TMI Blog2020 (9) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, we direct the assessing officer to estimate the income @ 2.5% of the turnover - Decided in favour of assessee partly . - IT APPEAL NO.235 (GAU.) OF 2019 - - - Dated:- 31-7-2020 - A.T. Varkey, Judicial Member And Dr. A.L. Saini, Accountant Member For the Appellant : Anil Kumar Agarwal For the Respondent : T. Hunar ORDER DR. A.L. SAINI, ACCOUNTANT MEMBER 1. The captioned appeal filed by the assessee, pertaining to assessment year 2014-15, is directed against the order passed by the Commissioner of Income-tax (Appeal)-1, Guwahati, in appeal no. 374494271250118/343, dated 7-2-2019,which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3)/147 of the Income-tax Act, 1961 (in short the 'Act') dated 27/12/2017. 2. The grounds of appeal raised by the assessee are as follows: 1. For that the ld. CIT(A) was not justified in partially upholding the addition made by the Assessing Officer on estimated basis merely on the ground that the appellant assessee had failed to comply with requirements of law relating to audit and filing of returns, ignoring the fact that separate penalty was prescribed in the Act for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit lower than 8%, therefore, the assessee's estimation of income on the turnover was not accepted by assessing officer and assessee was asked to show cause that why the net profit shall not be estimated @ 8% on turnover declared by the assessee. 5. In response, the assessee submitted that the net profit percentage is very low in his business and requested the assessing officer to take the net profit percentage @ 3% on the turnover. 6. However, the assessing officer rejected the contention of the assessee and held that since the turnover of business of the assessee was more than one crore and the assessee had failed to get the accounts audited by a Chartered Accountant as required by the provisions of section 44AB of the Act, therefore, the assessee's estimation of income lower than 8% was not acceptable. Hence, in the absence of audited accounts, the net profit of the assessee was therefore estimated by assessing officer @ 8%, which came to ₹ 17,88,797/- ( ₹ 2,23,59,967 x 8%). Since the assessee had already declared the net profit at ₹ 2,21,539/- therefore, the balance sum of ₹ 15,67,258/- (₹ 17,88,797 minus ₹ 2,21,539) was add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not being repeated for the sake of brevity. 10. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that the Assessing Officer has applied the provisions of section 44AD of the Act and completed the assessment by making estimation of income at the rate of 8% of turnover declared by the assessee. The Assessing Officer has made the presumption that the provisions of section 44AD of the Act is applicable to the assessee's case. We note that the assessee is an individual carrying on business of trading in hardware goods. He carries on business from a shop at Bangalmora in the name of Islam Hardware Store. He filed return of income for A.Y. 2014-15 in response to notice u/s 148 of the Act, declaring income of ₹ 2,54,970/-. The ld. Assessing Officer assessed the income at ₹ 17,88,797/- by applying the provisions of section 44AD of the Act and estimated business profits @ 8% of assessee`s turnover. On appeal, the ld CIT(A) reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015-16 43,71,503 1,83,18,634 1,75,256 2,07,98,021 28,65,338 7,97,966 10,91,552 5,49,917 3.84% 2.64% 2016-17 28,65,338 1,88,92,405 1,12,061 1,91,94,379 31,57,059 4,81,634 9,69,724 5,08,026 2.51% 2.65% 2017-18 31,57,059 1,50,84,085 35,104 1,71,32,223 16,23,554 4,79,529 7,65,994 6,84,541 2.80% 4.00% Notes: 1. Figures of FY 2013-14 are unaudited. Subsequent years' figures are from audited accounts filed with IT Department. 2. Figures of FY 2014-15 are unavailable online. Status of the same could not tie ascertained. 3. Audited Profit Loss Account and Balance Sheets for FY 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer without pointing out any mistake and error in the bills/vouchers and in the books of accounts made addition @ 8% which was reduced by the ld CIT(A) to5%. It is also admitted fact that assessee`s books of accounts were not rejected by the assessing officer although these were not audited under section 44AB of the Act by a Chartered Accountant. We note that the AO could have ventured into estimation only after rejecting the books of accounts of the assessee u/s 145(3) and thereafter by best judgment assessment u/s 144 of the Act. Here in this case, the AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses and showing net profit ratio at a very low rate. Therefore, based on the factual position narrated above we find merits in the contention of the Counsel. Therefore, taking into account merits of the assessee`s case, as narrated above, in our opinion the ends of justice would be met, if a net profit rate of 2.50% is adopted. Thus, we direct the assessing officer to estimate the income @ 2.5% of the turnov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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