TMI Blog2014 (12) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... was negligible. The turnover for the year under consideration had considerably increased in comparison to last year. It is commonly observed that when turnover is increased the profit margin is generally decreased. The assessed income of the assessee for the year under consideration even at the rate of 3% of the turnover at ₹ 29.40 lakhs was much more than the assessed income at the rate of 10% of the turnover of the preceding year at ₹ 13.57 lakhs. The Ld. CIT(A), after taking into consideration the facts and circumstances of the case and also taking into consideration the assessed income of the assessee in the subsequent year, has directed the assessment of income at the rate of 3% of the total turnover. We do not find any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s own for the Asstt. Year 2005- 06, the Ld. CIT(A) restricted the estimation of income at 10% of the turnover which too was not accepted by the department and second appeal is filed before the Hon'ble ITAT. 3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in restricting the estimation at 3% of turnover as against 10% without any reasonable and cogent reasons, and failed to appreciate the fact that the assessee had adopted a recalcitrant attitude of non-compliance, by not furnishing even the rudimentary details called for during the assessment proceedings. 4. The appellant prays that the order of the CIT(A) on the grounds be set aside and that of the Assessing Officer be restored. 5. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al turnover at ₹ 10,26,31,581/- which included other income of ₹ 45,52,251/- and assessed the income of the assessee at ₹ 1,02,63,160/-. 4. It was submitted by the assessee before the Ld. CIT(A) that the facts of earlier year were altogether different from the year under consideration. During the current year, the assessee had shifted its business into 'consignment business' i.e. without maintaining stock, whereas in earlier year the assessee's business was of stockist of vehicles. The diversion of assessee's business from stockist of vehicles into consignment of vehicle had led to an increase in sales turnover of over seven times from 135.72 lakhs to ₹ 980.79 lakhs. It was also submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect in subsequent years if the facts are not same or similar. The A.O while estimating total income @ 10% of turnover ignored the fact that sale turnover in the current year had multiplied seven times. The net profit is not expected to increase in the same proportion. Further a fixed rate of 10% of the turnover cannot be applied for estimating the income when the turnover comprised mainly consignment sales this year. This can be seen from the table below: Particulars A.Y. 2005-06 (Rs.in Lacs) A.Y. 2006-07 (Rs. in Lacs) A.Y. 2007-08 (Rs. in Lacs) Sales 135.72 980.79 1290.23 Less : Cost o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsequent year are similar to those of the current year. Still the AO made assessment almost accepting the book profit of ₹ 0.86% on sales as declared in the return. It is thus clear that the AO has made estimation in the current year on assumptions and surmises without bringing any material to justify that the appellant would have earned a huge income of ₹ 1,02,63,160 as against ₹ 10,50,780 disclosed in the return of income. 5.3 It is well-settled that in a best judgment assessment there is always a certain degree of guess work. No doubt the AO concerned should try to make an honest and fair estimate of the income even in a best judgment assessment, and should not act totally arbitrarily, but there is necessarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had diverted its business from being stockist of vehicles into consignee of the vehicles. Since there was not much requirement of investment of funds in consignment business, hence the risk factor involved was negligible. The turnover for the year under consideration had considerably increased in comparison to last year. It is commonly observed that when turnover is increased the profit margin is generally decreased. The assessed income of the assessee for the year under consideration even at the rate of 3% of the turnover at ₹ 29.40 lakhs was much more than the assessed income at the rate of 10% of the turnover of the preceding year at ₹ 13.57 lakhs. The Ld. CIT(A), after taking into consideration the facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X
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