The AO found that the labour charged debited was very high, and hence the gross profit shown was low. He rejected the books of account and estimated net profit @ 12.5%. On appeal the CIT(A) reduced the estimate to 1% and affirmed 11. 5 percent. The Tribunal noted that the assessee was engaged in a labour-intensive industry, and most payments were made through banking channels. The assessee has produced the books of account duly audited, muster roll, bills, and vouchers. However, the AO has failed to consider the same or specify any irregularity in the books of account or identify a single voucher which is not in order. Further, it failed to carry out any independent investigation on the bills and vouchers furnished by the assessee. The Revenue accepts the net profit from the same business in earlier years. Hence, 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. (AY. 2014-15)
Pooranchand Agarwal v. Dy. CIT (2022) 216 TTJ 507 (Raipur)(Trib.)
S. 145 : Method of accounting-Rejection of Profit-No defects in the books of accounts-Similar profit margin in earlier years-Rejection of books of account is not justified-Estimation of net profit was deleted. [S. 145(3)]