GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (5) TMI 196 - PUNJAB AND HARYANA HIGH COURT

2016 (5) TMI 196 - PUNJAB AND HARYANA HIGH COURT - [2017] 390 ITR 314 - Estimation of Net profit - Tribunal had estimated the rate of profit at 9% - Held that:- It is true that the discretion to determine a net profit rate must necessarily be exercised on the basis of relevant factors. In the present case, it has been categorically recorded by the Tribunal that the assessee did not produce any supporting vouchers for expenses exceeding ₹ 25,000/-. It did not file copies of the bank account .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ck were filed. In view of these facts, the Assessing officer could not verify various details and in this way he could not rely upon the book version of the assessee. The assessee even did not file return unless the same was detected during the search. Keeping all the factors in view, the Assessing Officer adopted net rate of 10% on the gross receipts on estimate basis which was reduced by the Tribunal to 9% to meet the ends of justice The estimation of gross profit rate at 9% could not be he .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, Chandigarh Bench 'B', Chandigarh (in short, the Tribunal ) in ITA No.244/Chd/2015 for the assessment year 2007-08, claiming following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the order passed by the learned Tribunal is violative of principles of natural justice in as much as the same has been passed without dealing with all the contentions raised by the appellant during the course of hearing as well as written submissions in the paper .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

profit rate? iv) Whether in the facts and circumstances of the case, the learned ITAT is justified in applying a net profit rate of 9% on the total gross receipts without giving any reasons or relying upon any comparable case especially when in the case of appellant itself, the net profit rate of 2.48% had been accepted by the department for the assessment year 2005-06? v) Whether the finding of learned ITAT is perverse in so far as it has observed that the rate of 9% gross profit is applicable .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

accordingly notices were issued under section 148 of the Act to the appellant for the assessment years 2005-06, 2007-08 and 2008-09. In response thereto, the appellant filed its returns for the concerned assessment years. Necessary documents, books of account, records and vouchers were produced. While framing assessment for the assessment year 2005-06, vide order dated 28.12.2010, Annexure A.1, the books were not rejected and certain disallowances were made in addition to an amount of ₹ 4 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ipt from Anil Talwar holding that the said amount was on account of imprest amount and therefore could not be treated as business receipt. The appeal was partly allowed. Similarly for the assessment year 2007-08, the Assessing officer carried out proceedings under section 147 of the Act in which certain enquiries were made. The appellant submitted written submissions and produced necessary documents. Certain defects were noticed by the Assessing Officer which were not removed by the appellant. 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

s) [CIT(A)]. Vide order dated 10.12.2014, Annexure A.5, the CIT(A) partly allowed the appeal holding that receipts from Anil Talwar could not be added in the gross receipts and similarly entries with regard to bounced cheques/total mistakes could also not be considered for the purpose of examining gross receipts from business. The net profit rate of 10% was however upheld. The appellant filed appeal, Annexure A.6 before the Tribunal pleading that the CIT(A) erred in confirming the application 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

the Tribunal erred in applying the gross profit rate of 9% without thoroughly examining the matter. It was incumbent upon the authorities to have rejected the books of account first while adopting a certain rate of gross profit keeping in view the comparative cases. 5. A perusal of the impugned order passed by the Tribunal shows that after considering the overall facts and circumstances of the case, the Tribunal had estimated the rate of profit at 9%. It is true that the discretion to determine .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssee did not file the details of purchases in the format given by the Assessing Officer. Regarding sundry debtors, no confirmation was filed and even in the balance sheet, the names of the sundry debtors to the extent of ₹ 1,66,00,000/- were not shown. No details of opening and closing stock were filed. In view of these facts, the Assessing officer could not verify various details and in this way he could not rely upon the book version of the assessee. The assessee even did not file return .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssee is a firm and was having two permanent account numbers. It was admitted before us that there was a firm with the same name but the partners were different and the firm was again started with the same name with different partners. Since this issue is not before us we are not going into the details. Further, it is also admitted fact that assessee did not file any return despite having taxable income. This fact becomes clear because assessee has itself filed the return declaring income of S .....

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 firm from bankers or payment taken directly from the customer by the partners. The assessee has shown wages payable of ₹ 9,38,500/- which were paid on 5.7.2007 and normally labour will not work for period of three months without receiving their payments. The assessee also did not file the details of purchases in the format given by the Assessing Officer. The assessee was having sundry creditors of ₹ 75,69,505/- and did not file any confirmation even in cases where sundry credito .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

creditors and debtors are also not subject to any verification. Wages, salaries, general expense and other expenses mentioned in para 15 of my letter dated 21.1.2013 are also not subject to any verification. In view of the above facts, the book version shown by the assessee cannot be relied upon. I therefore, apply net profit rate of 10% on the gross receipts of ₹ 5,42,83,935/- which will mean that assessee's income would work out at ₹ 54,28,393/-.From this interest paid to partn .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cts a particular case. Even the Hon'ble Punjab and Haryana High Court in the case cited by learned counsel in the case of Telelinks vs. CIT(supra) has observed that while discussing the nature of power to be exercised for determining the net profit, it was observed as under:- The first question relates to the nature of the power exercised while determining a net profit rate. The question must necessarily be answered by holding that where books of account rejected or not produced, the Assessi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ates, it was observed as under:- The second question of law namely factors required to be taken into consideration while applying a net profit rate has come up for consideration, as on the same set of facts the Assessing Officer, the Commissioner of Income Tax and Income Tax appellate Tribunal have applied different rates of net profit, the discretion to determine on adequate net profit rate undoubtedly vests with authorities under the Act by the discretion so vested is neither unbridled nor ung .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

erate but before doing so, would clarify that these factors are neither exhaustive nor a final word on relevant factors that may be considered while determining the net profit rate. A few significant factors are the past tax history of the assessee, if available, assessment order that may have been passed and accepted by the department, the nature of the assessee's business, an appraisal of the value of the contract, prevailing economic conditions vis a vis the assessee's business, the p .....

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. Prabhat Kumar (supra) where addition was made on account of wages, which was not found to be verifiable, ultimately the court applied profit rate of 12% and it was observed as under:- The Tribunal has proceeded on the basis that there may be unverifiable wages which may call for addition to income but not to the extent assessed by the Commissioner of Income Tax (Appeals). Applying net profit rate on the basis of best judgment assessment in a given situation will be a question of fact unless s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

case of M/s Talwar Group. Anyway the most relevant factor in the case before us was that assessee is engaged in the business of construction of house for private parties. It is a common knowledge that rate of profit in construction of a private houses is much higher than in comparison to the mass construction contracts for government or other government authorities. This is so because the construction of a private house involves superior quality of work, fancy items for which generally the contr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| 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