IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "SMC", NEW DELHI
BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER
ITA No.5230/Del/2018
Assessment Year: 2014-15
Sh. Lokesh Garg Vs ITO
Prop. M/s. Garg Yarn Traders, Ward 3 (4)
Railway Road, Pulkhuwa, Distt. Hapur
Hapur
PAN AAYPG2757N
(APPELLANT) (RESPONDENT)
Appellant by Sh.Alok Gupta, CA
Respondent by Sh. S. L. Anuragi, Sr. DR
Date of hearing: 14/01/2019
Date of Pronouncement: 14/01/2019
ORDER
PER N. S. SAINI AM:
1. This appeal filed by the assessee is directed against the order dated
23.05.2018 of the CIT(A), Muzaffarnagar.
2. The only issue involved in this appeal is that the CIT (A) erred in
confirming the addition of Rs.37,18,872/-.
3. The brief the facts of the case are that during the course of
assessment proceedings the Assessing Officer observed that the assessee
has shown low net profit rate. He observed that the assessee has not filed
before him documentary evidences like purchase bills, sales bills. No books
of account such as ledger, Cash book, Bank book and journal are produced.
No stock register was produced. Therefore, he held that in absence of the
books of accounts net profit shown by the assessee is not acceptable. He
observed that on total turnover of Rs.21,28,34,094/-. Assessee has
disclosed gross profit of Rs.23,37,424/- and net profit of Rs.5,93,942 which
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works out to gross profit rate of 1.09% and net profit rate of 0.28% which is
very low. Therefore, he rejected the books of accounts of the assessee by
invoking the provision of section 145 of the Act and computed income of the
assessee by applying net profit rate of 2% on the total turnover which work
out to Rs.42,56,681/- and treated the same as income of the assessee from
business in place of Rs.5,93,742/- shown by the assessee.
4. Being aggrieved by this order of the Assessing Officer the assessee
filed appeal before the CIT(A).
5. The CIT(A) confirmed the action of the Assessing Officer on the ground
that the authorized representative of the assessee has filed comparable
results from the past years in the case of the assessee itself. In absence of
any corroborating evidence/ details such results from past years cannot be
applied in the present year as each year is a different year for the purpose of
Income Tax proceedings. Once books of accounts have been rejected the
Assessing Officer has to make an assessment in the manner provided u/s
144 of the Act. On the basis of material and other information he observed
that the Assessing Officer has been fair and reasonable in applying rate
profit @ 2% in this case to compute business income. Hence, he confirm the
addition of Rs.37,18,872/- made by the Assessing Officer and dismissed the
ground of appeal of the assessee.
6. Before me the AR of the assessee submitted that the CIT(A) was not
justified in confirming order of the Assessing Officer in computing the
income for the year under appeal of the assessee applying net profit rate of
2% on the turnover. He submitted that he is not challenging the rejection of
books of accounts by the Assessing Officer u/s 145 of the Act as he agreed
that the assessee failed to produce the books of accounts before the
Assessing Officer that assessee same were also not produced before the
CIT(A). His only argument was that looking to the past accepted results of
the assessee where the assessee has shown net profit at the rate varying
from 0.28% in the assessment year 2013-14 to 0.21% in the assessment
year 2011-12 the computation of income of the assessee by applying the rate
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of 2% on the turnover was on a higher side. He prayed that the same may
be reduced to 0.50% of the total turnover of the assessee.
7. On the other hand the Ld. DR vehemently opposed the submissions of
the AR of the assessee and submitted that where the assessee failed to
produce the books of accounts and other evidences, the CIT(A) was perfectly
justified in confirming the action of the Assessing Officer in computing the
income of the assessee by applying rate of 2% on the gross turnover of the
assessee.
8. I have heard the rival submissions and perused the orders of the
authorities below and materials available on record. In the instant case the
undisputed facts of the case are that the assessee failed to produce the
books of accounts and other supporting documents before the Assessing
Officer. Therefore, the Assessing Officer rejected the book result of the
assessee and estimated income of the assessee for the year under appeal by
applying the net profit rate of 2% on the gross turnover of the assessee. The
same was confirmed in appeal by CIT(A).
9. Before me the rejection of books of accounts by the Assessing Officer
is not in appeal. The only grievance of the assessee in the appeal is that the
computation of Income of the assessee after rejecting its books of accounts
by applying the rate of 2% on the gross turnover of the assessee is on higher
side. It is the submission of the AR of the assessee that the assessee has
shown net profit rate of 0.21% to 0.28% in the past preceding three
assessment years 2011-12 to 2013-14 and considering the same the net
profit rate for the year under appeal should be determined at 0.50%.
10. On the other hand the Ld. DR has vehemently opposed the
submissions of the AR of the assessee on the ground that the assessee failed
to produce the books of account and evidences before the Assessing Officer.
11. In the above facts and circumstances of the case I am of the
considered view that after rejecting the books of account of the assessee the
Assessing Officer cannot make a wild guess of the income of the assessee.
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He has to compute the income of the assessee on some proper basis. In the
case of the assessee the proper basis is the past accepted results of the
assessee. It is not in dispute that in the assessment made for the
assessment year 2011-12 to 2013-14 net profit @ 0.21% to 0.28% shown by
the assessee has been accepted by the department. Therefore, I find force in
the arguments of the AR of the assessee that considering the past results of
the assessee the income for the year under appeal should be computed by
applying the rate of 0.50%. Therefore, I accept the argument of the AR of
the assessee and set aside the orders of the lower authorities and direct the
Assessing Officer to compute the income for the year under appeal of the
assessee by applying the rate of 0.50% to the gross turnover of the assessee.
Thus, the grounds of appeal of the assessee are partly allowed.
12. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 14.01.2019.
Sd/-
(N. S. SAINI)
ACCOUNTANT MEMBER
Dated:14.01.2019.
*Neha *
Copy of order to: -
1) The Appellant
2) The Respondent
3) The CIT
4) The CIT(A)
5) The DR, I.T.A.T ., New Delhi
Assist ant Regi stra r
ITAT, New Delhi
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Date of dictation 14.01.2019
Date on which the typed draft is placed
before the dictating Member
Date on which the approved draft comes to
the Sr.PS/PS
Date on which the fair order is placed before
the Dictating Member for Pronouncement
Date on which the fair order comes back to
the Sr. PS/ PS
Date on which the final order is uploaded 14.01.2019
on the website of ITAT
Date on which the file goes to the Bench
Clerk
Date on which file goes to the Head Clerk.
The date on which file goes to the Assistant
Registrar for signature on the order
Date of dispatch of the Order
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