INCOME TAX ACT, 1961

Section 153A

Search and seizure - Assessment under section 153A - Estimation of income without any material found -

Assessee engaged in jewellery business filed its original return of income declaring loss of Rs. 8,06,87,262 and Rs. 9,43,92,456 respectively for the assessment years 2016-17 and 2017-18. Subsequently in response to notice issued under section 153A, assessee filed revised returns and declared the loss of Rs. 6,30,90,9227 and Rs. 9,43,92,456 for said assessment years. Thus, assessee has reduced loss of Rs. 1,75,96,335 for the assessment year 2016-17 and there was no change in the return for the assessment year 2017-18. AO observed that assessee's net profit was ranging from 0.04% to 9.91% for the assessment years 2011-12 to 2013-14 and sharply decreased the nety profit from assessment year 2014-15 onwards. Assessee's average net profit from assessment years 2011-12 to 2015-16 was worked out to 6.26% and net profit of assessment years 2016-17 and 2017-18 declined to 8.27% abd 18.34% respectively. AO viewed that reduction in profit was in order to pre-empt the declarations made during the search admitting additional income and hence, AO estimated income @ 6.26% (the average for the assessment years 2011-12 to 2015-16. Held: There was no material and no defects were pointed out by AO. Even though search was conducted no evidence was found by evidencing suppression of income or inflation of purchase or inflation of expenditure. Assessee has maintained regular books of account which were duly audited. Search was conducted but no evidence was found indicating concealment of income. Accordingly, estimation of income made without having any material was bad-in-law.

Relied:Pr. CIT v. Marg Ltd. (2017) 84 Taxmann.com 52 (Mad-HC) : 2017 TaxPub(DT) 2117 (Mad-HC) and Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC) : 1954 TaxPub(DT) 123 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

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