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Shri Ramit Vohra, Prop. M/s. Impact Enterprises, 9210/5, Multani Dhanda, Pahar Ganj, New Delhi Vs. ACIT, Circle : 63 (1) New Delhi.
September, 22nd 2021

INCOME TAX APPELLATE TRIBUNAL
[DELHI BENCH “SMC”: NEW DELHI ]
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER

AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER

(Through Video Conferencing)

ITA No. 3565/Del/2019

(Assessment Year: 2011-12)

Shri Ramit Vohra, ACIT,

Prop. M/s. Impact Enterprises, Vs. Circle : 63 (1)

9210/5, Multani Dhanda, New Delhi.

Pahar Ganj, New Delhi–110055.

PAN: AAGPJ0542C

(Appellant) (Respondent)

Assessee by : Shri G. S. Kohli, C. A.;
Revenue by: Shri R. K. Gupta, Sr. D. R.;

Date of Hearing : 12/08/2021
Date of pronouncement : 21/09/2021

O R D E R


PER PRASHANT MAHARISHI, A. M.

1. This appeal is filed by the assessee against the order passed by the ld CIT(A)-20,

New Delhi dated 15.03.2019, wherein, the appeal filed by the assessee against the

order passed u/s 143(3) read with section 254 of the Act by the ld ACIT, Circle-

63(1), New Delhi dated 27.12.2017 was dismissed. Therefore, the assessee is in

appeal before us as per ground of appeal as under:-

“1. That assessment framed as well as C.I.T.'s (Appeal) order are unlawful and
are against the natural law of justice.

2. That learned C.I.T. (Appeal) has reiterated the facts given by learned A.O. in
Asstt. order, while the A.O. has initiated the proceedings when it was verge to
time-barred, thus, blindly followed the original Asstt. order.

3. The learned A.O. had failed to discharge his liability in spite of sufficient time
available with him and put it on the shoulders of the appellant for not
discharging his liability.

4. That the maximum requirements to justify the questionnaire of the A.O. were
placed on the record in original Asstt., the other requirements, if any, of the
learned A.O. could have sorted out at his own end keeping in view the
circumstances of the appellant.

5. (a)That the application of Average rate of Net Profit of three allied concerns is
not valid in the eyes of law.

(b) That where no expenses is disturbed, purchase and sales has also
been proved by having VAT Asstt., the applied rate of Net Profit in a
discretionary manner is not justified. “

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2. Brief facts of the case shows that the assessee filed its return of income on

30.09.2011 of Rs. 1,31,140/-. The assessment u/s 143(3) read with was passed on

19.03.2014 rejecting the books of account applying net profit rate of 1.34% taking

average net profit rate of three different firms of the same industry and total

income was assessed at Rs. 26,31,084/-. The appeal of the assessee before the ld

CIT(A) was dismissed and therefore, the appeal before ITAT was filed which was set

aside to the file of the ld AO by order dated 05.01.2017. Therefore, this appeal is

the second round of proceedings. The SMC bench in ITA No. 5243/Del/2015 vide

order dated 05.01.2017 vide para No. 5 of the order the order was set aside on the

Principles of Natural justice. Consequent to that fresh assessment order was

required to be passed.

3. The ld AO issued a show cause notice on 21.12.2017 stating that books of account

of the assessee was rejected earlier in view of three unverified creditors and has not

produced books of account for verification. The ld AO asked the assessee to

produce the supporting evidence, original bills, bank statement to show that the

payment to the respective creditors and the details of VAT return where the sales

has been shown. The ld AO further asked that if the above information is not

provided he would be constrain to adopt net profit ratio @1.34%.

4. The assessee on 27.12.2017 submitted the confirmation of the credits, DVAT

return of the assessee. The assessee further stated that assessee himself has been

assessed u/s 143(3) for Assessment Year 2013-14 i.e. subsequent to this

assessment year accepting the book results.

5. The ld AO once again rejected the contentions of the assessee stating that the

confirmation is merely a paper document whether there were no business activity

was carried out by those creditors at the given address . Assessee once again failed

to produce the right returns of the suppliers as well as it also failed to provide any

bills and vouchers in relation with the purchase and sales. With respect to the

adoption of the net profit he held that the ld AO would have taken average net

profit rates of previous three years of the assessee itself and whose average net

profit ratio @1.74% against that the addition has been made @1.34% therefore, the

total income was once again determined at Rs. 26,31,080/-. The assessee preferred

an appeal before the ld CIT(A) who vide para No. 6.2.4 upheld the order the order

of the ld AO. The assessee is in appeal before us.

6. The ld AR submitted a paper book containing 49 pages. At page 49 of the PB he

has also given the net profit ratio for Assessment Year 2009-10, 2013-14 stating

that for Assessment Year 2009-10 it was @1.72%, for Assessment Year 2010-11 it

was @1.81% and for subsequent year for Assessment Year 2012-13 it was 0.41%

and Assessment Year 2013-14 it was 0.83%. He submitted that the assessment
Page | 2
year 2013-14 has also been passed u/s 143(3) of the Act on 17.03.2016 where the
identical facts and circumstances of the case exists. With respect to Assessment
Year 2012-13 he submitted that though no assessment u/s 143(3) is made but still
the net profit ratio is 0.41%. He therefore, submitted that the adoption of the gross
profit ratio 1.34% by the ld AO is unjustified. On the merits of the addition he
submitted that the confirmation of the creditor was produced. The detail of the VAT
return of the assessee for this assessment year was also shown to the ld AO. There
is no mismatch was found and therefore, rejection of books of account is not
correct.


7. The ld DR vehemently objected and stated in this year there is a specific finding of
none genuine creditors, therefore, the results of other assessment here’s cannot be
considered for the purpose of the working out gross profit. He further stated that
even if the chart submitted by the assessee at page 49 is considered, the net profit
ratio for Assessment Year 2013-14, 2012-13, 2010-11 and 2009-10 also comes to
1.19%. In this year there is a specific discrepancy found in the sundry creditors of
the assessee the additions has been made @1.34%. He therefore, submitted that
the orders of the lower authorities deserves to be upheld.
8. We have carefully considered the rival contentions and perused the orders of the
lower authorities. Categorically the ld AO has rejected the books of account of the
assessee for the reason that assessee has failed to produce any credible evidence
with respect to the three major creditors earlier. The case of the assessee reached
before the SMC bench and it was set aside to the file of the ld AO on the principles
of natural justice. During the course of the assessment proceedings the assessee
was granted the opportunity for substantiating its creditors along with production
of books of account. The assessee produced the same details which were produced
in the original proceedings. A new argument was raised that for Assessment Year
2013-14 the assessment of the assessee is completed u/s 143(3) of the Act. It was
also stated that the assessment for subsequent years completed by the ld AO
deserves to be accepted.It is apparent that the assessee has been assessed for
Assessment Year 2013-14 u/s 143(3) of the Act. The assessee has placed at Page
number 49 the details of net profit ratio of assessment year 2009-10 till
Assessment Year 2013-14. The above statement also shows net profit ratio
contains a reduction of gross profit ratio on account of administrative expenses.
There is no dispute on such expenditure. The addition has been made after
rejecting the books of account of the assessee for the reason that the assessee has
not been able to justify of the same of the creditors. Therefore, it would be
appropriate to restrict the addition on the basis of the gross profit ratio. The gross
profit ratio of undisputed four years other than impugned assessment year case

Page | 3
5.42%. Admittedly assessee also submitted the quantitative details of the purchase
and sales which were also in conformity with the VAT return filed by the assessee.
With respect to the nonavailability of the creditors it may be possible as contended
by the assessee that either the creditors have shifted the business activity or close
down the their activities. We do not approve the finding of the learned assessing
officer that though the creditors have filed the confirmation of the account, but the
learned assessing officer has rejected the same stating that so-called creditors on
the address given by the assessee are not available. It could also not have been the
reason that the nonproduction of the VAT return of the creditors can result into
rejection of the books of accounts. It is merely because on report of the inspector it
was found that the creditors were not available at the address given by the
assessee, the learned assessing officer has rejected the books of accounts and
estimated the profit comparing the results of three different entities. Merely
because the VAT return of the suppliers were not produced assessee cannot be
burdened with additional tax liabilities when the quantitative details of material
purchased and sold which included the material purchased from the suppliers are
also accounted for. It is also not the case of the learned assessing officer that
assessee was directed to produce those creditors. Accordingly, the action of the
learned assessing officer by estimating the net profit of the assessee cannot be
upheld. On looking at page number 19 of the paper book the assessee has
submitted the permanent account number of all the creditors were doubted by the
learned assessing officer. In case of JK since Corporation it was submitted that it is
nonavailability is only for the reason that it has sifted its business premises.
Assessee also submitted the address of these party once again which is placed at
page number 28 of the paper book. With respect to MInar saree Center that it has
continued its activities from its head office and the assessee has also given a new
address at J -23 /52A, Kamal Pura Bari Bazar , Varansi. With respect to Astha
Imepex assessee submitted the address of its proprietor and his permanent
account number. The learned assessing officer from the records it is apparent that
did not try to locate this parties. The confirmations of these parties are placed at
page number 22 – 25 of the paper book. Undisputedly the accounts of the assessee
are audited Under the provisions of Section 44AB of the act. For the subsequent
years the learned assessing officer has assessed the assessee Under the provisions
of Section 143 (3) of the act and the books of accounts were accepted.In view of
this we do not approve the order of the lower authorities rejecting the books of
accounts of the assessee and estimating the profit by taking three different entities
though in the similar line of business for estimating the income of the assessee. In
view of this we allow ground number 5 of the appeal of the assessee. Ground

Page | 4
number 1 – 4 and 6 does not require any adjudication in view of our decision in
ground number 5 of the appeal of the assessee.
9. In the result appeal of the assessee is allowed.
Order pronounced in the open court on 21/09/2021.

-Sd/- -Sd/-
( AMIT SHUKLA ) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 21/09/2021.

*AK KEOT*

Copy forwarded to

1. Appellant;
2. Respondent
3. CIT
4. CIT (Appeals)
5. DR:ITAT

ASSISTANT REGISTRAR
ITAT, New Delhi

Page | 5

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