MU SAMPATH RAJA,ANTHIYUR vs. COMMISSIONER OF INCOME-TAX (APPEALS), ERODE

Before us, the assessee is noted to have contested only the reasonableness of the estimation of profit sustained by Ld CIT(A). Thus, the Ld AR has restricted his plea for reasonable estimation of the income. According to the Ld.AR, the assessee is only a trader of perishable fruits like water- melon, seasonal fruits etc. Hence, he urges that considering the business of the assessee, the profit estimation of 8% is high and unreasonable. In this regard, he also brought to our notice that barring the captioned years under consideration & AY 2019-20 (where assessee has filed ITR u/s 148), the assessee has filed ITR u/s.139(1)/139(4) of the Act for AY 2018-19, AYs 2022- 23 to 2025-26. And also that assessee’s books of account have been duly audited for subsequent assessment years, barring AY 2017-18. In order to show that impugned profit estimation of 8% is high, assessee has filed the chart below, which captures the profit for the assessment years from AY 2018-

From a perusal of the chart supra, and relevant documents, it is noted that other than the relevant assessment year 2017-18, the assessee’s books are regularly audited. And from a perusal of the earlier/subsequent results of the assessee, it is noted that net-profit shown by the assessee is in the range of 1.0039 to 2.4001%, whereas the AO has estimated the net-profit at 8% which according to us, is not based on any relevant material or comparables. Hence, reasonable profit rate needs to be adopted for computing the profit of the assessee. And for that we take note of the assessee’s book results which are found to be audited (supra), which information can be a guide to estimate the income of assessee. Hence we find from the history of the profits declared by the assessee’s shown (supra) that the average net profit ratio works out to approximately 2% on the turnover of assessee. Hence considering the nature of business of assessee, and audited book results of assessee, who deals with perishable fruits, vegetables etc, net profit of 3.5% shall be estimated as against the 8% estimated by AO. Hence, we restrict the impugned addition at 3.5% of the turnover and direct the AO to compute the net-profit @ 3.5% of the total turnover as income of the assessee from the vegetable/fruit trading business.

Since we find that the AO has made similar estimation of profit at 8% of the turnover for AY 2020-21 and there is no change in facts and law, following our order for AY 2017-18 (supra), we restrict the impugned addition for AY 2020-21 at 3.5% of the turnover and hence, direct the AO to compute the net-profit @ 3.5% of the total turnover as income of the assessee from the vegetable/fruit trading business.

It is unnecessary to go into great detail in these matters for there is a statement in the order of the Tribunal, the fact-finding authority, that reads thus : "We will straightaway agree with the assessee's submission that the Income-tax Officer had not given to the assessee proper opportunity of being heard." 2. That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of selling out his case. We, therefore, do not agree with the Tribunal and the High Court that it was not necessary to set aside the order of assessment and remand the matter to the assessing authority for fresh assessment after giving to the assessee a proper opportunity of being heard. 3. Two questions were placed before the High Court, of which the second question is not pressed. The first question reads thus: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not setting aside the assessment order in spite of a finding arrived at by it that the Income-tax Officer had not given a proper opportunity of hearing to the assessee?"

The appeals are allowed. The order under challenge is set aside. The assessment order, that of the Commissioner (Appeals) and of the Tribunal are also set aside. The matter shall now be remanded to the assessing authority for fresh consideration, as aforestated. No order as to costs.