TMI Blog2021 (10) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... r. We direct the Assessing Officer to estimate the income as per above direction considering the fact that the profit has to be assessed based on the actual and in case, it is forced to estimate, it has to be based on past declared profit, which the Revenue has accepted. Therefore, the grounds no.1 and 2 raised by the assessee are partly allowed. Penalty u/s 271(1)(c) - HELD THAT:- In the given case, we noticed that the AO himself estimated the income @ 8% and the same was sustained by the Ld. CIT(A). The assessee filed quantum appeal and in that we have directed the AO to restrict the profit earned by the assessee which was declared and accepted by the Revenue based on earlier assessment years, thus penalty levied by the AO estimating the income is not sustainable. Accordingly, we direct the AO to delete the penalty levied by the AO. - ITA no.3818/Mum./2019 And ITA no.3819/Mum./2019 - - - Dated:- 30-9-2021 - Shri Mahavir Singh, Vice President And Shri S. Rifaur Rahman, Accountant Member For the Assessee : Shri Vimal Punmiya For the Revenue : Shri Ajay Singh ORDER PER S. RIFAUR RAHMAN, A.M. The present appeal has been filed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,21,54,561. Aggrieved with the above order, the assessee preferred appeal before the first appellate authority. 4. The learned CIT(A) after considering the submissions of the assessee and rejected the submissions of the assessee, sustained the estimation of net profit @ 8% with the following observations: However, keeping in view of the submissions made by the assessee who was carrying on the business of trading in iron and steel under whom proprietorship of M/s., Vaibhav Enterprises and in 2004 his brother Mr. Hasmukh Shah introduced the assessee to Mr. Amarchand Sharma. As per the version of the assessee, Mr.Amarchand Sharma offered him to float a proprietary concern M/s. Harsh Corporation under his name for a monthly remuneration of ₹ 20,000/-. As per the assessee's own submissions, the entire FIS of the said concern was managed by Mr. Amarchand Sharma including issuing of bills, invoices, placing. orders, maiking payments, maintaining books of accounts, etc. As per assessee's submissions, Mr. Amarchand Sharma was the beneficiary of M/s. Harsh Corporation. The assessee used. to give blank signed cheques to Amarchand Sharma of the current bank account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amar Tubes Pvt Ltd and Alpha Steels Tubes Pvt Ltd for F.Y. 2011-12. The assessee could furnish copy of annual return filed for Alpha Steel Tubes Pvt Ltd for F.Y. 2009-10 and for Amar Tubes Pvt Ltd for F.Y. 2011 12, from which it could not be ascertainable that the assessee had transactions with both these entities. Neither assessee could produce Mr. Amarchand Sharma before the AG to prove the assessee's stand. The AG issued summons u/s. 131 of the I.T. Act at the request of the appellant to prove the stand taken by the assessee. However, at this juncture nothing more can be done as the assessee himself admitted that he had signed the documents relating to M/s. Harsh Corporation, the cheques, but whereas he could not produce his witness Mr. Amarchand Sharma. The appellant could not produce the signed audited financial statements as well. Neither he could furnish his copy of ITR and financial statements for A.Y. 2008-09 onwards. The return application filed by the assessee through e-filing portal were downloaded and it is noticed that the assessee has shown turnover of ₹ 11,71,94,614/ in the ITR for F.Y. 2010 11 and ₹ 16,20,33,452/- for F.Y. 11-12 which clearly cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified and hence, the estimated income of 8% on gross turnover of ₹ 27,69,32,010/- which works out to ₹ 2,21,54,561/- is hereby confirmed, dismissing all his grounds of appeal. OUR SUBMISSION The Ld. AO added and CIT(A) confirmed ₹ 2,21,54,561/ on adhoc basis i.e. 8% net profit of Gross turnover of ₹ 27,69,32,010/- without considering all the material facts available on record. A comparative chart showing net profit of existing and previous assessment years is produced below for your perusal:- Sr. no. A.Y. Turnover ( ` ) N.P. ( ` ) N.P. (%) 1. 2010 11 11,74,91,614 7,25,326 0.62 2. 2011 12 16,20,33,452 6,78,487 0.42 3. 2012 13 27,69,32,010 2,29,142 0.08 From the above comparative profit chart of previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er scrutiny. As per assessee, the netprofit rate for AY 2006-07 and worked out to 2.2% and for AY 200708 it came to 1.7%. In the case of MIs. Deluxe Roadlines Pvt. Ltd. (supra) relied on by the id. AR, where assessee was engaged in transportation business, Their Lordships of the jurisdictional High Court had held as under: 6. The Apex Court in the case of RAGHUBAR MANDAL HARIHAR MANDAL vs THE STATE OF BIHAR (1957 Vo.VIII STC 770) has held when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess; but the estimate must be related to some evidence of material and it must be something more than mere suspicion. The assessing officer must make what he honestly believes to be a fair estimate of the proper figure of assessment and for this purpose he must take into consideration such materials as the assessing officer has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which the assessing officer thinks will assist him in arriving at a fair and proper estimate. [Emphasis Supplied] 7. Therefore, in the instant case, when the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to take the average of netprofit of the above two years and apply it to the gross receipts of the assessee and determine its income from business for the impugned assessment year. In view of our submissions made earlier and substantial increase in turnover and accounts audited by Chartered Accountant in Income Tax and VAT Act, and all payments received by cheque and paid by cheque, all seller and purchaser are identifiable and even today they are available, also stock has been maintained properly, we request your honours to kindly accept the book result shown by assessee. HUMBLE PRAYER In view of the above facts, circumstances and the referred judicial pronouncements, the appellant humbly requests your goodself to consider the above submission and extend a sympathetic consideration. 7. The learned Departmental Representative relied upon the order passed by the authorities below. 8. Considered the rival submissions and perused the material on record. We notice that the assessee has two line of business. The Assessing Officer estimated the income due to non availability of the information at the time of assessment. We notice that even the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has accepted. Therefore, the grounds no.1 and 2 raised by the assessee are partly allowed. 9. With regard to ground no.3, the learned Authorised Representative has not submitted any arguments, we are directing the Assessing Officer to verify the claim of the assessee and if it is allowable as per law, same may be allowed. 10. With regard to ground no.4, it is consequential, hence dismissed. 11. With regard to ground no.5, it is premature, hence dismissed. 12. With regard to ground no.6, the same being general in nature need not be adjudicated separately. 13. We noticed that the assessee is in appeal on the penalty levied by the AO on income which is based on estimation. The Courts have held that the penalty cannot be levied on the income which is estimated. In the given case, we noticed that the AO himself estimated the income @ 8% and the same was sustained by the Ld. CIT(A). The assessee filed quantum appeal and in that we have directed the AO to restrict the profit earned by the assessee which was declared and accepted by the Revenue based on earlier assessment years referred at para 8 above. Therefore, the penalty levied by the AO estimating the income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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