9911796707
TMI Blog2002 (4) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered in an application under section 256 really does not call for any consideration in this case as the finding has been reached on appreciation of facts concerning the assessment in question. The background of the question is that the Assessing Officer finding that the net profit rate disclosed in the books of account of the assessee for the previous years relevant to the assessment years in question, respectively, were not showing the true and correct picture of the trading results and therefore by rejecting the books of account, the Assessing Officer resorted to section 145(2) and computed the income chargeable to tax for the respective assessment years by estimating the net profit rate at 11 per cent. without subject to any appropriation. For considering that the books of account by the assessee do not disclose the correct picture of profit and gain from business, the Assessing Officer has referred to the net profit rate showing the trading result as per books of account was lower than previous years. Such net profit rate taken into account was without taking into account the allowable depreciation and interest paid to third parties, and the same were still to be appropri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative chart: --------------------------------------------------------------------------- Assessment Net profit rate Net profit rate Net profit rate confirmed year disclosed by the applied by the sustained by the learned by the assessee Assessing Officer Commissioner of Incometax in the return (Appeals) --------------------------------------------------------------------------- (1) (2) & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Subject to (Subject to (Subject to depreciation depreciation depreciation and interest to third and interest to and interest to parties) third parties) third parties) 1992-93 6.58% 11% 10.0% (Subject to (Subject to (Subject to deprecia- & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub- third parties, tion) letting commission, sales tax, sub- salary and interest letting commis- to partners) sion, salary and interest to partners) 1995-96 10.01% 11% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners) ----------------------------------------------------------------------------- Note: (1) The figures for the assessment years 1990-91, 1991-92 and 1993-94 are also shown in the chart to facilitate better comparison; (2) The Tribunal has upheld the net profit rates of 10% and 10.49% for the assessment years 1990-91 and 1991-92, respectively. From the aforesaid chart, it is apparent that in the case of the assessee at least since 1989-90, the Assessing Officer has taken trading result of the assessee on the basis of the net profit rate before appropriation towards depreciation and interest to third parties, though in the case of the assessment years 1994-95 and 1995-96 some other expenses have also been claimed. The Tribunal also referred to the net profit rate as per the assessee's methodology disclosed in the assessment years 1986-87 at 10.7 per cent., 1987-88 at 10.4 per cent. and 1988-89 at 11.6 per cent. to sustain basic net profit rate at 11 per cent. The Assessing Officer while altering the net profit rate as disclosed in the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of the assessee. We are of the opinion that there is a reasonable nexus in the reasoning Of the Tribunal by linking the process of estimating income with the past practice followed in the assessee's case by the Revenue itself consistently for five years prior to the relevant years in question. In this case the very foundation of fixing the net profit rate has been the average net profit rate as has been applied by the Revenue in the past consistently since the assessment year 1989-90 and which has been followed in determining the taxable income of the assessee year after year. Such net profit rate was determined without considering any appropriation towards depreciation and interest on borrowings. Once the basic premise was founded on past history which was apparently denoting towards fixing of net profit rate by the assessing authority vis-a-vis the net profit rate declared by the assessee by excluding the element of depreciation and interest on borrowings whether in computing the net profit rate disclosed by the assessee or the net profit rate applied by the Assessing Officer, the consequence automatically follows that in the net profit rate so fixed the element o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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