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TMI Blog2016 (6) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is as to whether the Learned CITA is justified in estimating the net profit of the assessee @ 0.75% in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is engaged in the business of export of rice and mustard cake under the name and style of "M/s Tapan Traders". A survey was conducted u/s 133A of the Act on 2.8.2006 and accordingly the case was selected for scrutiny. In course of assessment proceedings the assessee did not produce original bank statements, cash book, bank book, general ledger, party ledger, purchase ledger, sales ledger, stock register and other accounts and bills and vouchers of the business of M/s. Tapan Traders for examination and verification and hence the Ld AO was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided by the assessee and hence he added the same to total income in the assessment. 4. Before the Learned CITA, the assessee argued that the assessee was dealing in mustard oil cake as well as rice and occasionally in dal. The Learned AO had considered only the bills / invoices pertaining to mustard oil cake and that for only one month i.e July 2006 and there too, he had just picked up the bills with lowest rate of purchase. The assessee argued that the Learned AO had taken 10 bills for purchase with quantity of 133740 kgs , whereas sale bills are 17 in number with quantity of 2370000 kgs and stated that in the assessee's line of business, rate of sale and purchase fluctuate greatly from month to month and position in one month cannot giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported by producing sample bills, where rates of purchase are much higher than taken by the assessing officer. Even otherwise, it is common knowledge that purchase, as well as export prices of commodities like rice, mustard oil cake etc. keep on fluctuating, not necessarily in synchronization and their ratio cannot be expected to be constant. Therefore, it won't be proper to apply ratio in respect of one commodity for one month to the entire sale for the year. Thus, the addition made by the assessing officer is not on sound footing as he has simply extrapolated ratio of purchase and sale for one commodity for one month over the entire year. Rather, it is based on conjectures and surmises. As stated earlier, no specific instance has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation if considered necessary by him. Therefore, his action of adding all sundry creditors without any verification cannot be upheld. Further, while deciding the preceding ground I have directed that income may be assessed by applying net profit rate on the turnover. Once net profit is estimated, it is supposed to have taken into account all the items of expenditure incurred. The sundry creditors arise out of unpaid balance in respect of purchase and other expenditure debited in profit and 1055 account. Such sundry creditors can be either carried forward from earlier years or arising from the expenditure booked during the year. In former case, no addition can be made in the year under consideration, whereas in the latter case the concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act by the Learned AO had not been contested by the assessee. He reiterated the arguments of the Learned AO in the assessment order. He argued that the Learned CITA ought not to have estimated the net profit @ 0.75% based on subsequent year's profit declared by the assessee @ 0.60%. He prayed for setting aside of this issue to look into this aspect afresh. In response to this, the Learned AR vehemently supported the order of the Learned CITA and stated that this is the first year of assessee engaged in this line of business and hence there was no past history available with the assessee to understand the profit percentage earned in the earlier years. Hence the Learned CITA is justified in referring to immediately succeeding assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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