RAJENDRA MADHAVRAO BARHATE,AHMEDNAGAR vs. INCOME-TAX OFFICER, WARD - 2, AHMEDNAGAR

This appeal is time barred by 56 days. An affidavit has been filed by the assessee stating the reasons which led to the late filing of the appeal. I am satisfied with such reasons. The delay is condoned and the appeal is admitted for hearing on merits.

The only issue raised in this appeal is against confirmation of addition of Rs.18,22,754/- made by the AO on account of estimated amount of profit from business operations.

Briefly stated, the facts of the case are that the assessee carried on the onion business as commission agent. Return of income was filed declaring total income at Rs.7,01,880/-. The AO found certain discrepancies in books of account. Invoking the provisions of section 145A of the Act, he rejected the books of account and estimated the assessed income at 1% of total deposits in various bank accounts amounting to Rs.26,75,08,543/-. This resulted into an addition of Rs.18,22,754/-, being such 1% net profit as reduced by the amount of profit shown by the assessee at Rs.8,53,051/-. The ld. CIT(A) dismissed the appeal. 5. I have heard both the sides through virtual court and have gone through the relevant material on record. The assessee is admittedly, engaged in the business of onions as commission agent. The total gross receipts of assessee from said business stand at Rs.59,52,372/-. The AO correctly found certain discrepancies in the books of accounts and rightly rejected the same. After rejecting the books of account, it becomes obligatory on the part of AO to determine the income in a fair and reasonable manner and not on ad hoc basis. It is not understandable as to how the AO proceeded to apply 1% of net profit on the deposits in various bank accounts amounting to Rs.26.75 crore without considering that he was dealing with a case of an assessee who was in the business as commission agent. Any percentage of profit ought to have been applied on the gross receipts from business operations and not on amount of bank deposits. A chart has been placed on record showing profit rates of preceding two years. For the A.Y. 2013-14, the assessee declared net profit of Rs.4.73 lakhs. The AO made an addition of Rs.1,50,000/- and after adding such amount of addition, the assessee‟s net profit percentage comes to 16.01%. For the immediately preceding assessment year, net profit percentage was 15.10% of gross receipts. For the year under consideration, the assessee has shown net profit at 14.33% of gross receipts. As net profit percentage shown by the assessee in the current year is less than that of preceding two years and the books of account are held to be rightly rejected, I deem it fit to apply net profit percentage of 16.01% to gross receipts of Rs.59,52,372/-, which is higher between the profit rates of immediately preceding two years.

In the result, the appeal is partly allowed.