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Shri K. Venkatesh Versus The Income Tax Officer, Ward 4 (4) , Bangalore

2016 (8) TMI 205 - ITAT BANGALORE

Computation of net income - return of income filed by the assessee was accompanied by the report of an accountant u/s.44AB - Held that:- Following the decision CIT v. Balchand Ajit Kumar (2003 (4) TMI 76 - MADHYA PRADESH High Court ) and CIT v. Hariram Bhambhani (2015 (2) TMI 907 - BOMBAY HIGH COURT ), it is of the view that the lower authorities ought to have determined the net income of the assessee on the basis of net profit earned by the assessee and ought to have adopted the net profit @ 5. .....

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or the year under appeal reporting an income of ₹ 3,08,770/-. It is submitted that the return of income filed by the assessee was accompanied by the report of an accountant u/s.44AB of the Act. The total revenue or turnover shown for the year under appeal was ₹ 53,27,417/- and ultimately, the assessee had shown a net income of ₹ 3,08,770/- which works out to 5.80% of the gross receipts. 3. It was submitted that there were payments made by the assessee s clients directly to the .....

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counts by the assessee for the year under appeal was ₹ 40,79,790/-. It was submitted before A.O. that the omission to show the aforesaid receipts of ₹ 40,79,790/- does not distort the correct income of the assessee in as much as, to the extent of such receipts, the related expenditure on the payment made to security guards is also not claimed as deduction. However, the learned AO did not appreciate the foresaid contentions and explanation and while completing the original assessment .....

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e proceeded to hold that the Gross Profit (GP) reckoned at 38,98% of the receipts (as shown by the assessee in his account) requires to be assessed in place of addition of ₹ 40,79,790/-. Accordingly, the CIT(A) modified the addition to ₹ 15,80,302/- and determined the income of the assessee at ₹ 18,89,072/-. 6. Aggrieved by the order of the CIT(A), the assessee preferred an appeal before the ITAT in ITA No.712/Bang/2010. It is submitted that the Department accepted the order of .....

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d that the contention of the assessee with regard to lack of sufficient opportunity has been rightly rejected by the CIT(A) after thoroughly examining the records of the assessment proceedings. As regards the other grounds, we find that the contention of the assessee that some times, the agency/contractors have paid the wages directly to the guards is not disputed and has been found to be in favour of the assessee. In such a case, the entire receipts cannot be said to be the income of the assess .....

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we direct the AO to take into consideration the totality of facts into consideration the totality of facts income consideration and compute the net income of the assessee. 7. In the set aside proceedings, the AO called for certain details from the assessee. After consideration of the details filed by the assessee, the AO determined the income of the assessee by the impugned order dated 30.3.2013, at ₹ 18,89,072/- based on the extent of income sustained by the CIT(A) in the first round. 8. .....

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the ITAT had observed that the mere allowance of wages and direct expenses was not enough. Thus the basis on which the learned CIT(A) has proceeded to estimate the income of the assessee has not been approved by the ITAT and therefore, the AO ought not to have determined the income on that basis, especially as the assessee had not claimed any expenses in respect of these receipts, which, if reckoned, would mean that the income shown by the assessee was capable to being accepted. The assessee su .....

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observed that there is no dispute in the fact that the total receipt of ₹ 40,79,790/- has not been accounted for in the turnover by the assessee. The CIT(A) in his order dated 16.02.2010 has given a relief of ₹ 24,99,488/- after considering the fact that the assessee must have incurred ESI, PF etc. At the same time, the contention of the assessee that there are circumstances that agency / contractor has to incur other expenses for the purpose of carrying on the business, it is likel .....

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of ₹ 40,79,790/- can be allowed as additional expenses. Accordingly, the assessee was granted a relief of ₹ 1,70,535/-. 10. Aggrieved by the above order of CIT(Appeals), the assessee is in appeal before me on the following grounds:- 1. The orders of the authorities below in so far as it is against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT[A] is not justified in modifying the original addition .....

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erefore, the addition sustained by the learned CIT[A] is highly excessive and unreasonable under the facts and in the circumstances of the appellant's case. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234-B and 234-D of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled. 5. For the above and other grounds that may be urged at the time .....

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e Madhya Pradesh High Court in CIT v. Balchand Ajit Kumar, 263 ITR 610 (MP), wherein it was held that the total sale could not be regarded as profit of the assessee. The net profit rate had to be adopted and once it was adopted, it could not be said that there was perversity of approach. 12. The ld. counsel for the assessee also relied on the decision of Hon ble Bombay High Court in the case of CIT v. Hariram Bhambhani, ITA No.313 of 2013 dated 4.2.2015, wherein the Hon ble High Court considered .....

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