COMMISSIONER OF INCOME TAX, ROHTAK vs. PARVEEN KUMAR MITTAL

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ITA/272/2011HC Punjab & HaryanaPHHC01095601201113 October 2011Author: MR. JUSTICE HEMANT GUPTA,MR. JUSTICE GURMEET SINGH SANDHAWALIA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court found no merit in the Revenue's argument. It noted that the assessee's return for assessment year 2003-04 was accepted under Section 143(1) with a net profit of 6.37%. In the subsequent year, 2004-05, the assessment under Section 143(3) allowed a net profit rate of 2.15%. Considering these previous years' accepted profit rates by the Revenue, the ITAT's decision to apply a net profit rate of 4% for the current year was deemed a question of fact. The Court held that no substantial question of law arose for its consideration. The appeal was dismissed.

What were the facts?

The Revenue is in appeal against an order of the Income Tax Appellate Tribunal (ITAT) dated January 20, 2011. The ITAT had set aside an order of the Commissioner of Income Tax (Appeals) which had applied a profit rate of 12% and instead adopted a profit rate of 4%. The Assessing Officer had initially assessed the net profit at 5%. The assessee had filed his return declaring a total income of Rs. 12,80,189/- for the assessment year in question. The assessee failed to produce books of accounts during the assessment and appellate proceedings.

What were the issues?

1. Whether the ITAT was right in directing to apply a net profit rate of 4% on gross receipts instead of 12% (enhanced by CIT(A) from 5% assessed by AO), considering the assessee failed to produce books of accounts during assessment and appellate proceedings? (Question of law) 2. Whether the ITAT was right in not following the ratio laid down in the Punjab & Haryana High Court's decision in *Parbhat Kumar, Contractor Sirsa* by reducing the net profit rate to 4% of gross receipts as against 12% decided by the CIT(A)? (Question of law) Assessee's contentions: Not explicitly recorded, but the ITAT considered the net profit rates accepted by the Department in previous assessment years (2003-04 and 2004-05) of 6.37% and 2.15% respectively, and applied 4% for the current year. Revenue's contentions: Relied on the High Court's decision in *Parbhat Kumar's* case to uphold the 12% net profit rate and argued that the ITAT should not have interfered with this rate, especially given the failure to produce books of accounts.

Which sections of the Income-tax Act were involved?

Section 260A,Section 143(2),Section 143(1),Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: October 13, 2011. The Commissioner of Income Tax, Rohtak ... Appellant(s) v. Shri Parveen Kumar Mittal ... Respondent(s) CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE G.S. SANDHAWALIA Present: Shri Inderpreet Singh, Advocate, for the appellant(s). Hemant Gupta

, J. (Oral): The revenue is in appeal under Section 260A of the Indian Tax Act, 1961 (for short the Act) arising out of the order passed by the Income Tax Appellate Tribunal, Delhi Bench, Delhi, dated 20.1.2011, whereby the order passed by the Commissioner of Income Tax (Appeals) applying the rate of profit @ 12% was set aside and instead rate of profit @ 4% was adopted. The revenue has claimed following substantial question of law:- “1. Whether the ITAT was right in directing to apply net profit rate of 4% on the gross receipts instead of 12% enhanced by learned CIT(A) from 5% as assessed by Assessing Officer in light of the fact that assessee failed to produce books of accounts during assessment as well as during both the stages of appellate proceedings?

2.

Whether the ITAT was right in not following the ratio laid down in the decision of Hon'ble Punjab & Haryana High Court in the case of Parbhat kumar, Contractor Sirsa by reducing the N.P. Rate to 4% of gross receipts as against 12% decided by learned CIT(A)?” The said questions of law are claimed on the fact that the assessee furnished his return on 31.10.2006 declaring total income of Rs.12,80,189/-. The Assessing Officer served notice under Section 143(2) and 143(1) of the Act and after giving opportunity, framed best judgment- assessment applying net profit for the year at the rate of 5% and made additions against the net profit. In appeal, the Commissioner of Income Tax, after serving a notice, applied net profit rate of 12% after relying upon a judgment of this Court in Parbhat Kumar's case, in ITA No.293 of 2008 decided on 14.11.2008. The assessee further filed an appeal before the ITAT, New Delhi (for short the Tribunal). The Tribunal considered the net rate of profit for the last assessment years, i.e., 2003-04 and 2004-05 wherein the income of the assessee has been assessed with net profit rate of 6.37% and 2.15% respectively. Considering the said rate of profit accepted by the Department in the previous assessment years, i.e., 2003-04 and 2004-05, applied the net profit at the rate of 4% in view of the rate adopted in the immediately preceding assessment year. The sole argument raised by learned counsel for the appellant is that this Court has upheld the rate of 12% as net profit in the case of civil contractor, therefore, there was no reason as to why such rate could be interfered with by the Tribunal. We do not find any merit in the said argument. The assessee's return for the year 2003-04 was accepted under Section 143(1) of the Act and when assessee has claimed 6.37% as net profit. In the subsequent year, i.e., 2004-05, assessment was completed under Section 143(3) of the Act with 2.15% as the net profit rate. Keeping in view the profits allowed by the revenue in the previous two assessment years, the assessment by applying rate of net profit as 4% is a question of fact. We do not find any substantial question of law arising for consideration of this Court.

The appeal is dismissed. [ Hemant Gupta ]

Judge

[ G.S. Sandhawalia ] October 13, 2011. Judge kadyan

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