2015 (2) TMI 490 - AT - Income Tax

Addition to income made on account of net profit rate applied - CIT(A) deleted the addition - double taxation - Held that - As regards the addition of Rs. 34, 48, 820/- the AO has taken gross receipts as per certificate available on record which in fact has been treated by the AO as per TDS certificate. But in fact they were certificates in form 27D for the tax collected and meant for purchases and not for sales. This is the prime mistake which has been done by the AO while framing the assessment. As per TDS certificates the total receipts from construction has been submitted to be at Rs. 2, 57, 75, 427/- and sale of liquor business at Rs. 36, 01, 644/- totaling receipts to Rs. 2, 93, 77, 071/- which has been reflected by the assessee in his books of account in the profit Gurgaon where the opening balance of Rs. 14, 25, 263/- was also taken into consideration by the AO which was meant in fact for the preceding year. Few adjustments were part of the reconciliation as per statement of account of M/s. Ericson India Pvt. Ltd. and receipts as per TDS certificate. We find that the receipts from M/s. Ericson India Pvt. Ltd. were of Rs. 31, 92, 644/- which in fact had been declared by the assessee in its total receipts from the contract business therefore by applying a net profit rate on the said amount by the AO will tantamount to a double taxation. The assessee having declared receipts in the profit & loss account cannot again be a subject matter of taxation which the AO has done and the ld. CIT(A) has rightly deleted the said addition. - Decided against revenue.

Summary

Issues:
1. Addition of net profit rate in ex-parte assessment.
2. Deletion of addition based on material evidence.
3. Treatment of paperless return without P&L account and balance sheet.
4. Validity of assessment based on lack of inquiry and material evidence.

Analysis:

Issue 1:
The Revenue appealed against the CIT(A)'s order deleting the addition made on account of net profit rate in an ex-parte assessment for the assessment year 2008-09. The AO applied a net profit rate of 12% on the receipts, resulting in an addition to the income of the assessee. The CIT(A) found that the AO wrongly included certain amounts as receipts, which were actually purchases related to the liquor business. The CIT(A) concluded that the addition of Rs. 34,48,820 was uncalled for and deleted it.

Issue 2:
Regarding the second addition of Rs. 5,33,542, the AO based the assessment on information from M/s. Ericsson India Pvt. Ltd. The appellant argued that the AO's calculation led to double taxation as the receipts were already declared in the profit & loss account. The CIT(A) found merit in the appellant's submission and deleted the addition, emphasizing that the AO's approach was incorrect.

Issue 3:
The Revenue contended that the assessment lacked material evidence due to the absence of books of account, audit report, and balance sheet in the paperless return. The appellant argued that all figures were included in the return, and the AO failed to consider the expenses incurred by the assessee, resulting in double taxation. The Tribunal noted that the balance sheet and profit & loss account were on record, and the AO's reliance solely on Form 27D for gross receipts miscalculated the income.

Issue 4:
The Revenue further argued that the assessment was improper due to the lack of inquiry and material evidence. The Tribunal found that the AO's assessment was flawed as the receipts were already declared in the profit & loss account, and the AO's calculations led to double taxation. The CIT(A)'s decision to delete the additions was upheld, dismissing all grounds of the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the additions based on incorrect application of net profit rates and lack of proper inquiry and material evidence in the assessment process.