Post rejection of books u/s 145(3), income estimation must be reasonable, adopting weighted average NP rate from preceding scrutinized assessments absent evidence of changed circumstances.

आदेश/ORDER 

PER RAVISH SOOD, JM:

The present appeals filed by the assessee firm are directed against the respective orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, both dated 12.08.2025, which in turn arises from the orders passed by the Assessing Officer (for short, “A.O”) under section 143(3) of the Income-Tax Act, 1961 (for short, “the Act”), dated 28.12.2019 and under section 143(3) r.w.s. 144B of the Act dated 29.09.2021 for the A.Y. 2017-18 & A.Y.2018-19, respectively. As common issues are involved in the captioned appeals, therefore, we shall take up and dispose of the same vide a consolidated order. We shall first take up the appeal filed by the assessee firm for the A.Y. 2017-18 in ITA No. 632/VIZ/2025, and the order therein passed shall apply mutatis-mutandis for the purposes of disposing of the other appeal. The assessee firm has assailed the impugned order on the following grounds of appeal before us:

“1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case.

2. The learned Commissioner of Income Tax (Appeals) ought to have held that the assessing officer is not justified in rejecting the audited books of account of appellant.

3. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.94,76,048 made by the assessing officer by estimating the profit @ 8% of the gross receipts.

4. The learned Commissioner of Income Tax (Appeals) ought to have held that the rate of profit adopted by the assessing officer at 8% is on higher side.

5. Any other grounds may be urged at the time of hearing.”

2. Succinctly stated, the assessee firm, which is engaged in civil contract business, had filed its return of income for the A.Y. 2017-18 on 30.10.2017, declaring its income at Rs. 73,73,850/-. Subsequently, the case of the assessee firm was selected for scrutiny assessment under section 143(2) of the Act.

2. During the course of the assessment proceedings, the AO issued notice under section 142(1) of the Act, dated 05.09.2019, wherein the assessee firm was called upon to submit certain information relevant for framing of assessment in its case. In response, the assessee firm furnished a part reply. Thereafter, the A.O issued another notice under section 142(1) of the Act dated 09.12.2019, wherein he called upon the assessee firm to furnish certain specific details, viz., (i) details of unsecured loans along with the confirmation letters of the parties; (ii) details of sundry creditors along with documentary evidences; (iii) details of sundry debtors along with bills and vouchers and copies of ledger accounts; (iv) details of TDS returns along with the details of tax deducted at sources of sub-contractors with supporting evidences; (v) details of work-in-progress; and (vi) copies of the ledgers accounts along with the bills and vouchers, viz. (a) labor charges (paid to sub-contractors): Rs. 4,53,64,581/- (b) labor charges: Rs. 1,52,76,633/- (c) site expenses: Rs. 1,04,25,247/- and (d) office expenses: Rs. 13,55,040/-.

3. As the assessee firm did not comply with the aforesaid notice issued under section 142(1) of the Act and failed to place on record the requisite details/ information, therefore, another notice under section 142(1) of the Act, dated 16.12.2019 was issued to him with a specific observation that in case the req