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ACIT, Cir. Moradabad , Circle-1, Moradabad. Vs. J.K. Construction, Zeena Inayat Khan, Rampur, Uttar Pradesh.
October, 08th 2014

                     DELHI BENCH "D" NEW DELHI

                             ITA No. 3003/Del/2013
                             Asstt. Yr: 2009-10
ACIT, Cir. Moradabad ,              Vs. J.K. Construction,
Circle-1, Moradabad.                       Zeena Inayat Khan, Rampur,
                                           Uttar Pradesh.
                                           PAN: AAEFJ 8820 B
( Appellant )                              ( Respondent )

                Appellant  by      :      Shri Vivek Nangia Sr. DR
                Assessee by        :      None (Written submissions)

                Date of hearing    :      17-09-2014
                Date of order      :      22-09-2014.


       This appeal, preferred by the revenue, is directed against order dated 04-03-
2013 passed by the ld. CIT(A), Bareilly, in appeal no. 1126/JCIT(OSD)/MBD/11-12,
relating to A.Y. 2009-10.
2.     None put in appearance on behalf of the assessee at the hearing. We proceed to
dispose of departmental appeal after hearing the Ld. DR and the written submissions
filed on behalf of the assessee.
3.     Brief facts of the case are that the assessee filed its return of income declaring
total income of Rs. 12,97,970/-. During the assessment proceedings the assessee was
required to produce books of account along with all the bills/ vouchers for purchases
and also details/ documents in support of labour charges. After considering the
assessee's submissions, the AO pointed out that there was fall in net profit during the
year under consideration for which no satisfactory explanation was provided. AO
rejected the books of a/c by invoking the provisions of section 145(3) and passed the
assessment order u/s 144. He applied the rate of 5% on gross receipts in the P&L A/c
to work out the net profit of the assessee, which worked out at Rs. 51,36,409.6 as

against net profit of Rs. 5,77,060/- disclosed by the assessee and accordingly
made an addition of Rs. 37,20,670/-.
4.    Before ld. CIT(A), the assessee had filed written submissions. Ld. CIT(A)
called for a remand report from AO. Ld. CIT(A) did not accept the AO's action
in rejecting the books of a/c after considering the assessee's submissions that
merely because some purchase vouchers could not be produced, the rejection of
book results was not justified. However, since all bills and vouchers were not
available for verification, considering the past history of the case he directed the
net profit to be taken at 2.78%. Being aggrieved with the order of ld. CIT(A),
the department is in appeal before us and has taken following grounds of
     "1.      In the facts and circumstances of the case, Ld. CIT(A) has
     erred in holding that the AO was not right in rejecting the books of
     accounts u/s 145(3) whereas the AO had given cogent reasons to
     reject the books of accounts which make his action reasonable and

     2.      In the facts and circumstances of the case, Ld. CIT(A) has
     erred in holding, on the one hand, that the AO was not right in
     rejecting the books of accounts and, on the other hand, directing
     the AO to compute the net profit of the assessee by applying N.P.
     rate of 2.78% on turnover, without appreciating the fact that the
     AO cannot estimate the net profit by applying certain N.P. rate on
     turnover without first rejecting the books of account.

     3.      In the facts and circumstances of the case, Ld. CIT(A) has
     erred in directing the AO to compute the net profit of the assessee
     by applying N.P. rate of 2.78% in place of 5% as done by the AO,
     without giving any cogent reason and justification for reducing the
     NP rate from 5% to 2.78% to estimate the net profit of the assessee.

5.    We have heard ld. DR and perused the entire material available on record
including the written submissions filed on behalf of the assessee.          In our
considered view, the AO was not justified in invoking the provisions of

145(3)particularly when books of a/c were duly audited, because he did not
point out any specific bills/ vouchers which were missing and had only made a
bald statement to that effect. Under such circumstances, the ld. CIT(A) was
justified in accepting the books of a/c. However, admittedly all the bills and
vouchers were not available, therefore, he had estimated the net profit at 2.78%
keeping in view past history. We see no reason to interfere in the order of
CIT(A) and, accordingly, uphold the same.
6.    In the result, revenue's appeal is dismissed.
Order pronounced in open court on 22-09-2014.

       Sd/-                                         Sd/-
( A.T. VARKEY )                              ( S.V. MEHROTRA )
JUDICIAL MEMBER                              ACCOUNTANT MEMBER
Dated: 22-09-2014.
Copy to :
   1. Assessee
   2. AO
   3. CIT
   4. CIT(A)
   5. DR
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