JAYASAKTHI KNIT WEAR,TIRUPPUR V. ITO, WARD-1(4), TIRUPPUR

ITA 1757/CHNY/2024

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The case involves Jayasakthi Knit Wear, a partnership firm, which did not file a return of income for the Assessment Year 2017-18. The AO estimated the income at 8% of the gross business receipts amounting to Rs.4,95,21,331, resulting in an income of Rs.39,61,706, and added Rs.26,268 as income from other sources. The assessee appealed against this estimation, arguing that a lower rate based on historical data should be applied. The Tribunal agreed with the assessee, citing the need for reasonable estimation based on relevant material, and directed the AO to recalculate the income at 3%.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 107122 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-09-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 18-06-2024
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM
• Assessee Lawyers: S. SRIDHAR
• Keywords: Business income
• Section: 44AB

Judgement Text

"आयकर अपीलीय अिधकरण, ‘बी’ \u0001यायपीठ, चे\tई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI \u0001ी एबी टी. वक , \u000bाियक सद\u0011 एवं एवं एवं एवं \u0001ी अिमताभ शु\u0018ा, लेखा सद\t क े सम\u001b BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1757/Chny/2024 िनधा\u000eरण वष\u000e/Assessment Year: 2017-18 Jayasakthi Knit Wear, 3/95, Thanneerpandal Colony, Cheyur Road, Karukkampalayam B.O. Avinashi, Tirupur-641 654. v. The ITO, Ward-1(4), Tirupur. [PAN: AAFFJ 4343 J] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : Mr.S. Sridhar, Advocate (Erode) \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Ms. Gouthami Manivasagam, JCIT सुनवाईक\u001aतारीख/Date of Hearing : 26.09.2024 घोषणाक\u001aतारीख /Date of Pronouncement : 13.11.2024 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter in short ‘the Ld.CIT(A)’), NFAC, Delhi, dated 19.04.2024 for the Assessment Year (hereinafter in short ‘AY’) 2017-18. ITA No.1757/Chny/2024 (AY 2017-18) Jayasakthi Knit Wear :: 2 :: 2. The main grievance of the assessee is against the action of the Ld.CIT(A) confirming the action of the AO estimating income @8% of the gross business receipts of Rs.4,95,21,331/- i.e. Rs.39,61,706/- and an amount of Rs.26,268/- u/s.194A of the Act as income from other sources. 3. Brief facts are that the assessee is a partnership firm and didn’t file return of income (RoI). The AO noted that assessee had made exports worth of Rs.4,88,00,649/- and imports worth of Rs.5,90,588/- and also derived interest income of Rs.26,268/-. The AO re-opened the assessment of the assessee and noted that the assessee didn’t file RoI in response to notice u/s.148 of the Act and therefore, the AO issued several notices and also notice u/s.144 of the Act and thereafter, finding no response from the assessee, completed the assessment u/s.144 (best judgment assessment) by estimating the income @8% of the gross business receipts of Rs.4,95,21,331/- i.e. Rs.39,61,706/- and added Rs.26,268/- as income from other sources. On appeal, the Ld.CIT(A), confirmed the action of the AO. 4. Aggrieved, the assessee is before us. 5. We have heard both the parties and perused the material available on record. We note that the assessee is a partnership firm and didn’t file return of income (RoI). The AO noted that assessee had made exports worth of Rs.4,88,00,649/- and imports worth of Rs.5,90,588/- and also ITA No.1757/Chny/2024 (AY 2017-18) Jayasakthi Knit Wear :: 3 :: derived interest income of Rs.26,268/-. According to the Ld.AR, the assessee was regularly filing RoI from AYs 2012-13 to 2015-16 and also from AYs 2018-19 to 2019-20 except for AYs 2016-17 & 2017-18 and that the RoI filed earlier has been duly accepted by the department. The only plea of the assessee is that a reasonable estimation of income may be made by considering the earlier year book results of the assessee and drew our attention to the summary of the chart which shows the past and future book results, which are noted as under: A.Y. Gross Receipts Gross Profit GP Rate Net Profit NP Rate Date of 44AB 2012-13 1,17,46,303 - - 1,51,422 1.29% - 2013-14 89,63,632 22,98,717 25.64% 1,35,018 1.51% - 2014-15 3,42,26,413 14,47,811 4.23% 8,80,900 2.57% 30/11/2014 2015-16 5,66,07,667 54,20,674 9.58% 1,91,664 0.34% 29/10/2015 2018-19 4,01,07,232 57,21,761 14.27% 69,512 0.17% 31/10/2018 2019-20 4,79,07,168 35,39,241 7.39% 80,156 0.17% 31/10/2019 Average Net Profit Rate 1.008% 6. The Hon’ble Courts have held that the estimation has to be based on relevant material and it should not be whimsical or arbitrary; and that while estimating the income of an assessee, the earlier and subsequent book results of the assessee is good indicator to reasonably estimate the income of the assessee. We note that the AO/the Ld.CIT(A) has estimated the income of the assessee @8% whereas the assessee has been filing returns from AYs 2012-13 to 2015-16 (four years) wherein the assessee has been showing a net profit maximum of 2.57% for AY 2014- 15, and in other years average net profit (even considering subsequent AYs 2018-19 to 2019-20) is 1.008%. Therefore, considering the aforesaid Chart, [i.e. earlier and subsequent book results of the ITA No.1757/Chny/2024 (AY 2017-18) Jayasakthi Knit Wear :: 4 :: assessee], which is an indicator of assessee’s income from its business, we are of the considered view that 3% would be a reasonable estimate in place of 8%. Therefore, we direct the AO to compute the income @3% of the gross business receipts of Rs.4,95,21,331/- and compute the total income of the assessee. 7. In the result, appeal filed by the assessee is partly allowed. Order pronounced on the 13th day of November, 2024, in Chennai. Sd/- (अिमताभ शु\u0018ा) (AMITABH SHUKLA) लेखा सद\u0003य/ACCOUNTANT MEMBER Sd/- (एबी टी. वक ) (ABY T. VARKEY) \u0005याियक सद\u0003य/JUDICIAL MEMBER चे\tई/Chennai, !दनांक/Dated: 13th November, 2024. TLN, Sr.PS आदेश क\u001a \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ\r/Appellant 2. \u000e\u000fथ\r/Respondent 3. आयकरआयु\u0015/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u000eितिनिध/DR 5. गाड\u001eफाईल/GF "