S.S.M. FOREX PRIVATE LIMITED,KAROL BAGH V. DCIT CC-29, DELHI

ITA 11/DEL/2024

AI Insights

S.S.M. Forex Pvt. Ltd., a currency exchange company, appealed against the orders of the Learned Commissioner of Income Tax (Appeals)-30, New Delhi, for the Assessment Years 2019-20 and 2020-21. The appeals were consolidated due to common grounds and facts. The primary contention was the application of section 145(3) of the Income Tax Act by the Assessing Officer, who invoked this section due to the non-availability of regular books of accounts during a search operation. The Tribunal found that while the books were not available at the time of search, they were produced later during the assessment proceedings. The Tribunal partly allowed the appeal for A.Y. 2019-20 by reducing the profit rate applied from 4% to 2%, citing a substantial drop in turnover and a lower profit rate shown in the previous year. For A.Y. 2020-21, the Tribunal upheld the 4% profit rate as it matched the profit rate declared by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23669 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2019-2020
• Other Referred Cases: M/s Sheetal Industries vs. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYA CHAUDHARY
• Assessee Lawyers: RAGHAV SHARMA
• Keywords: Search and seizure
• Section: 145(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’: NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.11/Del/2024 (ASSESSMENT YEAR 2019-20) ITA No.12/Del/2024 (ASSESSMENT YEAR 2020-21) S.S.M. Forex Pvt. Ltd., 30-31, Gaffar Market, Karol Bagh, New Delhi-110005. PAN-AAJCS4554M Vs. DCIT, Central Circle-29, Delhi. (Appellant) (Respondent) Assessee by Sh. Raghav Sharma, Adv. and Ms. Chandrima Choudhary, Adv. Department by Ms. Jaya Chaudhary, CIT-DR Date of Hearing 11/02/2025 Date of Pronouncement 19/02/2025 O R D E R PER BENCH: Both the appeals are filed by the Assessee against the order of Learned Commissioner of Income Tax (Appeals)-30, New Delhi, dated 07/11/2023 for Assessment Years 2019-20 & 2020-21 respectively. 2. Since, grounds of appeal taken by the assessee for both the appeals are common as well facts leading to these grounds of appeal are also common, therefore, disposed off by a single order. 2 ITA Nos.11 & 12 /Del/2024 S.S.M. Forex Pvt. Ltd. vs. DCIT 3. Brief facts of the case are that the assessee company is an RBI registered currency exchanger. A search and seizure operation was conducted upon Sushil Goel group on 30/01/2020, including the assessee company also. During the course of search, the regular books of accounts of the assessee were not found, however, it is an admitted position that no incriminating paper was found and seized during the course of search. The assessment of these two years were completed wherein after invoking provisions of section 145(3) of the Act, the AO has applied profit rate of 4% and, accordingly, made the addition. Ld. CIT(A) confirmed the additions, thus, the present appeals are filed before us. 4. During the course of hearing, the Ld. AR of the assessee submitted that the assessee has maintained regular books of accounts which though were not available at the time of search, however, they were produced before the Assessing Officer, who without pointing out specific defects have invoked the provisions of section 145(3) of the Act and made the addition. He further argued that the AO has not issued any show cause notice before invoking the provisions of section 145(3) and, since, no show cause notice was issued, the assessee was never confronted nor could be able to explain the deficiencies noticed by the Assessing Officer. He further placed reliance on the judgment of the Co-ordinate Bench of ITAT, Chandigarh in the case of M/s Sheetal Industries vs. DCIT in ITA No.143/Chd/2023 dated 29/01/2025 wherein the Co-ordinate Bench held that unless specific defects are pointed out, books of 3 ITA Nos.11 & 12 /Del/2024 S.S.M. Forex Pvt. Ltd. vs. DCIT accounts cannot be rejected. With regard to the application by the profit rate, the AR submit that the Assessing Officer has applied very high G.P. rate of 4% based on the rate declared for Assessment Year 2020-21 wherein the sales were of Rs.91,77,354/- as against which in Assessment Year 2019-20, the sales were of more than 17 Cr. having G.P rate of 0.363 thus, both the years are not comparable. Thus, he accordingly prayed that the addition so made please be deleted. 5. On the other hand, Ld. Sr. DR vehemently supported the orders of the lower authorities and submit that the assessee has not produced books of accounts during the course of search, therefore, the books of accounts produced during the course of assessments cannot be relied upon. 6. With regard to the application of the profit rate of 4%, Ld. Sr. DR submit that the assessee itself has shown profit rate of 4.11% in Asst. Year 2020-21, therefore, the AO has rightly applied the said profit rate in Assessment Year 2019-20 also which is quite reasonable and he prayed for the confirmation of the same. 7. We have heard the rival submissions and perused the material available on record. In the instant case, it is seen that assessee has failed to produce the books of account on the date of search which was later on filed before the AO during the course of assessment proceedings. The assessee has not given any plausible explanation as to why the books of accounts were not available at the time of search, thus, there is a possibility that these books of accounts have 4 ITA Nos.11 & 12 /Del/2024 S.S.M. Forex Pvt. Ltd. vs. DCIT been prepared after search and under these circumstances, we are not inclined to interfere with the order of the lower authorities in invoking the provisions of section 145(3) of the Act. In both the years, where AO has applied 4% of the profit rate, we find that assessee has itself has shown G.P. Rate of 4.11% of the Assessment Year 2020-21, therefore, however, the AO has applied the net profit rate of 4% in both the years. The turn over of the assessee has fallen substantially from 17.14 Cr. in A.Y. 2019-20 to 91 lacs in A.Y. 2020-21 only and in A.Y. 2018-19 also the turnover was substantially high, thus, looking to these facts, in our considered view profit rate of 2%, is fair and reasonable for AY 2019-20 which would meet the end of the justice in the instant case. Accordingly, we direct the AO to apply the profit rate of 2.0% on the turn over declared by the assesse for A.Y.2019-20. With regard to A.Y.2020-21, the AO applied net profit rate of 4% and looking to the fact that in this year assessee itself shown G.P. rate 4.13% thus in our opinion net profit rate of 4% is reasonable. As a result, grounds of appeal for A.Y.2019-20 are partly allowed and for AY 2020-21 are dismissed. 8. In the result, the appeal of the assessee for A.Y.2019-20 is partly allowed and for A.Y.2020-21 is dismissed. Order pronounced on 19/02/2025. Sd/- Sd/-/- (ANUBHAV SHARMA) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 19/02/2025 PK/Ps 5 ITA Nos.11 & 12 /Del/2024 S.S.M. Forex Pvt. Ltd. vs. DCIT Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "