DCIT-14(1)(1), MUMBAI vs. MINIBOSS CONSULTANCY PVT. LTD., MUMBAI

This appeal by the revenue is preferred against the order dated 16/08/2024 by NFAC, Delhi {hereinafter “the ld. CIT(A)”} pertaining to AY 2021-22.

The grievance of the revenue reads as under:- “1. Whether on the facts and in the circumstance of the case, the Ld. CIT(A) having concluded that the rejection of the books of account of the assessee on the reasons given by the Assessing Officer was reasonable but erred in holding that estimation of the net profit at 20% of the total sales was not reasonable considering that competitors in similar line of business are much less? The Ld. CIT(A) erred in then directing that re- computation of profit be done at 5% and since assessee had declared profit at 3.36%, further addition at1,64% be made. 2. Whether on the facts and in the circumstance of the case, the Ld. CIT(A) ought to have considered the detailed findings of the fact brought out by the Assessing Officer in the assessment order and having accepted that the rejection of the books of account was reasonable, the action of the Assessing Officer in estimating profit at 20% of the total sales should have been confirmed by the Ld. CIT(A)? 3. Whether on the facts and in the circumstance of the case, the Ld. CIT(A) has erred in restricting the addition to 1.64% of the total sales without bringing out any 2 details as to how the conclusion was reached that the competitors in similar line of business as assessee was much less and the gross profit estimation at 20% was not reasonable.

Whether on the facts and in the circumstance of the case, the Ld. CIT(A) erred in deleting the addition to fixed assets of Rs.19,09,890/- not explained by assessee with supporting evidence on the ground that once gross profit addition is made at 1.64% more than that declared by assessee, the addition of Rs. 19,09,890/- will amount to double addition?

Whether on the facts and in the circumstance of the case, the Ld. CIT(A) failed to appreciate that the additions of Rs.24,34,200/- & Rs. 19,09,890/- were made on different reasons not connected with the book results of the assessee and, hence, same cannot be said to be covered in the further addition at 1.64% of the gross profit?

The Appellant prays that the order of the CIT(A) be set aside on the above grounds and that of the Assessing Officer be restored.

The appellant craves leave to amend, or alter any grounds or add a new ground, which may be necessary.”

None appeared on behalf of the assessee in spite of notices. Therefore, we decide to proceed ex-parte. The ld. D/R was heard at length and orders of the authorities below carefully perused.

Briefly stated the facts of the case are that the assessee filed its return of income on 15/02/2022 declaring income of Rs. 40,51,740/-. The return was selected for scrutiny and accordingly statutory notices were issued and served upon the assessee. During the course of scrutiny assessment proceedings, the AO found that the assessee has made substantial purchases from suppliers who are either non-filer(s) or have filed non-business ITR or reflected a substantially lower turnover in ITR as compared to turnover shown in GSTR 1 return. The assessee was issued a showcause notice to furnish details of its nature of business 3 activities carried out during the year under consideration. In its reply, the assessee submitted that it conducts marketing activities either for self or for client like insurance companies some other comparable companies etc., which involves activities like setting up stalls/kiosks/ temporary structure along with stage/light/sound etc. After considering the detailed submissions made by the assessee, the AO observed that in spite of several opportunities, the assessee has not furnished the requisite details. Every time the assessee apologized for not filing the details, the AO was left with no choice but to hold that the assessee remained non- compliant as required in the notices u/s 142(1) and reminders during the entire assessment proceedings. The returned income was assessed at Rs. 2,86,40,872/- after making additions on account of bogus purchases Rs. 2,02,45,042/-. In respect of other liabilities of Rs. 24,34,200/- and in respect of additions in the capital account Rs. 19,09,890/-. 4.1. The assessee challenged the additions before the ld. CIT(A) contending that once the AO has rejected the books of accounts, at the most he should have estimated the profit and not made additions separately. After considering the facts and the materials available on record, the ld. CIT(A) was convinced with the rejection of books of accounts but observed that the estimation of profits @ 20% on total sales is very high and further accepted that once the profit is being estimated, no separate addition should have been made. While reducing the profit addition to 5% of the sales, the ld. CIT(A) observed that the AO has not considered comparatives in similar line of business and directed the AO to re-compute the profit @5% and since the assessee had already returned 3.36%, the ld. CIT(A) directed the AO to restrict the addition to 1.64% of the turnover.