NABAGHANA PANDA,JAJPUR vs. ITO, JAJPUR WARD,, JAJPUR

Ld. Counsel of the assessee submitted that in both the appeals of the assessee, the authorities below have estimated net profit of assessee @8% of the gross turnover, which is illegal, arbitrary and liable to be set aside as the assessee is doing retail business of cement, ms rod etc., wherein profit percentage is very low in comparison to the other stream of business. Placing reliance on the order of this Bench in the case of Smt. Anima Mohapatra Vs. ITO, in order dated 2 ITA No.247&248/CTK/2019 12.04.2017 for A.Y.2010-2011 and in the case of same assessee passed in ITA No.510/CTK/2012, order dated 22.02.2013 for A.Y.2008-2009, ld. counsel submitted that in the retail business of cement and ms rod the profit percentage is very low which cannot be estimated more than 2% in view of the orders of the Tribunal for the assessee in the similar line of business, therefore, net profit estimated by the AO and confirmed by the ld. CIT(A) @8% of the total turnover, may kindly be reduced to 2% of gross turnover, granting reasonable and justified relief to the assessee.

Replying to the above, ld.Sr. DR vehemently pointed out that the business modus operandi in the case of Smt. Anima Mohapatra is not retail business of cement and ms rod etc. but she is doing wholesale business of cement and ms road, which is amply clear from both the orders and from the statement of facts submitted by the assessee in para (a), the assessee himself writes that the assessee is engaged in trading of cement and ms rod etc. on retail basis during the year under appeal, therefore, net profit percentage applied to a case of wholeseller cannot be applied to a case of retailer, therefore, profit estimated by the AO and confirmed by the CIT(A) @8% of gross turnover may kindly be confirmed. Alternatively, ld. Sr. Departmental Representative, in all fairness, submitted that if it is found just and proper, then the Bench may take a reasonable view and he left this issue to the wisdom of the Bench.

On careful consideration of the rival submissions of both the parties, first of all, I may point out that the ld. counsel of the assessee candidly submitted that except prayer to reduce the percentage for estimation of 3 net profit of the assessee, the assessee has no other grievance, therefore, this issue may kindly be adjudicated and other grievance of the assessee may kindly be deemed as not pressed. Therefore, I proceed to adjudicate the sole grievance of the assessee regarding estimation of net profit of gross turnover.

First of all, I may point out that from the submissions of facts, it is amply clear that the assessee is engaged in the business of retail trading of cement and ms rod etc. whereas in the case of Smt. Anima Mohapatra, the assessee was in the business of wholesale trading of cement and ms rod wherein net profit @2% of the gross turnover has been confirmed by the Tribunal. Therefore, I am in agreement with the contention of the ld. Sr. DR that the net profit percentage adopted in a case for whole-seller cannot be applied to a case of retailer which earned higher profit in comparison to a whole-seller. In the present case, the AO has estimated the net profit @8% of the total turnover which has been confirmed by the ld. CIT(A) and the sole grievance of the assessee is revolving around this estimation by praying that net profit may kindly be reduced to 2% of gross turnover.

I have already noted above that the net profit percentage confirmed by this Bench in a case of whole-seller of cement, ms rod etc. cannot be applied to the present assessee being engaged in the retail trading of cement and ms rod. etc., therefore, I respectfully hold that the ratio of the orders of the coordinate bench in the case of Anima Mohapatra (supra), does not apply to the present case.

However, keeping in view the entire facts and circumstances of the case and the grievance of the assessee, I am of the considered view that the profit percentage of a retailer is obviously higher than the net profit earned by a whole-seller in the similar line of business but estimation of net profit @8% is also very excessive and higher which deserves to be reduced to a reasonable percentage to meet the ends of justice. Therefore, keeping in view the facts and circumstances of the present case and foregoing discussion, I find it just, proper and reasonable to reduce the net profit percentage @4% of gross turnover of assessee undertaken during the relevant financial year and, therefore, the AO is directed to estimate the net profit @4% of gross turnover of the assessee undertaken from the F.Ys.2012-2013 and 2013-2014 relevant to assessment years 2013-2014 & 2014-2015. This direction has been given keeping in view the fact that if in the wholesale trading of cement and ms rod, the profit percentage is 2% then in the retail trading of same business, the profit must be double which comes to 4% of the total turnover. Accordingly, the AO is directed to estimate the net profit @4% of the total gross turnover for both the assessment years under consideration.