Madras High Court
Commissioner Of Income Tax vs Shri Srinivasan Devendran on 10 January, 2023
T.C.A.No.15 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 10.01.2023
Coram:
THE HONOURABLE MR.JUSTICE S.VAIDYANATHAN
and
THE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ
T.C.A.No.15 of 2023
---
Commissioner of Income Tax,
Circle-3, Trichy. .. Appellant
Vs.
Shri Srinivasan Devendran .. Respondent
Tax Case Appeal filed under Section 260-A of the Income Tax Act,
1961, against the order dated 12.10.2022 in I.T.A.No.2675/Chny/2019 on
the file of the Income Tax Appellate Tribunal - "A" Bench, Chennai.
For appellant : Mrs.V.Pushpa
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T.C.A.No.15 of 2023
JUDGMENT
This Tax Case Appeal is filed raising the following substantial
question of law:
Whether on the facts and in the circumstances of the case, the Income
Tax Appellate Tribunal is right in upholding the order of the Commissioner
of Income Tax (Appeals) estimating the income of the assessee at 4% of the
turn-over on the basis of the earlier year assessment orders, when the
assessee has not maintained the Books of Accounts and has not audited his
accounts by a Chartered Accountant ?
2. Very briefly the facts are that the respondent/assessee was
executing works contract for the State Public Works Department relating to
road construction. The respondent-assessee had procured the work through
Tender process and the payments are made by various State Government
Departments and receipts are available and found in Form 26-AS under the
Income Tax Act and TDS was deducted by the Government Departments. It
is submitted that the respondent-assessee has not got his books audited and
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T.C.A.No.15 of 2023
had furnished income of Rs.2.30 crores and added 3% on the turn-over and
estimate was made, which had been followed for the previous years. Since
the assessee had not maintained the Accounts, the income was estimated for
the previous four years by the Assessing Officer, who proceeded to make
and determine the income on the basis of the estimation by adding 8% to the
income reported as per Section 44-AB of the Income Tax Act, resulting in
enhancement of the income liable to tax.
3. Now, we find that the order in appeal, namely the order of the
appellate authority, dated 12.10.2022 is primarily one relating to estimation
and thus, essentially a question of fact. No question of law much less
substantial question of law, arises for consideration in this case. To
appreciate the same, it is relevant to extract the portion of the Tribunal's
order:
"7. We have heard both the sides, perused
the materials available on record and gone through
the orders of authorities below. During the course
of assessment proceedings, the assessee has
justified for adopting 3% of receipts from civil
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T.C.A.No.15 of 2023
contract as net profit by stating that his volume of
work was more and due to heavy competitions, he
could not get more profit in these kind of contract.
In support of his contention, before the Assessing
Officer, the assessee gave the details of the
previous years' assessment completed which are as
follows:
Profit Profit
percentage (%) Income
determined
S. A.Y Total turnover of the declared by the declared by
No. assessee assessee the assesssee u/s 143(3)
1 2015-16 41,81,21,750 3% 1,25,43,653 3%
2 2014-15 22,63,98,010 3% 67,91,940 3.50%
3 2013-14 14,07,09,573 4% 56,28,383
4 2012-13 13,71,29,706 4% 54,85,188
8. The assessment year under consideration
is 2016-17. In the assessment year 2015-16, the
assessee has estimated the net profit at 3% and the
same was accepted by the Assessing Officer under
Section 143(3) of the Act. In the assessment year
2014-15, the assessee has estimated the net profit
at 3% and the Assessing Officer determined the
net profit at 3.50% under section 143(3) of the Act.
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T.C.A.No.15 of 2023
In the assessment year under consideration, the
assessee has declared the net profit at 3% and the
Assessing Officer has estimated the net profit at
8%. On appeal, the ld. CIT(A) scale it down to 4%
without depreciation. We find that by referring to
various case law and after considering earlier
assessment years' estimation of the Assessing
Officer, the ld. CIT(A) has reduced the net profit to
4%. Thus, we find no infirmity in the order passed
by the ld. CIT(A). Thus, the ground raised by the
Revenue is dismissed."
4. The estimation is by way of 'best judgment assessment' and it has
been consistently held that there is bound to be an element of guess work
and there cannot be any rigid formula for estimation based on best
Judgment, no interference is warranted unless and until it is shown that the
estimation / best Judgment is palpably arbitrary or perverse.
5. In the circumstances, we do not find any reason to interfere with
the findings of the Tribunal on estimation, which is essentially a question of
fact/discretion, more so, in the absence of challenge to the estimate as being
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T.C.A.No.15 of 2023
arbitrary or perverse.
6. In view of the above conclusion, the Tax Case Appeal is dismissed.
There shall be no order as to costs.
(S.V.N., J) (M.S.Q., J)
10.01.2023
Index: Yes/no
Speaking Order: Yes/no
Neutral Citation : Yes/no
cs
To
1. Commissioner of Income Tax, Circle-3, Trichy.
2. The Registrar, Income Tax Appellate Tribunal, 'A' Bench, Chennai.
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T.C.A.No.15 of 2023
S.VAIDYANATHAN, J
and
MOHAMMED SHAFFIQ, J
cs
T.C.A.No.15 of 2023
10.01.2023
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