Income Estimation Invalid Without Invoking S.145 and Rejecting Books of Account: ITAT [Read Order]
Although issues like bogus labour charges and lack of plant and machinery were mentioned, there was no clear finding on book rejection in the assessment order. The CIT(A) also did not explicitly mention any rejection of books.
![Income Estimation Invalid Without Invoking S.145 and Rejecting Books of Account: ITAT [Read Order]](https://images.taxscan.in/h-upload/2025/07/24/2068567-income-estimation-taxscan.webp "Income Estimation Invalid Without Invoking S.145 and Rejecting Books of Account: ITAT [Read Order]")
The Cuttack Bench of Income Tax Appellate Tribunal ( ITAT ) held that income estimation is invalid without invoking Section 145 under the Income Tax Act,1961,and rejecting the books of account. Sat Inder Constructions Private Limited, appellant-assessee, was engaged in civil contract work and filed its return on 04.11.2017, declaring income of ₹1.31 crore on total receipts...
The Cuttack Bench of Income Tax Appellate Tribunal ( ITAT ) held that income estimation is invalid without invoking Section 145 under the Income Tax Act,1961,and rejecting the books of account.
Sat Inder Constructions Private Limited, appellant-assessee, was engaged in civil contract work and filed its return on 04.11.2017, declaring income of ₹1.31 crore on total receipts of ₹30.03 crore. The assessee counsel submitted that the Assessing Officer (AO) estimated income at 8% after depreciation without rejecting the books of account. The assessee argued that such estimation was not valid without rejecting the books.
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The Department counsel submitted that the AO had given reasons for the income estimation in the assessment order, and the Commissioner of Income Tax (Appeals) [CIT(A)] had also explained the basis for estimation and book rejection in the appellate order.
It was argued that these reasons implied the books were rejected. The counsel also pointed out that the assessee failed to provide details for the Section 80G deduction and could not fully support the return. Hence, the estimation was justified.
The two member bench comprising George Mathan (Judicial Member) and Rajesg Kumar (Accountant Member) noted that the AO had not rejected the books of account or invoked Section 145 in the assessment order. While issues like bogus labour charges and lack of plant and machinery were mentioned, there was no clear finding on book rejection.
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The CIT(A) also referred to these points but did not state that the books were rejected. The Tribunal held that for income estimation to be valid, the provisions of Section 145 must be invoked and the books must be rejected.
Since this was not done, the tribunal found the estimation made by the AO and upheld by the CIT(A) to be unsustainable, and accordingly directed deletion of the estimated income.
Accordingly.the appeal was allowed.
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