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ITO, Ward 35 (4) , New Delhi Versus Shri Anil Kumar Garg and Vica-Versa

N.P. determination - Held that:- AO adopted net profit rate of 6%. No reason has been given by the AO to adopt this figure. And AO while working out the closing stock had ignored all other expenses debited by the assessee in P&L account and only included the construction expenses. The AO erred in adopting net profit rate at 6% without valid reasons and exclusion of other expenses as pointed out to value the closing stock, makes the order of the AO erroneous and not sustainable. We concur with th .....

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evenue and the cross objection filed by the assessee are directed against the order of the CIT (Appeals)-XXVII, New Delhi dated 18.09.2012 for the assessment year 2009-10. 2. The revenue has taken the following grounds of appeal which read as under :- 1. On the facts and in the circumstances of the case, the order of Ld. CIT(A) is bad in law and not in consonance with facts of the case. 2. On the facts and in the circumstance of the case, the Ld. CIT(A) had erred in law by deleting the addition .....

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appellant. 5. The appellant craves leave to add, allow or amend any/all the grounds of appeal before or during the course of hearing of the appeal." 3. Brief facts of the case are that the assessee is engaged in the construction business. The return of income was filed on 20.09.2009 declaring net taxable income of ₹ 9,80,890/-. The AO completed the assessment u/s 143(3) of the Act at an income of ₹ 64,31,564/- after making various additions. On appeal, the ld. CIT (A) partly al .....

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stock by the assessee at ₹ 2,04,85,000/- and against the observation of the AO for applying net profit @ 6% against @ 5.35% shown by the assessee. 7. The AO observed that the assessee had shown net profit of ₹ 10,80,890/- on sale of ₹ 2,02,02,000/- giving a net profit rate of 5.35%. The AO applied the net profit rate of 6% and worked out the value of closing stock at ₹ 1,63,14,265/- as against declared value of closing stock by the assessee at ₹ 2,04,85,000/-. Ther .....

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y the AO in the assessment order. The observation of the AO with regard to the addition of ₹ 39,20,490/- are as under.- He has sold flats valued at ₹ 2,02,02,0001- out of opening stock of ₹ 2,38,41,000/-. The net profit worked out by the auditor is @ 5.35%, if this is taken @6% on expenditure involved etc. the value of flats sold amounted to @ 94% of sales i.e., ₹ 1,89,89,880/-. The balance stock available as on 31.3.2009 will be ₹ 48,51,120/-. If the construction e .....

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that while working out the value of the closing stock he has applied the net profit margin of 6% as against 5.35% shown by the appellant. No reasons have been given by the A.O. for adopting the net profit rate of 6%. Further, while working out the value of closing stock the A.O. has taken into account only the construction expenses and all the other expenses have been ignored, whereas the appellant had filed a consolidated Trading and P&L A/c i.e. on the credit side the appellant had include .....

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y the appellant resulting into a difference of Rs.(-) 1,31,313/- (65% on sales of ₹ 2,02,02,000/- ) - by ignoring the P&L expenses except for construction expenses resulting in the difference of ₹ 45,45,351/- by ignoring two credit side amounts of Rs. (-) 2,43,585/- i.e. ₹ 1,35,000/- shown on account of renovation / customization receipts and ₹ 1,08,585/- on account of interest income. 10. By thus applying his own calculations the AO arrived at the value of the closin .....

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tems of expenditure and income mentioned in the Trading and P&L account are excluded arbitrarily while working out the value of the closing stock the result is bound to be different from the result shown by the appellant on the basis of the Trading and P&L account. 11. In view of the discussion made above, it is held that the calculations adopted by the A.O. for arriving at the value of the closing stock are arbitrary and not based on any accounting principles. Moreover, the appellant ha .....

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AO (which according to the AO's own working is the cost of sales). Therefore, the addition of ₹ 39,20,490/- made by the A.O. on account of net profit on suppressed sales is deleted. 9. The ld. DR relied on the order of the AO and submitted that the AO has rightly made the addition, which has been deleted by the CIT (A), so he wants us to reverse the order of CIT (A) and uphold the order of the AO. 10. On the other hand, the ld. AR for the assessee reiterated the submissions made before .....

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