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TMI Blog2020 (2) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... c) of the Tax Audit Report, the auditor has remarked that no books of accounts had been examined thoroughly and reliance was placed on the audit report of the auditor of society Mr.... (b) As per Column 11 (a) of Tax Audit Report, the auditor has remarked that method of accounting employed in the previous year was generally mercantile but in some cases it had not been followed. (c) As per Column 16(b) of Tax Audit Report, the auditor has remarked that information regarding any sum received from employees a towards contribution to any provident fund or superannuation fund or any other fund mentioned in section 2(24)(x) and due date for payment and the actual date of payment to the concerned authorities under section 36(1)(va) was not available. (d) As per Column B(b) of the Report, the auditor has remarked that f s. -information in respect of any sum referred in clauses (a), (b),9c),(d),(e) or or (f) of Section 43B, the liability for which was incurred in the previous year and was paid on or before the due date for furnishing the return of income of the previous year under section 139(1), was not available. It was further remarked that information on whether sales tax, custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the AR of the assessee filed written submissions which were not accepted by the AO. Thus, the AO rejected the books of account of the assessee in terms of section 145(3) of the Act and applied NP rate of 11.03% as against 1.01% declared by the assessee. 3. By the impugned order, the ld CIT(A) reduced N.P. rate from 11.03% to 3.66% after having the following observation: "5.2.1. As regards the applying NP rate which results in addition of Rs, 2,09,35,774/-. I find that the appellant bank had shown the net loss during the F.Y. 2007-08. However, in the year under consideration, the turnover of the assessee was lower as compared to previous financial year; it had been shown the Net profit at 1.01%. The appellant contended that during the year under consideration, the assessee bank has declared NP rate of 1.01% on consolidated turnover of Rs. 33,52,17,124/-, as against in the immediate previous year the appellant bank had shown loss on consolidated turnover of Rs. 270,79,98,724/-, the appellant bank had shown better Net profit rate during the year under consideration, therefore, trading addition on lump sum basis is not justified by applying section 145(3). I find some force in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P of 11.03% on the Gross Interest Receipts, (on the basis of a so-called comparable case of a Co-operative Society) with the following findings as recorded in para 7 at page no.13 of the assessment order: " In view of above discussion, it is clear that the books of accounts as maintained by assessee do not reflect the true picture of the profit/loss of the assessee and are liable to be rejected u/s 145(3) of the IT Act. A comparable case being, assessed in Circle-1 namely Rajasthan State Cooperative Society has shown a net profit of 11.03% for A.Y. 2009-10 as against 1.05% shown by the assessee. Accordingly, net profit rate of 11.03% is applied resulting into an addition Rs. 2,09,35,774/- is made to the total income of the assessee which includes Rs. 33,66,311/- which has not been reflected as a part of the interest income as discussed above. From reading of the above findings, it is noted that the AO had estimated profit results @ 11.03% by comparing the results shown by a Society. In fact, the case of such Society is not a 'Comparable Case' as it had never done banking operations. Thus the AO had incorrectly compared the results of this Society with the assessee Bank. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity had ever been undertaken. In the circumstances, the book results i.e. the 'receipts and expenses' had never been questioned in the past; except making certain disallowances of the expenses for specific procedural lapses and noncompliance of certain legal obligations as provided in the Act. At no stage, the. provisions of 145(3) of the Act had ever been invoked to estimate the profits by applying NP rate. During the year, the assessee 'Bank' had continued to carry out its operations in the similar manner and style as in the past. However, the AO had opted to proceed in the assessment proceedings on entirely different lines, ignoring the past history of the case. However, the A.O. after considering the observation of the auditor, rejected books of account U/s 145(3) of the Act and applied NP of 11.03% on the gross deposits. However, the finding of the A.O. was rejected by the ld. CIT(A) after recording his finding at para 5.2 page 10 to 12 of his appellate order which reads as under: The appellant contended that the AO only considered noting written by the auditor and had verified the same. However. I am not inclined to agree with this argument of the AR of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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