GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
What's New Case Laws Highlights Articles News Forum Short Notes Statutory TMI SMS More ...
Extracts
Home List
← Previous Next →

2015 (9) TMI 447 - ITAT MUMBAI

2015 (9) TMI 447 - ITAT MUMBAI - TMI - Unexplained drastic variation in net profit rate - AO mentioned that considering the fact that the sales are not verifiable, it will not be unreasonable to compute the profits at the rate of 5% of the disclosed sales - Held that:- We are of the considered opinion that neither the AO nor the CIT(A) examined the books of accounts. Both of them did not pin point any defects in the books of account. Further selling its products in cash is not against the law. A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s case for the assessment years 2005-06 to 2010-11 prior to the assessment u/s.153C of the Act which is the first assessment for the years under consideration, the scope of assessment expands to the original jurisdiction as well as jurisdiction conferred u/s.153A and in other words, the A.O may conclude the assessment based on the findings of the search and also on the basis of any material existing or brought on record of the A.O. In view of the above, the ground raised in this regard is not en .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

issioner as a person appointed to be Joint Commissioner of Income-tax or an Addl. Commissioner of Income-tax under sub section 1 of section 117 of the Act. In view of the above, the ground of appellant is hereby dismissed. - Decided against assessee. - ITA Nos.3163 to 3168/Mum/2015 - Dated:- 25-8-2015 - SHRI R.C.SHARMA,J. For The Assessee : Shri Satish R. Mody For The Revenue : Shri Jasbir S. Chouhan ORDER These are the appeals filed by the assessee against the order of CIT(A), Mumbai for the as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

out appreciating the explanation and documentary evidence furnished by the Appellant during appellant proceedings. 2] On the facts and circumstances and in law, the learned Commissioner of Income Tax (A) - 49 totally erred in estimating deemed profit rate of 5% on the turnover u/s. 44AF of the Income Tax Act, 1961. The assessee has maintained the Book of Accounts as per section 44AA and got his Books of Accounts audited u/s. 44AB of the Income Tax Act, 1961. 3] On the facts and circumstances and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f Income Tax (A) -. 49 has erred as approval of the Joint Commissioner of Income Tax is absent u/s. 153C of Income Tax Act, 1961. 5] On the facts and circumstances and in law, the learned Commissioner of Income Tax (A) - 49 has erred in making addition in the net profit purely on the basis of conjecture and surmises without any supporting material and hence, it is submitted that income to be computed in accordance with Books of accounts maintained u/s.145 of the Income Tax Act, 1961. 6] On the f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

leave to add, alter or amend his Grounds of Appeal during the course of appeal. 3. Briefly stated the facts of the case are that the assessee is a firm constituted of three partners being Mr. Subhash Deshmukh, Mrs. Anu Wadhawani and Mrs. Lata Deshmukh. This firm runs a wine shop under the name and style of M/s La Sonia Wines. There was search and seizure action u/s 132 of the Act was conducted in the case of Shri Subhash Deshmukh and his other group companies alongwith the residential premises .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or AY.2006-07, 2,26,753/- for AY 2007-08, ₹ 1,65,3501- for AY 2008-09, ₹ 3,04,975/- for AY. 2009-10 and ₹ 2,26,439/- for AY. 2010-11. The assessee is engaged in the business of running a wine shop. The assessment was completed u/s 143(3) r.w.s. 153C of the Act on 11.03.2013 determining total income at ₹ 6,55,890/- for AY. 2005-06, ₹ 9,95,000/- for A.Y. 2006-07, ₹ 9,57,040/- for A.Y 2007-08, ₹ 8,95,850/- for AY. 2008-09, ₹ 11,21,580/- for AY.2009-10 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the AO mentioned that the assessee company has credited total sales of ₹ 1,12,89,203/- for A.Y.2005-06, ₹ 1,48,22,740/- for A.Y.2006-07, ₹ 1,65,11,490/- for A.Y.2007-08, ₹ 1,59,41,080/- for A.Y.2008-09, ₹ 1,94,94,500/- for A.Y.2009-10 and ₹ 2,33,04,050/- for A.Y.2010-11 against which it has shown gross profit of ₹ 10,45,557/- for A.Y.2005-06, ₹ 12,33,890/- for A.Y.2006-07, ₹ 19,93,844/- for A.Y.2007-08, ₹ 10,46,652/- for A.Y.2008-09, &# .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

The said disclosure has been reflected in the return for A.Y.2011-12. The NP rate as worked out in all the assessment years is given as under :- 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Sales 11289203 14822740 16511490 15941080 19494500 23304050 24133710 Net profit 139512 148484 226753 165350 300616 169896 7778760 Net profit as %of sales 1.23 1.00 1.37 1.03 1.54 0.72 32.23 5.2 The AO mentioned that the assessee offered additional income in the year of search only. Hence, it cannot .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rofit at ₹ 5,64,460/-, for A.Y.2005-06, ₹ 7,41,137/- for A.Y.2006-07, ₹ 8,25,575/- for A.Y.2007-08, ₹ 7,97,054/- for A.Y.2008-09, ₹ 9,74,725/- for A.Y.2009-10 and ₹ 11,65,202/- for A.Y.2010-11 being 5% of sales. Since the assessee had already shown a net profit of ₹ 1,39,512/-, 1,48,484/-, ₹ 2,26,753/-, ₹ 1,65,350/-, ₹ 3,00,616/- and ₹ 1,69,896/- for the A.Ys.2005-06 to 2010-11, respectively the addition of ₹ 4,24,948/- for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is purely on the basis of conjectures & surmises, without any supporting material; the .Ld. AO failed to note that the N.P. rate for the current year is not only higher than 'the immediately succeeding year but is higher than any of the earlier years as well as of the succeeding year. It is submitted that when earlier years' N.P. rate was accepted, addition in the current years is not justified, merely on the basis of conjectures & surmises {Ref: Inani Marbles P. Ltd. 316 ITR 125 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he books of account maintained by the assessee- that is the mandate of section 145 of the Act. 2) It is submitted that, it is settled position, that when books are not rejected, no addition can be made to profit rate. Reliance in this regard is placed upon the decision of the Hon'ble Rajasthan High Court in CIT V/so Maharaja Shree Umed Mills 192 ITR 565- (Raj.). The said view was followed by the Hon'ble Tribunal in Mewar Textile Mills 64 TT J (Jp.) 502. 3) It is submitted that the assess .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

led to bring on record any comparative instances of profit rate so as to justify the addition. Further, it is settled position that profit rate addition can only be made on the basis of the assessee's own figures and that too for earlier years and not subsequent years. 5) The appellant further submits that the assumption of 5% net profit is only in the case where the conditions of Section 44AF of the Act are satisfied. In the case of the appellant since the turnover is above 40 lacs the prov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

facts of the appellant's case. The appellant relied upon the decision of the Hon'ble Rajasthan High Court in the case of Inani Marbles (P.) Ltd.316 ITR 125, in support of its contention that once earlier years net profit rate was accepted the additions in the current years are not justified. It is also contended that the AO cannot rely upon the net profit rate of the later assessment year 2011-12 as a bench mark. In this regard, it is stated that in the case of Inani Marbles (P.) Ltd., t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

9-2000. In that case since GP Rate was settled at 2.51 % by the highest fact finding authority i.e. IT AT, for the immediately preceding assessment year, the same was followed for the relevant assessment year 2000-01 instead of 15% GP rate. This judgement shows that GP rate of other assessment years can be adopted as a bench mark for determining the gross profit rate for the current assessment year. Nowhere in the order, the Hon'ble High Court of Rajasthan held that the gross profit rate of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not reject books of account and in spite of that he took 5% profit on turn over. The assessee further mentioned that books of accounts were properly maintained u/s.44AA and audited u/s.44AB. When this ground was raised before the ld. CIT(A), he mentioned as under :- 8.4 In the case of the appellant the AO did not use the word "the books of account are rejected", however, he proceeded to estimate the income at reasonable net profit rate, based upon the higher net profit rate disclosed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ns that the books of account have been rejected. Even if it is assumed that the AO failed to reject the books of account, the CIT(A) being vested with the powers of the AO can also reject the books of account and independently estimate the income based upon the material available on record. In my view, the book results cannot be relied upon since they have been found to be defective based on the disclosure made by the appellant during the course of search which resulted in admission of additiona .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

counting. It is reproduced as below :- 145. Method of accounting 1 (1) Income chargeable under the head" Profits and gains of business or profession" or" Income from other sources" shall be computed in accordance with the method of accounting regularly employed by the assessee: Provided that in any case where the accounts are correct and complete to the satisfaction of the 2 Assessing] Officer but the method employed is such that, in the opinion of the 4 Assessing] Officer, t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

being charged to income- tax in respect of any interest on securities received by him in a previous year if such interest had not been charged to income- tax for any earlier previous year.] (2) Where the 7 Assessing] Officer is not satisfied about the correctness or the completeness of the accounts of the assessee, or where no method of accounting, has been regularly employed by the assessee, the 8 Assessing] Officer may make an assessment in the manner provided in section 144. 5.7 As evident fr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

simply mentioning that I reject the books of account , it cannot be rejected. 5.9 We have considered these grounds carefully. We are of the considered opinion that neither the AO nor the CIT(A) examined the books of accounts. Both of them did not pin point any defects in the books of account. Further selling its products in cash is not against the law. A different percentage of profit cannot be adopted only because the assessee makes cash sale. We, therefore, delete the addition made by the AO. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nating material, no such addition can be made in the hands of the other person u/s.153A/153C, which could have been made in a regular assessment. Reliance, in this regard, is placed upon the recent decision of the Hon'ble Bombay High Court in CIT V/s. Murli Agro, Income Tax Appeal 36 of 2009, CIT VIs. Bharati Vidyapeeth ITXAl854 of 2012 dt. 12th Sept.'14 and that of the ITAT Special Bench in the case of All Cargo Global Logistics Ltd., vs. DCIT (2012) 137 ITD 287 (Mum.) (SB). The view wa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

kinds of assessments having parallel jurisdiction and the provision(s) of the pending assessments getting abated, would be rendered otiose. This is not the scheme of the Act as observed in SSP Aviation (2012) 252 CTR (Del) 291: (2012) 207 T AXMAN 260 (Delhi) (para 13). In view of the above the addition made on account of profit, while framing the assessment under section153C is bad in law as no incriminating material found during the course of search. 6.2 The CIT(A) observed that :- 12.4 By look .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o assessment was made earlier and it was only processing of return u/s.143 (1) of the Act, the assessment made u/s.153A of the Act for the first time, the issue of change of opinion does not arise. It appears that in the case of appellant no assessment was completed either u/s.143 (3) or u/s.147 or under any other provisions of the Act except processing of the return of income u/s.139 (1) of the Act. Since no assessment was made in this case for the assessment years 2005-06 to 2010-11 prior to t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the ld. CIT(A) and accordingly, this ground of assessee is dismissed. 7.1. In regard to Ground No.4, assessee contended that the approval of the Joint Commissioner, as mandated u/s. 153D is absent and hence the assessment is bad in law. It was further submitted that, as held by the Hon'ble Bombay High Court in 'Akil Gulamali Somji Income Tax Appeals (Lodg.) 1416- 1419 of 2012 dated 15th Jan'2013, the approval is mandatory and its absence would render the assessment null & voi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Latest Notifications:

    Dated      Category

20-7-2017 Cus (NT)

18-7-2017 IT

18-7-2017 CE (NT)

18-7-2017 CE

18-7-2017 GST CESS Rate

15-7-2017 Kerala SGST

14-7-2017 Andhra Pradesh SGST

14-7-2017 Cus (NT)

14-7-2017 Cus

13-7-2017 Co. Law

13-7-2017 Co. Law

13-7-2017 ADD

13-7-2017 ADD

12-7-2017 Jammu & Kashmir SGST

12-7-2017 Gujarat SGST

12-7-2017 Gujarat SGST

12-7-2017 CGST Rate

12-7-2017 UTGST Rate

12-7-2017 UTGST Rate

12-7-2017 IGST Rate

More Notifications


Latest Circulars:

19-7-2017 Income Tax

18-7-2017 Customs

17-7-2017 Customs

14-7-2017 Income Tax

13-7-2017 Central Excise

13-7-2017 Customs

13-7-2017 Central Excise

13-7-2017 Customs

7-7-2017 Income Tax

7-7-2017 Goods and Services Tax

More Circulars



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version