Kamarpukur CS Shop, Hooghly V. I.T.O., Ward-24(1), Hooghly, Hooghly

ITA 622/KOL/2022

AI Insights

The case involves Kamarpukur CS Shop, a partnership firm engaged in the liquor business, which appealed against the order of the Commissioner of Income-tax (Appeals) confirming the addition of Rs. 4,19,681 to its income for the Assessment Year 2018-2019. The addition was initially made by the AO by estimating the net profit at 1.5%, significantly higher than the 0.58% declared by the assessee. The Tribunal examined the profit and loss appropriation account and found that the AO had incorrectly calculated the net profit rate by not considering the correct book profit amount before apportioning interest and remuneration to partners.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128752 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-01-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 08-11-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 142(1); 250

Judgement Text

आयकर अपीलीय अधिकरण कोलकाता 'एसएमसी' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA श्री संजय गग ग , न्याधयक सदस्य एवं डॉ. मनीष बोरड, ल े खा सदस्य क े समक्ष Before SRI SANJAY GARG, JUDICIAL MEMBER & DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A. No.: 622/KOL/2022 Assessment Year: 2018-2019 Kamarpukur CS Shop..............................................Appellant [PAN: AAFFK 7937 D] Vs. ITO, Ward 24(1) Hooghly.......................................Respondent Appearances by: Sh. D. K. Sen, Adv., appeared on behalf of the Assessee. Smt. Ranu Biswas, Addl. CIT, Sr. D/R, appeared on behalf of the Revenue. Date of concluding the hearing : January 23 rd , 2023 Date of pronouncing the order : February 06 th , 2023 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2018-2019 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the I.T.A. No.: 622/KOL/2022 Assessment Year: 2018-2019 Kamarpukur CS Shop. Page 2 of 4 “Act”) by ld. Commissioner of Income-tax (Appeals)-NFAC, Delhi [in short ld. “CIT(A)”] dated 21.09.2022 arising out of the assessment order framed u/s 143(3) r.w.s. 144B of the Act dated 22.04.2021. 2. The assessee is in appeal before the Tribunal raising the following grounds: “1. For that the Order of the Ld. CIT (A), NFAC, confirming Order of the Ld. AO is arbitrary and bad in fact and in law, 2. For that the Ld. Appellate Authority, in consideration of the facts and circumstances of the matter, is not justified in sustaining addition of Rs. 4,19,681/- made by the Ld. A.O. on extraneous consideration. 3. For that the Ld. Appellate Authority, in consideration of the facts and circumstances of the matter, erred in sustaining the addition made by the A.O. without rejecting the audited books of accounts maintained by the appellant. 4. For that the appellant reserves his right to add to, to alter, and or to amend the grounds and to adduce paper and document at the time of hearing.” 3. The sole grievance of the assessee is the finding of ld. CIT(A) sustaining the addition of Rs. 4,19,681/- made by ld. AO by estimating the net profit of the assessee @ 1.5% as against 0.58% declared in the profit and loss account. 4. We have heard rival contentions and perused the records placed before us. We notice that the assessee is a partnership firm and is engaged in liquor business. Income of Rs. 2,64,790/- declared in the return of income for AY 2018-19 filed on 23.10.2018. Total turnover of the assessee during the year is 4,56,31,250/-. Ld. AO during the course of assessment proceedings which were carried out after serving of notices u/s I.T.A. No.: 622/KOL/2022 Assessment Year: 2018-2019 Kamarpukur CS Shop. Page 3 of 4 143(2) & 142(1) of the Act observed that in the concerns running similar types of businesses and sub-division firms, profit margins are between 1% to 1.5% of sales whereas net profit shown by the assessee is 0.58%. Though the assessee made detailed submissions justifying the net profit but ld. AO failed to find any merit and made the addition of Rs. 4,19,681/- which was subsequently confirmed by ld. CIT(A). 5. We notice that ld. AO adopted the net profit rate of 0.58% on the basis of net profit of Rs. 2,64,788/- declared by the assessee. However, on perusal of profit and loss appropriation account we notice that net profit of the assessee firm before apportioning the interest on capital to partners and remunerations to partners stood at Rs. 7,69,994/-. Therefore, for the purpose of calculating the net profit rate, ld. AO ought to have adopted the correct amount of book profit of Rs. 7,69,994/- and thus, the net profit of the assessee concern comes to 1.69% which is much above the profit rate considered by ld. AO for making the alleged addition. 6. We, therefore, fail to find any justification in the addition made by ld. AO and thus, reverse the finding of ld. CIT(A) and delete the addition of Rs. 4,19,681/-. We, however, would like to mention that our observation regarding net profit rate in the liquor business carried out by the assessee should not be taken as a precedence in the case of the other assessee’s carrying out similar nature of business as the net profit is based on various facts which may differ from case to case. Thus, the effective grounds raised on merits are allowed. I.T.A. No.: 622/KOL/2022 Assessment Year: 2018-2019 Kamarpukur CS Shop. Page 4 of 4 7. Other grounds are general in nature which need no adjudication. 8. In the result, the appeal filed by the assessee is allowed. Kolkata, the 06 th February, 2023 Sd/- Sd/- [Sanjay Garg] [Manish Borad] Judicial Member Accountant Member Dated: 06.02.2023 Bidhan (P.S.) Copy of the order forwarded to: 1. Kamarpukur CS Shop, Kamarpukur, P.O. - Sripur, Dist. - Hooghly, Pin- 712 612 (W.B.) 2. ITO, Ward 24(1) Hooghly. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata