TMI Blog2021 (5) TMI 1056X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission was paid to foreign agent, however he had not denied payment of commission by the assessee for procuring the orders. In view of the above, we allow this ground of the assessee on merit and delete the disallowance made u/s. 40(a)(ia). Applying the GP rate of 1.86% and to this duty draw back was added by the assessee - While calculating the net profit, the assessee has not taken into account the duty draw back and had separately added to the NP rate calculated by him. In the result the ground of the assessee is dismissed. - ITA No. 379/Agra/2018 - - - Dated:- 31-5-2021 - Shri Laliet Kumar, Judicial Member And Dr. Mitha Lal Meena, Accountant Member For the Appellant : Sh. Deepak Maheshwari, CA For the Respondent : Smt. Sita Srivastava, Sr. DR ORDER Per Laliet Kumar, J.M.: This appeal is filed by the assessee against the order dated 28.02.2018 passed by ld. CIT(A)-I, Agra for assessment year 2013-14 on the following revised grounds: Revised Grounds of Appeal 1. Because, the authorities below have erred in law and on facts in making the addition of Rs.14,98,883/- being 5% of the turnover instead of Rs.5,58,042/-as shown by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgument to prove the reliability of the appellant's books of account and also in light of the discrepancies noted oy the A.O. therein, I am convinced that it is a fit case for application of the provisions of section 145(3) of the Act. The appellant has not been able to provide any evidence in support of his two arguments regarding the reason for fall in GP rate and NP rate. Hence, I am also inclined to hold that the NP rate of 5% applied by the A.O. is justified and reasonable, particularly because the appellant is an exporter and export business, in general, fetches higher profits. It may be relevant to note in this context that low Net profit of 1.86% has been disclosed by the appellant in his Profit and loss account and if we exclude the Duty Draw back amount of Rs. 24,84,6577- from it , the net profit gets reduced to a net loss of Rs. 19,26,615/-, which is 6.43% of the business turnover.. The appellant's argument that the Duty Drawback amount of Rs. 24,84,657/- should not be added over and above the estimated net profit, is also not acceptable because there is no basis to assume that he had earned a loss during the impugned year. Thus, estimation of Rs. 14,98,8837- as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 2.49% to 1.86%. Therefore, at the best we take NP rate of 2.49%, which is NP rate for A.Y. 2011-12 or we can take 5% as proposed by the authorities below. To balance the equity, trend of industry, past NP rate of assessee and turnover of the assessee we reduce the NP rate of 5% to 4%. AO is directed to work out the income of the assessee accordingly. In the result the ground no1 of the assessee is partly allowed. GROUND NO 2 7. With respect to disallowance u/s. 40(a)(ia), we are of the opinion as per provisions of section 144 of the Act, the total income of the assessee has to be estimated by way of best judgment assessment after giving notice to the assessee. Total income is defined u/s. 5 of the Act which says as under : Total income. 15 5.16(1) Subject to17 the provisions of this Act, the total income18 of any previous year of a person who is a resident includes all income from whatever source derived which- (a) is received19 or is deemed to be received19 in India in such year by or on behalf of such person ; or (b) accrues or arises19 or is 19deemed to accrue or arise to him in India during such year ; or (c) accrues or arises19 to him o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid:] 10[Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purposes of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the payee referred to in the said proviso.] Explanation.-For the purposes of this sub-clause,- (A) royalty shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (B) fees for technical services shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; 11(ia)12 13[thirty per cent of any sum payable14 to a resident], on which tax is deductible at source14 under Chapter XVII-B and such tax has not been deducted or, after deduction, 15[has not been paid15a on or before the due date15a specified in sub-section (1) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch office. The Tribunal further observed as follows : ... The question arises whether in such a case any deduction on account of purchases is at all allowed to the assessee, though it may be true that a gross profit rate of 15 per cent, was fixed keeping in view all relevant facts including the purchases made by the assessee. Inasmuch as we are of the view that no deduction as such having been allowed to the assessee on account of purchases, we hold that no question of any disallowance on account of purchase can be made in this case under Section 40A(3). 9. All the three questions, referred to this court, revolve round the same controversy. The question for consideration is when no deduction was sought and allowed under Section 40A(3), was there any need to go into Section 40A(3) and Rule 6DD(j). We see force in the view taken by the Appellate Tribunal that when the income of the assessee was computed applying the gross profit rate and when no deduction was allowed in regard to the purchases of the assessee, there was no need to look into the provisions of Section 40A(3) and Rule 6DD(j). No disallowance could have been made in view of the provisions of Section 40A(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance made u/s. 40(a)(ia) of the Act. In the result the ground 2 of the assessee appeal is allowed. Ground no 3 14. The profit of the assessee would come to Rs.2,99,77,659 X 4% = 11,99,106, in term of our finding given in respect to ground no1. The net profit as per assessee was Rs.5,58,042/- , which was arrived by the assessee on applying the GP rate of 1.86% and to this duty draw back was added by the assessee. In case the submissions of the assessee is accepted than the income of the assessee would be well below the income shown by the assessee in return of income. In our view the duty drawback is required to be added, as added by the assessee, thus profit of the assessee will come to Rs.1199106 +2484657 = 3683743. For the purposes of clarity we are reproducing herein below the profit and loss account of the assessee for ready reference. M/S BENTLEY OVERSEAS (C-1, EPIP Shastripuram, Agra) Trading, Profit Loss Account (For the Year ended 31.03.2013) Particulars Amount Particular Amount Opening Stock 121860.00 Sales Direct Export ..... X X X X Extracts X X X X X X X X Extracts X X X X
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