TMI Blog2023 (8) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... WAN SINGH, JM DR. A. L. SAINI, AM For the Appellant : Shri Ashish Pophare, CIT (DR) For the Respondent : Shri P. M. Jagasheth, CA ORDER PER DR. A. L. SAINI, AM: This is bunch of four cross appeals filed by Revenue and Assessee, pertaining to the Assessment Years (AYs) 2013-14 to 2014-15, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals) [in short the ld. CIT(A) ], which in turn arise out of separate assessment orders passed by the Assessing Officer under section 143(3)/144 of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. Since, the issues involved in all the appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No.751/SRT/2018 for assessment year 2014-15, have been taken into consideration for deciding the above appeals en masse . 3. Grounds of appeal raised by the assessee as per lead case, in ITA No. 751/SRT/2018 for AY.2014-15 are as follows: 1. The Ld. CIT(A)-3, Vadodara has erred in law and in facts in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties on this preliminary issue. Having regard to the reasons given in the petition, we condone such minor delay of two days and admit both these appeals for hearing. 7. Succinct facts are that assessee has filed his return of income for Assessment Year 2014-15 on 29.11.2014, declaring total income of Rs. 3,85,727/-. The case was selected for scrutiny through CASS and accordingly notice under section 143(2) of the I.T. Act, 1961 was issued on 31.08.2015 and served upon the assessee on 05.09.2015. Thereafter, notice under section 142(1) of the I.T. Act along with questionnaire was issued on 12.07.2016 calling for details and the same was duly served upon the assessee. In response to the show cause notice, the assessee filed list of creditor. The assessee also submitted the address of some of the creditors on 24.11.2016 and filed confirmation of some of the creditors. Further for making verification, notice under section 133(6) of the Act, was issued to 32 creditors but confirmations were not received. The assessing officer noted that assessee did not file copy of bills raised by the creditors, therefore, assessing officer held that assessee miserably failed to prove the ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by pointing out that while computing the estimated net profit at the rate of 15% on turnover, the Ld. CIT(A) has added the amount received from customers during the year. The receipt from customers during the year should not be treated part of the turnover. That is, receipt from customers during the year is kind of an amount received from debtors of the assessee and such debtors should not be treated part of turnover, as it would tantamount to double addition. Therefore, net profit ratio computed by ld CIT(A) is wrong. The Ld. Counsel also pointed out that net profit estimated by the Ld. CIT(A) at the rate of 15% is excessive and unreasonable and such estimation of net profit is neither based on accounting principles nor based of taxation principles, because ld CIT(A) added receipt from customers as a part of turnover. The Ld. CIT(A) has considered the addition at the rate of 15% of turnover which is after including the advances received and booking amount received from customer. Therefore, the estimation of net profit by the Ld. CIT(A) at the rate of 15% on turnover includes the advance received/booking advance received from the customers which is not the income at all and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT(A) and other material brought on record. Before us, the assessee submitted the copy of income tax return for the AY. 2013-14, which is placed at paper book page no.74, and also submitted the computation of total income of assessee and audit report which is placed at paper book page nos. 75. The assessee also submitted the bank statements/ledger account, wherein receipts from customers/booking advance from customer have been stated. Besides, the Ld. Counsel submitted the analysis of the net profit of the assessee, which is placed at paper book page no. 232, and the same is reproduced below: With help of the above chart of net profit ratio, the ld Counsel stated that net profit estimation for assessment year 2013-14 should be at the rate of 10.31% before remuneration and interest to partners and net profit estimation for assessment year 2014-15 should be at the rate of 13.46% before remuneration and interest to partners. 14. The Ld. Counsel further pointed out that ld CIT(A), has taken into account unsecured loan interest for net profit estimation which gives unrealistic net profit ratio for both the assessment years. Hence, ld Counsel contended that net profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the profit can be resorted to in these types of cases but the estimate and that too at a particular percentage or fraction of percentage which ld CIT(A) has adopted has to be based on sound reasoning in comparison with the past results as well as comparable cases. Without this the estimation so made cannot be said to be valid estimation. We note that in the assessee`s case under consideration, the ld CIT(A) has not demonstrated comparable cases except to make a general statement and ld CIT(A) has also failed to take into account the average past profits/results of the assessee for the purpose of making profit estimation. It is well settled that in a best judgment assessment there is always a certain degree of guesswork. No doubt the authorities concerned should try to make an honest and fair estimate of the income even in a best judgment assessment and should not act totally arbitrarily. Department must act judiciously, while estimating net profit and must be guided by judicial consideration and by rule of justice, equity and good conscience. And also that there must be honest and fair estimate of the proper figure of assessment, for which consideration of local knowledge and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duly adjusted against sales in subsequent assessment years. It was also noted that majority of the advances in the current year i.e. to the extent of 89% were adjusted against the sales in succeeding assessment year i.e. in A.Y. 2011-12. On the basis of such observation, the ld. CIT(A) held that the fact do not warrant the treatment of customers advance as unexplained cash credit, merely for nonsubmission of full address and PAN, when facts clearly indicates that such advances are duly recorded in the books of account as sales turnover in subsequent year. The Assessing officer accepted in the assessment order that none of the advances were outstanding up to the date of assessment order. Before us, the ld. AR vehemently submitted that in the business of jewellery, the customers made advances and details of such advances in the form of chart from assessment year 2009-10 to 2014-15, indicating 3.6 to 5.5% of the total turnover was shown in the balance sheet as customers advance. We find that similar facts were brought in the notice of ld. CIT(A), which is not converted before us. We further find that the Assessing Officer has not made any investigation on the address furnished by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e he must be able to take into consideration, local knowledge, reputation of the assessee about his business, the previous history of the assessee or the similarly situated assessee. It is also pertinent to mention that judgment is a faculty to decide matter with wisdom, truly and legally. Judgment does not depend upon the arbitrary, caprice of an adjudicator, but on settled and invariably principles of justice. Thus, in a best judgment, even if, there is an element of guess work, it should not be a wild one, but shall have reasonable nexus to the available material and circumstances of each assessee. 20. During the course of hearing, we have confronted the ld. counsel for the assessee to show the basis for estimating income at 8%. Similarly, we have confronted the ld.CIT-DR as to how the figure of 20% should be taken up. The ld. counsel for the assessee drew our attention towards page nos.50-51 of the paper book wherein the assessee has kept the details of receipts received through account payee cheque as well as received cash in the booking of flats as well as shops. In the case of Koshor Mohanlal Telwala (supra) the Tribunal has observed that 8% profit offered by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Jay Builder -33 taxmann.com 62 (Gujarat) : 15% of On-Money Builders ii) H.S. Builders - 86 Taxmann 214 (Jaipur) (Mag) : 6% Builders and Developers iii) CIT Vs. Chandrika Towers -275 ITR 173 (MP) : 8% Builders iv) Nandi Housing Pvt. Ltd. Vs. DCIT-80TTJ750(Bang.) : 8% Builders v) Kishor Telwala V. ACIT -64 TTJ 543 (Ahd.) : 8% of gross receipt including on-money Builders and Developers 5.6 ITAT Ahmedabad in the case of Kishor Mohanlal Telwala Vs ACIT [1999] 107 TAXMAN 86 (Ahd.) (Mag.) have held that what was assessable was a reasonable amount of profit which assessee could have made and such profit at 8 per cent offered by assessee on total receipts was fair and reasonable. It was held by the Tribunal as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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