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2019 (9) TMI 260 - AT - Income TaxN.P. rate determination - Reliance of Audit report in the absence of books of accounts - CIT-A restricting net profit rate to 8% of Gross Receipts in place of net profit rate of 12% estimated by the A.O - Assessee seeking more relief - rejection of the books of account. - HELD THAT:- AO who has chosen to apply N.P rate of 12% without bringing on record any comparable case where such an exorbitant rate of N.P was either shown by the assessee or assessed by the AO which has become final. AO while framing assessment has totally lost sight of the fact that during the year under consideration the turnover of the assessee has grown up by more than five times as compared to last year and therefore, assessee cannot be expected to report the same rate of Net Profit as was earned in last year. The Audited Accounts for year under consideration as well as for past assessment years were undisputedly available with the Department. It is not the case of the AO by drawing comparison with the past years Audited Accounts in the year under consideration assessee had either shown certain expenses in abnormal terms or that certain expenses were debited for an abnormal amount. Hon’ble Delhi High Court in the case of Additional CIT Vs Jai Engineering Works [1978 (2) TMI 94 - DELHI HIGH COURT] had the occasion to consider a question that whether the report of the Auditor could be said to be ‘material’ on which reliance could be placed by the Income Tax Authorities. The Hon’ble High Court while approving the order passed by the Tribunal ruled that in case where books are not made available for AO’s verification the AO should rely on the Audit Report because the said evidence is admissible under Indian Evidence Act, 1872. Reasonable rate of Net Profit - Since, the turnover, has gone up manifold in the year under consideration from ₹ 5,59,62,965/ to ₹ 27,72,26,469/- therefore, reliance to past years trading results may not be an appropriate guide. We reject the submission of the assessee to apply 2.65% as Net Profit as was applied in the case of M/s. Sri Siddheshwar Engineer India (P) Ltd. [2018 (3) TMI 1667 - ITAT AGRA] as assessee therein is based in Etawah, and is a Private Limited Company and the Assessing framing the assessment happened to be different. Therefore, preference cannot be given to M/s. Sri Siddheshwar Engineer India (P) Ltd (supra). Thus, we direct the learned Assessing officer to apply N.P rate of 6% on gross receipts. We also make it clear that assessee shall not be entitled for any other deduction such as depreciation and interest paid. Thus, ground of appeal No.1 to 4 are partly allowed.
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