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TMI Blog2021 (1) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs. 7,06,920/-, excluding the returned income, as made by the ITO, without considering the factual position as narrated before him. 3. BECAUSE the Ld. CIT(A) has erred in law and on facts by holding that profit of earlier year cannot be basis of ascertaining the profit rate of impugned assessment year and confirmed the addition of Rs. 7,06,920/. 4. BECAUSE the appellant was prevented by reasonable clause for making compliance as per the provision of Income Tax Act, 1961 in the impugned assessment year whereas in subsequent assessment year the appellant made full compliance and punishment given by the ITO and confirmed by the Ld. CIT(A) is too harsh and illegal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idual and proprietor of M/s Jai Krishna Vastralaya. The assessee is dealing in wholesale cloth business and filed his return of income on 28.03.2015 declaring total income of Rs. 2,18,970/-. The assessee has declared the total turnover of Rs. 28,56,255/-. During the course of scrutiny assessment, the Assessing Officer noted that there are various deposit entries in the bank account of the assessee during the year under consideration and total deposit for the year comes to Rs. 1,84,69,376/-. When the Assessing Officer asked the assessee to explain the cash deposit in the bank account the assessee submitted that the deposit is representing the sale proceed of cloth on wholesale basis and offered the income by considering net profit at the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the turnover at N.P. rate of 2% which is proper and justified, whereas the Assessing Officer has not given any basis for adopting the N.P. at 5% which is highly arbitrary and unjustified. The ld. AR has referred to the submissions of the assessee before the CIT(A) and submitted that when the assessee has explained the basis of 2% of N.P which is also supported by the comparative cases then adoption of N.P at 5% is not warranted. Hence, the ld. AR has pleaded that the addition made by the Assessing Officer and confirmed by the ld. CIT(A) may be deleted and N.P. declared by the assessee at 2% may be upheld. 4. On the other hand, ld. DR has submitted that though the assessee has given the comparison NP cases however, in those cases, the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer whereas the Assessing Officer has estimated the income of the assessee by adopting NP at 5% on such turnover. There is no quarrel on the point that while estimating the income come the Assessing Officer has to apply some reasonable and proper criteria and the comparative rate of profit in the same trade/business is a proper guidance for estimation of income. In the case in hand, the assessee has produced the comparative cases, which are as under: S. No. Name of Parties F.Y. Turnover Rs. In lac GP Ratio NP Ratio 1. M/s Hari Om Vastralaya 2015-16 478.06 2.16% 1.13% 2. M/s Deluxe Emporium 2014-15 136.57 2.29% 1.58% 3. M/s Radhey Govind Saree Center 2015-16 150.14 3.03% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be based on some reasonable and proper criteria and not based on an arbitrary rate adopted by the Assessing Officer. The Assessing Officer has not given any reasonable basis of adopting NP rate at 5% except the fact that the assessee is not maintaining the books of account. Therefore, not maintenance on books of account cannot be a ground leading to higher NP to be adopted by the Assessing Officer. Hence, in the facts and circumstances of the case, the income of the assessee ought to have been estimated by adopting the prevailing rate of N.P. in the same trade/business. Looking into the comparative cases produced by the assessee, it is found that the N.P. declared by those entities/persons in the same trade is less than 2%, whereas th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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