SARAVANAKUMAR CHITRADEVI,ERODE vs. ASSESSING OFFICER, CIRCLE

The assessee is an individual and filed the return of income for AY 2017-18 on 21.12.2017 declaring total income of Rs.16,45,360/-. The case was selected for scrutiny for the reason that "large turnover shown in ITR but audit report not filed" and the statutory notices were duly served on the

There is a delay of 136 days in filing the appeal by the assessee. The assessee has filed condonation petition/affidavit stating the reasons for delay in filing the appeal. Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the Hon’ble Supreme Court decision in the case of Collector, Land Acquisition Vs. MST.Katiji & Ors., (167 ITR 471) (SC), we condone the delay in filing the appeal and admit the appeal for adjudication.

The Ld. Authorized Representative (AR) of the assessee during the course of hearing submitted the following table to submit that the consistent trend of profitability of the assessee is in the range of 0.90% to 2.06%:

The Ld. AR submitted that even in the years where there is substantial increase in the turnover of the assessee, the profit margin is consistently in the above range only. The ld AR further submitted that the assessee is engaged in the business of in trading in textile dyes and chemicals which yields very low margin as compared to other businesses and therefore applying the margin of 8% under section 44AD without considering the actual margins is not tenable. The Ld. AR also submitted that during the year under consideration, assessee's spouse was seriously ill and therefore the assessee could not devote adequate attention to the assessment proceedings due to which the assessee did not furnish all the details called for by the AO. The ld AR drew our attention to the fact that the assessee's accounts are audited and the audit report is part of the records. The Ld. AR accordingly prayed that considering the consistent profit margin declared by the assessee which has been accepted

The Ld. Departmental Representative (DR), on the other hand, relied on the orders of the lower authorities.

We have heard the parties, and perused the material available on record. We notice that the assessee in the return of income filed has declared income of Rs. 16,45,360/-. We further notice that the A.O during the course of assessment has called on the assessee to furnish details pertaining to loan creditors, sundry creditors and expenses which the assessee did not substantiate fully. The A.O accordingly estimated the income of the assessee @ 8% of the gross receipts. The CIT(A) upheld the estimated income on the same ground. From the perusal of the details submitted by the assessee with regard to the net profit earned by the assessee in earlier as well as subsequent AYs, we notice that the assessee has been consistently earning profit in the range of circa 2%. Further the accounts of the assessee are also audited and the audit report u/s. 44AB of the Act has also been filed by the assessee (page 15 to 27 of paper book). It is also relevant to notice here that the AO while estimating the income @ 8% has made the addition as income from business which substantiate the contention that the AO has not questioned the genuineness of the business carried on the by the assessee. Considering the overall facts and circumstances including the past history of the net profit earned by the assessee and the nature of business carried on by the assessee, we are of the considered view that estimation of profit @ 8% of the turnover is on the higher side. In our view, estimation of profit @ 3% of the total turnover of the assessee would meet to the ends of justice. We therefore direct the AO to restrict the overall business income of the assessee by adopting 3%

In the result, the appeal of the assessee is partly allowed.