ITAT Bangalore: Assessee Income 8% of the Gross T.O. if Accounts are No Declared

The Bangalore Bench of the ITAT ruled that “the income of the assessee should be estimated at 8% of the gross turnover if books of accounts are not maintained by the assessee.”

The income of the assessee, Atul Dinesh Seth, was estimated at 10 percent of gross turnover. The assessee contended that the rate imposed is too lofty and it should be reduced to the rate offered by him. The reason being, the percentage of income proposed by him is greater than the trade norms.

On the other contrary, the tax department submitted that the assessee’s argument is without documentary evidence. Consequently, it was submitted that the assessee’s books of accounts are not verifiable so the Assessing Officer’s (AO) estimate of 10% of the total turnover of the assessee is reasonable and rational.

Thereafter, The assessee challenged the estimation of income at the rate of 10% of the total turnover. Finally, The Coram headed by the Vice President, N.V. Vasudevan noted the fact that as the assessee is not maintaining books of accounts, so, the income of the assessee was decided by AO by adopting the method of invoking the provisions of section 44AF of the Act i.e. at the rate of 10% of the total turnover.

The Ruling of the Tribunal

“The assessee has adopted the net profit rate at 4.08% to 7.91% from one year to another. There is high volatility in adopting the rate of profit by the assessee. In our opinion, to meet the ends of justice, it is appropriate to estimate the income of the assessee at 8% of the gross turnover instead of 10% adopted by the AO,” the ITAT ruled.”