DILIP TILLUMAL LALWANI,AMALNER vs. DY. COMMISSIONER OF INCOME-TAX, CIRCLE 1, JALGAON, JALGAON

The assessee in the grounds of appeal along with challenging the validity of assessment proceedings as well as rejection of books of account u/s.145(3) of the Act has also raised the grounds for the arbitrary estimation of Gross Profit at 10% simply on the basis of unsubstantiated market data while ignoring the average profit rate of 5.67% earned by the assessee in previous year.

During the course of hearing, assessee did not make any specific arguments on the legal issue challenging the validity of assessment proceedings and therefore the legal grounds raising the validity of assessment proceedings are dismissed as not pressed.

So far as merits of the case are concerned, facts in brief are that the assessee is an individual running a Liquor shop in the name of M/s. H.Tillumal and Company, Amalner, District Jalgaon. Income of Rs.24,56,920/- declared in the return of income for A.Y. 2017-18 furnished on 09.03.2018. Return has been filed pursuant to search action u/s.133A of the Act filed on 23.03.2017. Thereafter after valid serving of notices u/s.143(2) and 142(1) of the Act assessment proceedings have been carried out. Ld. Assessing Officer has pointed out certain defects in the books of account which the assessee failed to rebut and ld. Assessing Officer concluded the proceedings estimating GP rate at 10% as against 5.67% declared by the assessee and made addition of Rs.31,70,171/- .

Aggrieved assessee preferred appeal before ld.CIT(A) but failed to succeed and the GP rate of 10% applied by the Assessing Officer was held to be justified. Now the assessee is in appeal before this Tribunal.

Ld. Counsel for the assessee has referred to the audited financial statement, gross profit rate chart for the preceding and succeeding years submitted that 10% GP rate is most arbitrary and by applying such GP rate even the net profit rate will be more than 8% which is not possible in this trade of business. Referring to gross profit rate chart of the assessee from A.Y. 2013-14 to A.Y. 2024-25 he requested for applying fair estimation.

On the other hand, ld. DR supported the order of ld.CIT(A).

We have heard the rival submissions and perused the record placed before us. The only issue for our consideration is against the estimation of gross profit rate. We observe that the assessee has declared Gross Profit rate at 5.67%. Ld. Assessing Officer and CIT(A) have applied 10% Gross Profit rate. So far as rejection of books of account is concerned, there were certain discrepancies noticed by the ld. AO resulting thereto section 145(3) of the Act has been invoked and we fail to find any inconsistency in such action of the Assessing Officer.

So far as the estimation of Gross Profit rate is concerned, we have gone through the Gross Profit rate chart for F.Y. 2013-14 to F.Y. 2024-25, we observe that the GP rate of the assessee is ranging from 4.79% to 6.47% and Net profit is ranging between 3.11% to 4.53%. Gross revenue for the year is not in dispute. Books of account are audited. By way of estimation at 10% Gross Profit rate the addition of Rs.13,71,171/- has been made by the Revenue authorities and which if added to the Net profit of Rs.25,88,496/- would leave behind net profit of Rs.57,58,667/- resulting into overall net profit rate of more than 8%. On due consideration of the estimation made by the Revenue authorities, assessee’s past financial trend the Net Profit rate arrived at after considering the impugned addition will be much higher . We also note that ld. Assessing Officer has not provided any other comparables of the retail trade business for benchmarking this Gross profit rate of 10%. Therefore, considering the facts and circumstances and the consistent business carried out by the assessee, we deem it proper to estimate the Gross Profit at 7% as against 10% estimated by the lower authorities. Resultantly, the addition of only Rs.9,74,401/- is sustained. Finding of ld.CIT(A) is set aside and grounds of appeal raised by the assessee are partly allowed.

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