assessee had filed copy of the ledger accounts before the Assessing Officer which was also filed before him but supporting details/vouchers and details of payments had not been filed. Further, the assessee had claimed that the books of accounts had been stolen and an FIR in respect of the said theft had been recorded. In the absence of full details and confirmations from the parties concerned, the book results and income declared could not be verified. The only figure verifiable was the total turnover of the contractual work undertaken by the assessee as the said work was undertaken for the Greater Noida Authority who had deducted tax at source on the payments made. He felt that the only option available was to reasonably estimate the assessee's income after rejecting the books of accounts and the profits as declared. Recording absence of material to show the net profit rate, which could be applied, the Commissioner of Income Tax (Appeals) applied net profit rate of 8% on total turnover referring to the net profit rate mentioned in Section 44AD of the Act. He observed that Section 44AD was not applicable as the turnover of the assessee was more than Rs.40 lacs but the presumptive net profit rate of 8% as stipulated could be taken for estimation. It would be reasonable to estimate the income by applying 8% net profit rate on turnover of Rs.18,43,03,935/ -. He accordingly computed income of the respondent assessee at Rs.1,46744,314/ -, thus making an addition of Rs.1,13,22,344/ - to the declared income of Rs.34,21,970/ -.