PARADEEP PARIVAHAN PVT. LTD.,JAGATSINGHPUR vs. ACIT, CIRCLE-1(1), CUTTACK

The facts of the case are that the assessee derives income from sales, service, transportation, contract & sub-contract work under the name and style of M/s Paradeep Parivahan Private Limited. The assessee filed return on 08.10.2012 declaring income of Rs.2,81,20,620/-. The case was selected for scrutiny and the statutory notices were issued to the assessee. During the course of assessment proceedings, the AO noticed that the assessee has derived income from various sources and balance sheet and profit & loss account were produced but there were no details available as per the business carried on by the assessee in different sectors. The assessee was asked to produce separate balance sheet and profit and loss account for the different business carried on by the assessee. The AR of the assessee expressed was unable to produce separate set of books, purchase and sales register, cash book and profit and loss account and balance sheet and assessee was also asked to produce the bills and vouchers but he could not produce bills and vouchers relating to the expenses booked in the profit and loss account and he produced only ledger accounts. Ld. AR of the assessee could not make compliance to the requirement of the AO viz. separate set of books of accounts, cash book, ledger account, bills and vouchers, purchase and sales register, expenditure vouchers and separate financial details etc. Accordingly, he was not satisfied regarding correctness and 3 completeness of the account of the assessee and rejected the books of accounts of the assessee as per Section 145(3) of the Act and framed assessment u/s.143(3) of the Act. The AO applied net profit @7% on the gross receipts of Rs.40,22,57,024/- excluding other income shown by the assessee of Rs.11,85,712/- i.e. Rs.40,10,71,312/-. It was noticed by the AO that the assessee had shown net profit @5.53% before depreciation of gross receipts of Rs.40,10,71,312/-. Accordingly, the Assessing Officer estimated net profit @7% on total receipts excluding other income shown by the assessee and completed the assessment.

Feeling aggrieved from the order of AO, the assessee filed appeal before the CIT(A). The CIT(A) after considering the submissions of the assessee, restricted the net profit rate @ 6.5% of the total gross receipts of the assessee as against 7% made by the AO and resultantly he gave relief to the assessee of Rs.19,28,284/-.

Feeling aggrieved from the order of CIT(A), the assessee filed appeal before the Income Tax Appellate Tribunal.

Before us, ld A.R. reiterated the submissions made before the CIT(A) which is placed on record. Ld. AR also submitted that in the preceding assessment year the CIT(A) has accepted net profit @5% of the gross receipt in I.T.Appeal No.141/2014-2015, vide order dated 26.02.2016. Therefore, CIT(A) is not justified to estimate net profit @6.5% in the impugned year under consideration. The ld. AR of the assessee conceded that for the impugned year the net profit rate may be restricted to 6% of the total turnover undertaken during the year by the assessee.

On the other hand, ld. DR submitted that ld. CIT(A) has rightly restricted the profit @6.5% keeping in view the nature of the business of the assessee, therefore, he justified the order of the CIT(A), which should be upheld.

After hearing both the sides and perusing the entire material available on record, we noticed that the assessee is engaged in various sectors of business wherein the rate of net profit may not be at a similar line. We also notice that the assessee could not produce complete bills and vouchers and sector-wise books of accounts before the AO. The AR of the assessee also produced the CIT(A)’s order for assessment year 2011-2012 in which the ld. CIT(A) has accepted 5% net profit on the gross receipts. Ld. DR also could not controvert with regard to filing of any appeal by the department against the acceptance of net profit @5% by the CIT(A) in the immediate preceding assessment year as mentioned above. Looking to the voluminous nature of the business carried on by the assessee and considering the arguments advanced by both the sides, we restrict the net profit to 6% on the gross turnover of the assessee of Rs.40,10,71,312/- as against 6.5% applied by the CIT(A) on gross receipts. We further make it clear that from the net profit of 6%, no further any depreciation shall be allowed.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 26/07/2019. [ (C.M.GARG) (L.P.SAHU) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य/ ACCOUNTANT MEMBER कटक Cuttack; ददनांक Dated 26/07/2019 प्र.कु.मम/PKM, Sr.P.S.