Estimation of income for tax purposes should reasonably reflect past records and established profit margins.

ORDER

PER SOUNDARARAJAN K., JUDICIAL MEMBER This is an appeal filed by the assessee challenging the order of the NFAC, New Delhi dated 17/02/2025 in respect of the A.Y. 2022-23 and raised the following grounds:

“1. The order of the learned CIT(A) in so far as it is against the appellant is opposed to law, equity and weight of evidence, probabilities, facts and circumstances of the case.

2. The authorities below has failed to appreciate that inference can be drawn from the rate specified under the first proviso to section 44AD of the Income Tax Act, 1961 ("the Act"), though section 44AD is not applicable on the facts and circumstance of the case.

3. The authorities below ought to have taken guidance from the past profit percentage declared by the appellant and the industry average while estimating the income for the impugned assessment year on the facts and circumstances of the case.

4. The learned CIT(A) has failed to take cognizance of the fact that for the assessment year 2020-21, the assessment under section 143(3) of the Act was completed by accepting the profit percentage of 6.40% and that the rule of consistency should have been followed on the facts and circumstances of the case.

5. The estimation of income at 10% by the learned CIT(A) is highly excessive and deserves to be substantially reduced. 6. Without prejudice, the income from contract business cannot exceed 8% on the facts and circumstances of the case.

7. It is a settled proposition of law that "consent cannot confer jurisdiction" on the facts and circumstances of the case.

8. The appellant denies the liability to pay interest under section 234A, 234B and 234C of the Act in view of the fact that there is no liability to additional tax as determined by the learned assessing officer. Without prejudice the rate, period and on what quantum the interest has been levied are not in accordance with law and further are not discernable from the order and hence deserves to be cancelled on the facts and circumstances of the case.

9. The appellant craves leave to add, alter, delete or substitute any of the grounds urged above.

10. 1n view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed and appropriate relief be granted in the interest of justice and equity.”

2. The brief facts of the case are that the assessee is a civil contractor and did the contract works to the various Govt. agencies and received the payment through the Banking channels. The Government deducted the TDS amount u/s. 194C of the Act which was also duly reflected in Form 26AS. The assessee filed his return of income in Form ITR 2 even though his income comprises of business income since the portal had not accepted the return in ITR 4 without any audit report where the gross receipts exceeds Rs. 2 crores. In order to avoid delay in filing the return, the assessee filed the return in ITR 2 within the extended time and shown the income as income from other sources. In any event, the entire contract receipts are reflected in Form 26AS on which TDS was deducted.

3. The AO issued notice u/s. 143(2) of the Act on 01.06.2023 and sought for clarifications about the TDS from “Income from other sources”, Contract Receipts & Sales turnover and receipts. Thereafter the AO issued a notice u/s. 142(1) of the Act and several queries were raised including about the Form ITR 2. The assessee filed their detailed reply on 31/08/2023. In the said reply, the assessee submitted that he was not maintaining any books of accounts and therefore out of the total contract receipts, he had estimated his income at 6% but mistakenly shown the same as income from other sources. The assessee also enclosed the assessment order for A.Y. 2020-