SANTOSH KUMAR PRUSTY,BHUBANESWAR vs. ITO, WARD-2(1), BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

ITA No.256/CTK/2018 Assessment Year : 2014-15

Santosh Kumar Prusty, Plot Vs. ITO, Ward 2(1), No. LB-44, Bhimatangi, Bhubaneswar. H.B,. Colony, Old Town, Bhubaneswar. PAN/GIR No.ABWKPP 0109 G (Appellant) .. ( Respondent)

Assessee by : Shri Akshaya Jethi, AR Revenue by : Shri Subhendu Dutta, DR

Date of Hearing : 25/01/ 2019 Date of Pronouncement : 25 /01/ 2019

O R D E R This is an appeal filed by the assessee against the order of

the Commissioner of Income Tax(Appeals)-1, Bhubaneswar dated

9.2.2018 for the assessment year 2014-15.

Commissioner of Income Tax(Appeals), Cuttack was not justified

in reducing the net profit to 4% as the net profit rate as per audit

report is 2%. Therefore, the Assessing Officer may be directed to

estimate net profit @ 2%.

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lower authorities and materials available on record. Ld A.R. of the

assessee submitted that the assessee filed the return of income

on the basis of unaudited accounts and after obtaining audit

report, the assessee could not file the revised return of income

due to ignorance and lack of knowledge. Ld A.R. submitted that

the assessee is in the business of trading in recharge vouchers of

mobile, wherein, the assessee purchased recharge vouchers from

franchise holders and thereafter sales it to the retailers located in

various part of the city, wherein, profit margin after deducting

operational cost is very minimum i.e. 2%. Therefore, the

Assessing Officer may kindly be directed to reduce the net profit of

the assessee to 2%, which is quite reasonable and justified.

the order of the first appellate authority, submitted that the

CIT(A) has taken a very reasonable and justified approach by

reducing the net profit estimated by the Assessing Officer from

8% to 4% and no further reduction can be allowed. Therefore,

the appeal of the assessee be dismissed.

record and as per findings arrived at by the lower authorities, I

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observe that the Assessing Officer has estimated the net profit at

8% which has been reduced by the CIT(A) to 4%. Undisputedly,

the turnover shown by the assessee in the computation of income

was enhanced in the audit report and the assessee did not file any

revised return so far. Ld D.R. has not disputed the fact that

during the immediately previous and succeeding assessment year,

the net profit shown by the assessee was neither 8% nor 4% and

the net profit was lesser. However, the peculiar position in the

present case is that there is difference between the turnover

shown by the assessee in the return of income and the turnover

taken by the auditor in the subsequent audit report. Keeping in

view the entire facts and circumstances of the case, I am of the

considered opinion that in the trading of mobile recharge vouchers

i.e. in the capacity of semi-wholesaler, wherein, the assessee

purchases bulk quantity of recharge vouchers from mobile

franchise dealers and sales to the small retailers located in the

various parts of the city, the profit cannot be estimated either 8%

or 4%. At the same time, I also take note of the fact that there

was dissimilarity in the turnover shown by the assessee in the

return of income and audit report. Keeping in view the entirety of

the facts and circumstances of the case, I am of the view that the

possibility of leakage of revenue should be taken into account and

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simultaneously the net profit earned by the assessee in such kind

of trading akin to the assessee should also be kept in mind while

estimating the net profit on the total turnover of the assessee. In

my view, the ends of justice would meet, if the net profit of the

assessee is estimated @ 3% of the total turnover of the assessee

in the audit report. I hold so. Consequently, the Assessing Officer

is directed to recalculate the net profit of the assessee as per my

direction given above

Order pronounced on 25/01/2019. Sd/- (Chandra Mohan Garg) JUDICIALMEMBER Cuttack; Dated 25/01/209 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Santosh Kumar Prusty, Plot No. LB-44, Bhimatangi, H.B,. Colony, Old Town, Bhubaneswar. 2. ITO, Ward 2(1), The Respondent. Bhubaneswar 3. The CIT(A)-1, Bhubaneswar 4. Pr.CIT- 1, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// By order

Sr. Pvt. Secretary, ITAT, Cuttack

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