9911796707
TMI Blog2023 (6) TMI 738X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2007-2008 on 07.09.2009 (A-2). On 29.11.2010, the proceedings were completed and addition of Rs.1,01,016/- was made and keeping in view the provisions of Section 40 (a) (ia) of the Act 1961 payment of Rs.1,01,016/- made to Satake India Engg (P) Ltd on account of AMC was disallowed. Further Rs.56,650/- incurred on purchase of UPS held to be capitalized and depreciation was ordered to be charged on it. Rs.7650/- were added to the income of the assessee on account of telephone expenses, as the assessee admitted the expenditure incurred on account of telephones installed at residences. Further addition of Rs.2,00,000/- was made on account of sale of rice, as no stock was maintained by the assessee quality wise and quality of different quality of rice produce from milling of paddy could not be ascertained. Rs.6236/- were added on account of foreign travelling expenses. The details of computation of income are given below:- Income returned Rs.1032186/- Add:- On account of ground nut:- Rs.87500/- On account of AMC:- Rs.101016/- On account of UPS:- Rs.56650/- On account of telephone expenses:- Rs.7650/- On account of sale of rice Rs.2,00,000/- On account of fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer thus adopted net rate of 10 per cent on gross receipts on estimate basis which was reduced by the Tribunal to 9 per cent. The appellant filed appeal and the same was dismissed. In para No. 5 and 6, it has been observed as under:- 5. A perusal of the impugned order passed by the Tribunal shows that after considering the overall facts and circumstances of the case, the Tribunal had estimated the rate of profit at 9%. It is true that the discretion to determine a net profit rate must necessarily be exercised on the basis of relevant factors. In the present case, it has been categorically recorded by the Tribunal that the assessee did not produce any supporting vouchers for expenses exceeding Rs. 25,000/-. It did not file copies of the bank accounts of the partners and thus the Assessing Officer could not have verified the various payments received by the appellant from bankers or payments taken directly from the customers by the partners. The assessee did not file the details of purchases in the format given by the Assessing Officer. Regarding sundry debtors, no confirmation was filed and even in the balance sheet, the names of the sundry debtors to the extent of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the names of the sundry debtors to the extent of Rs. 1,66,00,000/- were not shown. No details of opening and closing stock were filed. The Assessing Officer has discussed and summarized this issue at page 5 in the following para:- "From the above discussion, it is clear that purchases made by the assessee are not subject to any verification. Sundry creditors and debtors are also not subject to any verification. Wages, salaries, general expense and other expenses mentioned in para 15 of my letter dated 21.1.2013 are also not subject to any verification. In view of the above facts, the book version shown by the assessee cannot be relied upon. I therefore, apply net profit rate of 10% on the gross receipts of Rs. 5,42,83,935/- which will mean that assessee's income would work out at Rs. 54,28,393/-.From this interest paid to partners at Rs. 6,28,455/- is to be deducted and the balance would be income of the assessee at Rs. 47,99,938/-." 12. The above clearly shows that since Assessing Officer could not verify various details i.e. why he has estimated the profits. This clearly shows that books have been rejected. 13. Now the question is once books of account are rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, if available, assessment order that may have been passed and accepted by the department, the nature of the assessee's business, an appraisal of the value of the contract, prevailing economic conditions vis a vis the assessee's business, the price of raw material, labour etc. the rice in price index as notified by the Central Government from time to time if applicable and if the Assessing Officer proceeds to rely upon assessments of other assessees engaged in similar business to do so only after determining points of similarity etc." 15. Therefore, once details are not filed, the profit has to be estimated and such estimation would have to be done considering the facts of the particular case in a judicious manner. In the case of CIT vs. Prabhat Kumar (supra) where addition was made on account of wages, which was not found to be verifiable, ultimately the court applied profit rate of 12% and it was observed as under:- "The Tribunal has proceeded on the basis that there may be unverifiable wages which may call for addition to income but not to the extent assessed by the Commissioner of Income Tax (Appeals). Applying net profit rate on the basis of best judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of 2014 decided on 14.10.2014 (Bangalore) being based on individual fact situation involved therein do not come to the rescue of the appellant. Consequently, no substantial question of law arises. The appeal stands dismissed." Heard learned counsel for the parties at length. The above case of S.P. Construction (supra) is directly applicable to the facts of the present case, as in the present case as well, the assessee did not maintain the stock register quality wise. Thus, quantity of different quality of rice produced from milling of paddy could not be ascertained. No evidence has been given by the assessee to substantiate its submissions. Reference can now be made to Section 145 of the Income Tax Act which reads as under:- '145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. 2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
