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Income Tax Appellate Tribunal, DELHI “SMC” BENCH: NEW DELHI
Before: SHRI KUL BHARAT
ORDER PER KUL BHARAT, JM : This appeal filed by the assessee for the assessment year 2011-12 is directed against the order of Ld. CIT(A)-20, New Delhi dated 14.03.2016. The assessee has raised following grounds:-
“That the appellate order as passed is against law and facts of the case.
That the learned Commissioner of Income Tax (Appeals) has erred in upholding the rejection of books of accounts when all the details and reasons were placed on record. 3. That the learned Commissioner of Income Tax (Appeals) has erred in ignoring the arguments put forward by the appellant vide their letter dated 16.06.2015. 4. That the learned Commissioner of Income Tax (Appeals) has erred in rejecting Ground No.7 by not allowing deduction u/s. 40(b)(v) of the I.T. Act which is a statutory deduction which the Commissioner of Income Tax (Appeals) was bound to allow. 5. That the appellate order as passed is not sustainable on the facts and circumstances of the case.” 2. The facts in brief are that in this case, the assessee filed its return of income of Rs.1,44,500/- through electronic mode on 29.09.2011 and the same was processed u/s 143(1) of the Income Tax Act, 1961 [“the Act”] on 28.01.2012. Subsequently, the case was selected for scrutiny and the assessment u/s 143(3) of the Act was framed vide order dated 25.03.2014.
While framing the assessment, the Assessing Officer [“AO”] noticed that the assessee was engaged in the business of trading in cosmetics and toiletry goods. During the assessment proceedings, the assessee declared total sales of Rs.98,33,338/- and declared gross profit rate of 6% which in the preceding Financial Year was at 80.56% and the net profit for the year under consideration was Rs.5,82,243/-. The AO called upon the assessee to explain. In response thereto, it was stated that during the course of survey operation in the preceding year, excess stock was found. Therefore, under the exceptional circumstances, the profit was declared higher. The AO noticed certain discrepancies in the books of accounts related to availability of cash balance on 31.03.2012 and as on 31.03.2014. Further, the Assessing Officer noted that no explanation with regard to these variations in stock register and bills was filed. It is also recorded that the assessee vide order sheet entry dated 24.03.2014, agreed to surrender an amount of Rs.5,00,000/- as additional income for taxation. The AO rejected the books of accounts of the assessee and computed profit @ 8% of the total turnover which worked out to Rs.7,86,667/-. Thus, the AO assessed the income of the assessee at Rs.7,86,667/- against the returned income of Rs.1,44,500/-.
Aggrieved against this, the assessee preferred appeal before Ld.CIT(A) who after considering the submissions, dismissed the appeal.
Now, the assessee is in appeal before this Tribunal.
The only effective ground in this appeal is regarding the upholding of action of the Assessing Officer and not allowing the deduction u/s 40(b)(v) of the Act.
Ld. Counsel for the assessee submitted that the authorities below failed to appreciate the facts in right perspective. He submitted that there was no justification for rejection of books of accounts and applying the profit rate @ 8%. He submitted that the Assessing Officer even otherwise, also failed to give deduction regarding remuneration to the partners. Therefore, he prayed that impugned addition may be deleted.
On the contrary, Ld.Sr.DR opposed these submissions and supported the orders of the authorities below. He contended that the assessee himself had surrendered an amount of Rs.5,00,000/- before the authorities. Now, the assessee has taken a different stand.
I have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. I find that the Assessing Officer has noted that the assessee vide order sheet entry dated 24.03.2014 agreed to surrender an amount of Rs.5,00,000/- as additional income for taxation. Ld.CIT(A) decided the issue by observing as under:-
6.1. “I have considered the addition ground of appeal as mentioned above. However, I do not find any merit in it as the A.O has estimated the net profit at the rate of 8% while taking into account all the expenditure incurred for earning the income of the assessee that includes the salary expenditure incurred. Therefore, the additional ground of appeal is dismissed.”
9. Looking to the facts and circumstances of the present case where the assessee himself had surrendered Rs.5,00,000/- as an additional income.
The assessee has also filed gross profit and net profit chart for Assessment Years 2011-12, 2010-11, 2009-10 and 2008-09. Considering the totality of the facts, the net profit as directed to be adopted an average of three years i.e. Assessment Years 2008-09, 2009-10, 2011-12 that comes to 3.85% however, the assessee has declared net profit @ 5.90% hence, same is not disturbed. The assessee had itself surrendered an additional income of Rs.5,00,000/- on account of the discrepancies pointed out by the AO. After adding this amount to the income declared by the assessee, the total income comes to Rs.6,44,500/-. The assessee has claimed partners salary of Rs.4,41,743/- which has not been considered by the authorities below. The assessee had specifically raised this ground however, did not adjudicate upon the same. I find merit into the contention of the assessee that the AO had only doubted about the correctness of the salary of the partners related to Sh.
Rajesh Gupta. Therefore, I direct the Assessing Officer to allow this claim of the assessee as per law and re-compute the income of the assessee. The ground raised by the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 22nd March, 2022.