Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “SMC” BENCH, CUTTACK
Before: SHRI CHANDRA MOHAN GARG
O R D E R This appeal has been filed by the assessee against the order of Commissioner of Income Tax (Appeals), Sambalpur, dated 15.11.2019 for the assessment year 2013-2014 on the following grounds of appeal :-
1. For that, the order of the forum below is arbitrary, illegal, unjustified and erroneous and has been passed on improper application of mind, being devoid of merit as such deserves to be quashed in limine.
2. For that, the estimation of net income from wholesale business of electronic gadgets @ 2% of the gross turnover rejecting the book of account & invoking section 145 without referring to comparable cases and without considering past records of the appellant deserves to be set-aside being devoid of merit as illegal, unjustified & arbitrary.
3. For that, the estimation of income @2% of gross receipt deserves to be rejected and the returned income deserves to be accepted on the ground that, there cannot be any estimation of income on the basis of assumption, presumption, surmises or caprices in a best judgment assessment.
4. For the addition of Rs.2,99,675/- to the total income towards activation charges deserves to be deleted on the ground that, not only it is unjustified on the facts and in the circumstances of the case as contrary to legislative intentions but also, unwarranted as per the statutory provisions 5. For that, the appellant craves leave to add/alter/amend further grounds, if any, at the time of hearing of appeal. 2. There are two substantive grounds have been raised by the assessee, one is against the income estimated by the AO @2% of the gross receipts and another is against the addition of Rs.2,99,675/- on account of activation charges. Ground No.1 : 3. Facts relating to the ground No.1 are that the during the course of assessment proceedings, the AO has provided opportunity to the assessee to reconcile the difference between his books of accounts and the statements received from the 10 parties, which could not be explained by the assessee, therefore, the AO rejected the books of accounts and computed the business income of the assessee estimating the net profit @2% which comes to Rs.31,46,152/-. In the appellate proceedings, the CIT(A) observed that assessee has also not furnished ledger accounts of the 28 parties in his own books before the AO, accordingly, he upheld the action of AO. Now, the assessee is in further appeal before the Tribunal. 4. Ld. AR before us submitted that both the authorities below have committed gross error in estimating the net income from wholesale business of electronic gadgets @ 2% of the gross turnover rejecting the book of account & invoking section 145 of the Act without referring to comparable cases and without considering past records of the appellant deserves to be set-aside being devoid of merit as illegal, unjustified & arbitrary. Therefore, ld. AR submitted that the estimation of income @2% of gross receipt deserves to be rejected and the returned income deserves to be accepted on the ground that, there cannot be any estimation of income on the basis of assumption, presumption, surmises or caprices in a best judgment assessment.
On the other hand, ld. DR relied on the orders of authorities below.
On careful perusal of the assessment order, I find that the AO during the course of assessment proceedings found that the particulars of income disclosed in return of income are not confirmable and whether the books of account are maintained properly and correctly by the assessee is also not ascertainable and verifiable, therefore, the AO rejected the books of accounts invoking the provisions u/s.145(3) of the Act estimating the net profit @2% of the total gross turnover. The CIT(A) also upheld the action of AO in rejecting the books of account and estimating the net profit @2% by the AO. In view of the facts and circumstances of the case, I am of the view that the rejection of books of accounts is correct and justified. However, with regard to estimation of net profit @2% of total turnover, in my considered opinion, is highly excessive in view of the earlier and subsequent years profit which was 0.33% in A.Y.2012-2013 and 0.41% of the turnover in A.Y.2014-2015. Ld. DR submitted that the net profit estimation by the AO is quite correct and justified. He drew the attention of the Bench to para 4 at page 4 of the CIT(A) order, and submitted that some relaxation may be given if it is found necessary, just and proper.
Keeping in view the entire facts and circumstances of the case, I find it appropriate to estimate net profit @1% of the total turnover and the AO is directed to estimate the same accordingly. Ground No.1 of assessee is partly allowed. Ground No.2: 7. Ld. AR submitted that the addition made by the AO on account of activation charges of Rs.2,99,675/- and upheld by the CIT(A) is not justified as there is no basis of making the above addition has been given by the AO in the assessment order. Therefore, ld. AR requested to delete the same.
Ld. DR, on the other hand, relied on the order of authorities below.
On careful perusal of the assessment order as well as appellate order, I find that the AO has made addition of Rs.2.99 lakhs in last part of the assessment order but no basis has been given therein. Even this issue was not adjudicated by the CIT(A) in the appellate proceedings. In view of the above, I restore this issue to the file of AO for fresh adjudication after affording due opportunity to the assessee. Thus, ground No.2 of the assessee is allowed for statistical purposes.