Sh. Mukesh Kumar Sharma, Mandi V. ITO, Sunder Nagar

ITA 1278/CHANDI/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8310 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 02-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: IPSN
• Assessee Lawyers: ASHWANI KUMAR SHRI S K MITTAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 1278/CHD/2016 ASSESSMENT YEAR: 2010-11 SHRI MUKESH KUMAR SHARMA, VS THE ITO, PROP. SHARMA TRADING CO., SUNDER NAGAR (HP). VPO SANDHOL, TEHSIL SARKAGHAT, DISTT. MANDI (HP). PAN: BYIPS5601N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 02.02.2017 DATE OF PRONOUNCEMENT : 06.02.2017 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST T HE ORDER OF LD. CIT(APPEALS) PALAMPUR DATED 28.09.2016 FOR ASSESSMENT YEAR 2010-11, CHALLENGING THE APPLICATIO N OF NET PROFIT RATE OF 10% ON THE TOTAL TURNOVER AS AGAINST 5% DECLARED BY THE ASSESSEE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED RETURN OF INCOME AT RS. 3,60,828/- BY APPLYING NET PROFIT RATE OF 5% OF GROSS TURNOVER OF RS. 72,16,556/-. T HE ASSESSEE IS DEALING IN SALE AND PURCHASE OF STEEL, STEEL SHEETS AND CEMENT ETC. THE CASE WAS SELECTED FOR S CRUTINY BECAUSE AS PER AIR INFORMATION RECEIVED IN THE REVE NUE DEPARTMENT, ASSESSEE HAD DEPOSITED RS. 33,11,600/- IN 2 CASH IN HIS SAVING BANK ACCOUNT RELEVANT TO THE ASS ESSMENT YEAR UNDER APPEAL. THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT PROCEEDINGS BY APPLYING A RATE OF 12% OF THE TOTAL TURNOVER. 3. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) T HAT THE ASSESSEE DEALS IN SALE OF STEEL ON RETAIL BASIS IN REMOTE VILLAGE OF MANDI DISTRICT AND PROFIT MARGIN IN STEE L IS BETWEEN 2 TO 3% AND PROFIT HAVE BEEN DECLARED AT 5% UNDER SECTION 44AF OF THE ACT. THE ASSESSING OFFICER WIT HOUT BRINGING ANY MATERIAL ON RECORD, APPLIED HIGHER NET PROFIT RATE OF 12%. THE LD. CIT(APPEALS) NOTED THAT ASSES SEE DID NOT MAINTAIN THE DETAILS OF BUSINESS ACTIVITIES AND NO BOOKS OF ACCOUNT HAVE BEEN MAINTAINED. SIMILARLY, ASSESSI NG OFFICER HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SUBSTANTIATE HIS ACTION FOR APPLYING NET PROFIT RAT E OF 12%. THE CONTENTION OF THE ASSESSEE THAT PROFIT WAS ESTI MATED BY APPLYING PROVISIONS OF SECTION 44AF WAS REJECTED BE CAUSE THIS PROVISION IS RELATED TO TURNOVER OF RS. 40 LAC S ONLY. THE LD. CIT(APPEALS), HOWEVER, CONSIDERED THE APPLI CATION OF 12% NET PROFIT RATE AS EXCESSIVE AND REDUCED THE SA ME TO 10%. THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED . 4. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF THE VIEW APPLICATION OF NET PROFIT RATE OF 10% IS EXCESSIVE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE CASE WAS SELECT ED FOR SCRUTINY BECAUSE CASH WAS FOUND DEPOSITED IN THE BA NK ACCOUNT OF THE ASSESSEE. THE ASSESSEE EXPLAINED BE FORE THE 3 AUTHORITIES BELOW THAT IT WAS THE SALE ONLY AND ON THE SAME, NO ADVERSE INFERENCE HAS BEEN DRAWN AGAINST THE ASS ESSEE. IT IS ALSO A FACT THAT ASSESSEE DID NOT MAINTAIN B OOKS OF ACCOUNT FOR HIS RETAIL BUSINESS. THE ASSESSEE HAS DECLARED RETURNED INCOME OF RS. 3,60,828/-. THEREFORE, CONS IDERING THE NATURE OF BUSINESS OF THE ASSESSEE AND INCOME D ECLARED IN THE RETURN OF INCOME AND THAT NO ADVERSE INFEREN CE HAD BEEN DRAWN AGAINST THE ASSESSEE FOR DEPOSIT OF THE CASH IN HIS BANK ACCOUNT, IT WOULD BE REASONABLE AND PROPER TO DIRECT THE AUTHORITIES BELOW TO APPLY NET PROFIT RA TE OF 7% AS AGAINST 10% DIRECTED BY THE LD. CIT(APPEALS). THE ORDERS OF AUTHORITIES BELOW TO THAT EXTENT ARE SET ASIDE AND MODIFIED AND ASSESSING OFFICER IS DIRECTED TO COMPUTE BUSINE SS INCOME OF THE ASSESSEE BY APPLYING NET PROFIT RATE OF 7%. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 6 TH FEBRUARY,2017. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH