RAJESH TRADING COMPANY,PUNE vs. CIT (APPEAL), NFAC

Brief facts of the case are that the assessee is a partnership firm engaged in the business of wholesale trading in Tobacco and Non tobacco products exclusively of ITC Ltd. Income of Rs.6,00,390/- declared in the return of income for A.Y. 2017-18 e-filed on 31.10.2017. Case selected for Complete scrutiny under CASS for “Large increase in unsecured loans during the year and large value cash deposit during demonetization period”. Valid statutory notices issued. During the course of assessment proceedings, ld. Assessing Officer examined the books of account and found certain shortcomings mainly for non-maintenance of quantitative record, copies of sale bills not provided, certain expenses were not accounted for in the regular books of account based on which ld. Assessing Officer rejected the book results and calculated Gross Profit of Rs.1,73,18,860/- @4.5% on the total turnover of the assessee at Rs.38.49 crore (approx.) and after reducing the gross profit declared by the assessee at Rs.49,44,575/- the remaining amount of Rs.1,23,89,791/- has been added in the hands of assessee. Ld. Assessing Officer also made addition for supressed business income at Rs.1,00,38,987/- and assessed the income at Rs.2,30,29,170/-.

Aggrieved assessee preferred appeal before ld.CIT(A) and partly succeeded as the addition for supressed business income was deleted. On the issue of estimation of Gross Profit rate, ld.CIT(A) gave part relief by applying Gross Profit @3% as against 4.5% applied by the Assessing Officer thereby sustaining the addition of Rs.66,16,838/-. Now the assessee is in appeal before this Tribunal against the part relief granted by ld.CIT(A) raising following grounds of appeal :

So far as ground No.1 is concerned, ld. Counsel for the assessee submitted that books of account are regularly maintained and same procedures are followed and therefore ld.CIT(A) erred in confirming the rejection of books of account. As regards application of Gross Profit @3% is concerned, she made reference to the other sister concerns and the Gross Profit and Net Profit chart for the sister concerns clearly showing that the Gross Profit has never gone above 2% and it has been consistently held that if the same business is carried out then for estimating the profits the Gross Profit rate applied for the preceding years should be taken into consideration.

On the other hand, ld. DR supported the order of ld.CIT(A) and submitted that the books of account were not properly maintained. No quantitative details were filed and therefore ld.CIT(A) has rightly given major relief to the assessee adopting Gross Profit @3% which deserves to be sustained on the facts of the instant case.

We have heard the rival contentions and perused the record placed before us. So far as rejection of books of account, we have gone through the assessment order as well as the finding of ld.CIT(A) and find that certainly there are certain shortcomings in the maintenance of regular books of account, quantitative details are not maintained and certain expenses are also found unaccounted therefore ld. Assessing Officer has rightly rejected books of account and therefore finding of ld.CIT(A) needs no interference on this aspect.

So far as Ground No.2 is concerned which relates to application of Gross Profit rate, we observe that ld.Assessing Officer applied 4.5% which has been scaled down to 3% by ld.CIT(A). Though ld. Assessing Officer has not given any other comparable for applying the Gross Profit @4.5%, before us ld. Counsel for the assessee has given reference to the Gross Profit and Net Profit rates chart of self, other sister concerns namely Bombay Stores, Bombay Cigarette Centre, Poona Cigarette Centre etc. On going through all these details, we notice that the Gross Profit rate is ranging from 1% to 1.96%. Admittedly, the assessee is into this business trade for past many years and the assessee has been subjected to scrutiny proceedings for past many years where majorly Gross Profit and Net Profit rates declared by the assessee have been accepted. Considering the trend of Gross Profit and Net profit rate of the assessee and sister concerns of assessee, we deem it appropriate to apply Gross Profit of 2% on the gross turnover of the assessee as against 3% sustained by ld.CIT(A). Accordingly Gross Profit of the assessee for the year is estimated at Rs.76,97,271/- and after reducing the Gross Profit declared by the assessee at Rs.49,29,069/-, addition is sustained at Rs.27,68,202/-. Assessee get part relief. Ground of appeal No.2 raised by the assessee is partly allowed.

Remaining grounds raised by the assessee are general in nature which do not warrant any adjudication.

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

The Pr. CIT concerned. विभ गीय प्रतितनधि, आयकर अपीलीय अधिकरण, “B” बेंच, 4. पुणे / DR, ITAT, “B” Bench, Pune. ग र्ड फ़ इल / Guard File. 5. आिेश नुस र / BY ORDER,