Mangal Superfine Garments Private Limited, New Delhi V. ITO, Ward-16(2), New Delhi

ITA 182/DEL/2021

AI Insights

The case involves Mangal Superfine Garments P. Ltd., which appealed against the order of the CIT(A)-37, New Delhi, confirming the rejection of their books of account under section 145(3) of the Income Tax Act by the Assessing Officer (AO). The AO had added Rs 1,24,40,161 by applying an ad-hoc estimated net profit (NP) rate of 1.5% on the sales declared by the appellant. The CIT(A) reduced the AO's estimated NP from 3% to 1.5%, acknowledging the nature of the business involved in providing bogus sale bills. The Tribunal, after considering the submissions and the nature of the business, decided to further reduce the estimated NP to 1%, finding it a more reasonable estimate based on the typical commission rates in similar cases.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121992 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: E
• Next Hearing Date: 18-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 04-03-2021
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Accommodation entries
• Section: 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E: NEW DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA No.182/Del/2021 Assessment Year: 2014-15 Mangal Superfine Garments P. Ltd., Plot No. 20, Shiv Vihar Colony, Bhatia Marg, Hastal Village, New Delhi 110059 PAN AAGCM 9473 Q vs. ITO, Ward 16(2), New Delhi 110002. (Appellant) (Respondent) For Assessee: None For Revenue: Ms. Smita Singh, Sr.DR Date of Hearing : 19.07.2023 Date of Pronouncement : 03.08.2023 ORDER PER CHANDRA MOHAN GARG, J.M. This appeal has been filed against the order of Ld. CIT(A)-37, New Delhi dated 05.03.2020 for AY 2014-15. 2. The grounds have been raised of assessee are as follows:- 1. That on the facts and circumstances of the case, the order passed by the learned CIT(A) confirming rejection of books of account us 145(3) of the Act by the AO and confirming addition to the extent of Rs 1,24,40,161/- by applying ad-hoc estimated NP @ 1.5% on sales declared by the appellant, is bad both in the eyes of law and on facts. 2. That on the facts and circumstances of the case, Ld. CIT(A) has erred both on facts and in law in confirming addition to the extent of Rs 1,24,40,161/- by applying ad- hoc estimated NP @ 1.5% on sales declared by the appellant by arbitrarily rejecting the historical and/or assessed net profit ratio of the appellant. 3. When the appeal was called for hearing neither the assessee nor any authorized representative appeared nor any adjournment application has been filed despite several notices. However, or perusal of the appeal records and impugned order, we find that ITA No. 182/Del/2021 2 the appeal can be disposed of ex-parte qua assessee after hearing the arguments of ld. Senior DR. Therefore we proceed to adjudicate the appeal ex-parte qua assessee. 4. As per orders of the authorities below and grounds raised by the assessee we note that the main contention of assessee is that on the facts and circumstances of the case, the order passed by the learned CIT(A) confirming rejection of books of account us 145(3) of the Act by the AO and confirming addition to the extent of Rs 1,24,40,161/- by applying ad-hoc estimated NP @ 1.5% on sales declared by the appellant, is bad both in the eyes of law and on facts. It has also been contended that on the facts and circumstances of the case, Ld. CIT(A) has erred both on facts and in law in confirming addition to the extent of Rs 1,24,40,161/- by applying ad-hoc estimated NP @ 1.5% on sales declared by the appellant by arbitrarily rejecting the historical and/or assessed net profit ratio of the appellant. Therefore the final prayer of appellant is that the adhoc estimated NP @1.5% on the sales declared by the appellant is arbitrary, un-justified and unsustainable therefore the same may kindly be deleted. 5. Supporting action of the Assessing Officer the ld. Senior DR submitted that the Assessing Officer was quite correct and justified in estimating NP @3% as the main source of income of assessee is charging commission by providing hawala entries to the beneficiary in the form of bogus sale bills which was reduced by the ld. CIT(A) to 1.5% by giving part relief to the assessee and there is no requirement of further relaxation therein without any justified basis. Therefore appeal may kindly be dismissed. 6. On careful consideration of above submissions from the assessment order we note that the Assessing Officer made addition of NP by estimating 3% commission on total amount of entries given by the assessee. The ld. CIT(A) reduced the same to 1.5% of total value of sales bills by observing that generally in the line of providing accommodation entries the commission income charge ranges between 1 to 1.5% and he reduced the addition accordingly. Now aggrieved assessee being not satisfied by the part relief given by the ld. CIT(A) is again challenging the estimation of NP/commission @ 1.5% of total amount of sale bills without any proper representation. In our considered and humble view all possible leakage of revenue would be covered if the percentage of commission @1% a charged on the total amount of sale bills as the ld. CIT(A) himself noted at page 9 that the commission charged in the similar line of providing accommodation entries ranges between 1% to 1.5% and therefore Assessing Officer directed to recalculate the commission income @1% of total sales bills/turnover shown by the assessee. Assessee gets part relief and accordingly both the grounds of assessee are partly allowed. ITA No. 182/Del/2021 3 7. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 03.08.2023. Sd/- Sd/- (DR. B.R.R. KUMAR) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 03 rd August, 2023. NV/- Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR // By Order // Asstt. Registrar, ITAT, New Delhi