Delight Engineers, Noida V. Income Tax Officer, Noida

ITA 2467/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7288 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 20-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 27-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K C SINGHAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-3 : NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO.2467/DEL/2015 ASSESSMENT YEAR : 2010-11 DELIGHT ENGINEERS, C-95, SECTOR-8, NOIDA. PAN: AAEFD1135D VS. ITO, WARD 1(1), SECTOR 24, NOIDA. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.C. SINGHAL, ADVOCATE DEPARTMENT BY : SHRI RAJESH KUMAR, SR. DR DATE OF HEARING : 28.07.2016 DATE OF PRONOUNCEMENT : 31.08.2016 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A) DATED 16.02.2015 FOR THE ASSESSMENT YEAR 201 0-11. 2. THE ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON M ANUFACTURING BUSINESS AND SELLING OF CORRUGATED BOXES FROM CRAFT PAPERS. IT FILED ITS ITA NO.2467/DEL/2015 2 RETURN OF INCOME ON 27.8.2010 DECLARING TOTAL INCOM E OF RS.6,71,500/-. THE AO REJECTED THE BOOKS OF ACCOUNT FOR THE VARIOU S REASONS GIVEN IN HIS ORDER AND, THEREAFTER, ESTIMATED THE NET PROFIT AT 6% OF AN ESTIMATED TURNOVER OF RS.4 CRORES. AGGRIEVED, THE ASSESSEE CA RRIED THE MATTER IN APPEAL WITHOUT SUCCESS. FURTHER AGGRIEVED, THE ASS ESSEE IS BEFORE US. 3. AFTER HEARING THE RIVAL CONTENTIONS, I FIND THAT THE ASSESSEE HAS NOT SERIOUSLY DISPUTED THE REJECTION OF BOOKS OF ACCOUN T. HENCE, THE SAME IS UPHELD. THE ONLY ISSUE THAT ARISES BEFORE ME IS TH E ESTIMATION OF NET PROFIT. THE ESTIMATION OF TURNOVER IS ALSO NOT DIS PUTED. A PERUSAL OF THE CHART GIVEN BY THE ASSESSEE OF THE CALCULATION OF N ET PROFIT AND GROSS PROFIT DEMONSTRATES THAT FOR THE IMPUGNED ASSESSMEN T YEAR THE ASSESSEE HAS DECLARED MORE NET PROFIT THAN THAT WAS DECLARED IN THE PREVIOUS TWO YEARS. IN FACT, THE LD. AO HAS AT PAGE 5, PARA 3, OBSERVED AS FOLLOWS:- DURING THE YEAR ON TOTAL TURNOVER OF RS.3,96,81,15 3/- NET PROFIT AT RS.4,60,386/- HAS BEEN DISCLOSED WHICH GIVES NP RAT E AT 1.16% AND AS AGAINST 0.75% IN THE LAST YEAR. NO DOUBT ON COMPAR ISON THE NET PROFIT IS BETTER BUT THE STATE OF ACCOUNTS TOLD THAT TRUE PROFITS CAN NOT BE DETERMINED UNTIL EVERYTHING IS TRANSPARENT AND CLEA R. RECENTLY, I HAVE COMPLETED A CASE OF A COMPANY (NAME NOT DISCLOSED B UT CAN BE DISCLOSED TO THE APPELLATE AUTHORITIES) IN SIMILAR ACTIVITIES HAD DISCLOSED NET PROFIT OF 1.52% WHICH WAS ENHANCED TO 6%. TAKING THE ITA NO.2467/DEL/2015 3 SAME VIEW IN THE MATTER, A NET PROFIT RATE OF 6% IS APPLIED. NO DOUBT IT WAS A CASE OF DISCLOSURE OF LOW NET PROFIT. 4. FOR THE ASSESSMENT YEAR 2008-09 AND 2009-10, THE NET PROFIT RATIO DISCLOSED WAS 0.58% AND 0.76%. FOR THE SUBSEQUENT TWO ASSESSMENT YEARS, NET PROFIT FOR AY 2011-12 WAS 1.19% AND FOR AY 2012-13 IT WAS 1.51%. THE AO ADOPTED THE NP RATE @ 6%. THIS, IN M Y VIEW, IS HIGHLY EXCESSIVE. THE PAST HISTORY OF THE CASE OF THE ASS ESSEE HAS TO BE THE BASIS FOR PROPER ESTIMATION OF PROFITS. 5. THE ASSESSEE HAS RIGHTLY RELIED ON THE DECISION OF THE HONBLE JAIPUR BENCH OF THE RAJASTHAN HIGH COURT IN THE CAS E OF CIT VS. GOTAN LIME KHANIJ UDHYOG, 256 ITR 243 (RAJ) WHEREIN IT IS HELD AS FOLLOWS:- THEREFORE, MERELY BECAUSE THERE IS SOME DEFICIENCY IN THE BOOKS OF ACCOUNT OR MERELY BECAUSE OF REJECTION OF BOOKS OF ACCOUNT IT DOES NOT MEAN THAT IT MUST LEAD NECESSARILY TO ADDITIONS IN THE RETURNED INCOME OF THE ASSESSEE. 6. KEEPING IN VIEW THE FACTS OF THE CASE, I AM OF T HE CONSIDERED OPINION THAT THE ADDITION MADE IN THIS CASE ON ESTI MATION BASIS HAS TO BE DELETED AS THE INCOME DISCLOSED BY THE ASSESSEE IS FAIR. ITA NO.2467/DEL/2015 4 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. THE ORDER PRONOUNCED IN THE OPEN COURT ON 31.08.20 16. SD/- [J. SUDHAKAR REDDY] ACCOUNTANT MEMBER DATED, 31 ST AUGUST, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.