SH. VISHNU KANT,AGRA vs. ITO.-2(1)(5), AGRA

Addressing to ground No. 3 & 4, our attention was drawn by the ld. AR to para 3, 4 and 5 of the assessment order to the following effect : 3. On perusal of the Return of income filed for A.Y. 2015-16, it has, however, beer, noticed that in the 'computation of presumptive income from business' part of the Return the assessee has declared total sales of Rs, 12,50,0007- and net profit of Rs. 2,50,000/- by applying provisions of section 44AD of 'the Act', which comes to 20% of the sales declared. It, therefore, clearly shows that the assessee has suppressed the actual sales and net profit there-on. Had the Return not been picked up for scrutiny, the actual sales made by the assessee could not have been brought on record. As the assessee has himself shown net profit from the business @ 20% of the total sales declared in the Return by applying provisions of section 44-AD of 'the Act', in absence of audit report, the same procedure is being followed here to work out net profit on actual turnover shown in the Trading & P&L a/c. Thus, by applying N.P, rate of 20% of the actual turnover of Rs. 1,22,90,035/-, net profit works out to Rs. 24,58,007/-, which will be taken as the net profit from the business.

The assessee has shown cash balance of Rs. 85,000/- in the Return of income filed while computing 'presumptive income from the business1 whereas the cash balance of Rs. 2,77,280/- has been shown in the Balance-sheet filed for the accounting period ended on 31.3.2015. The assessee, vide Order-sheet entry dated 11.12.2017, was required to clarify the position. In reply it has been submitted that it was due to arithmetical mistake. The reply of the assessee in this regard is not convincing. Therefore, the difference of Rs. 1,92,280/- (i.e. 277280 -85000) will be added to the total income.

It was submitted by the ld. AR that once the Assessing Officer has accepted the total sales made by the assessee as well as the total purchases made, as is clear from paragraph No. 2 to 4 of the assessment order, then it is not open for the Assessing Officer to estimate the income of the assessee @ 20% on the turnover. It was submitted that the Assessing Officer as well as the CIT(A) have erred in applying the profit rate of 20% on the turnover in the light of above said submissions and also that the books of account have not been rejected.

We have heard the rival contentions and perused the material available on record. In our opinion, it requires to special knowledge in the case of a trader to find out the profit earned by the trader, as the profit is equal to the selling price received by the trader minus the cost of purchase of goods by such trader. In the present case, the total purchases made by assessee were for Rs.1,18,97,992/- and total sales were for Rs.1,22,90,035/-. Therefore, the profit, if any, would be Rs.1,22,90,035 – 1,18,97,992 = 3,92,043/-. In our view, the maximum profit earned by the assessee would be Rs.3,92,043/-. Admittedly, the assessee should have incurred some cost for selling the goods which are required to be given deduction thereof to the assessee. The assessee has not given any details of such cost of expenses incurred by the assessee As a result, we are required to estimate the cost incurred by assessee.

In the result, the appeal of the assessee is partly allowed.