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Income Tax Appellate Tribunal, DELHI BENCH : B : NEW DELHI
Before: SHRI R.K. PANDA & MS SUCHITRA KAMBLE
ORDER
PER R.K. PANDA, AM:
This appeal filed by the Revenue is directed against the order dated 30th December, 2016 of the CIT(A)-2, New Delhi, relating to assessment year 2010-11.
Facts of the case, in brief, are that the assessee is a company engaged in the business of providing manpower supply, data entry services and market research, etc. It filed its return of income on 31st March, 2011 declaring total income at Rs.27,60,390/-. The case was selected for scrutiny. However, a perusal of the assessment order shows that on seven occasions there was non-attendance from the side of the assessee starting from the date 08.09.2011 to 15.02.2013. Subsequently, towards the fag end of the assessment proceedings, the assessee filed certain details, but, neither the books of account were produced nor full details were filed before the AO to verify the genuineness of the claims made in the P&L Account and the correctness of the income as computed by the assessee remained unsubstantiated. The AO, therefore, rejected the book results and determined the profit at Rs.2,22,81,308/- by estimating the profit at 15% of the gross receipt at Rs.14,85,42,058/-.
Before the CIT(A), the assessee made elaborate arguments and filed certain additional evidences under Rule 46A of the IT Rules, 1962. The ld.CIT(A) forwarded all these details to the AO and called for a remand report. The AO, in her remand report stated that the documents submitted by the assessee were not relevant for the verification of the expenses and that in the absence of proper documents the claim of various expenses debited in the Profit & Loss Account remained unverifiable. However, the ld.CIT(A) accepted the additional evidences and, thereafter, accepted the offer of the assessee of additional income of 1% of the turnover in order to buy peace and to avoid future litigation. He accordingly directed the AO to make a further addition of 1% to the total turnover of Rs.14,85,42,058/- which comes to Rs.14,85,421/- to the returned income. Thus, the ld.CIT(A) sustained an addition of Rs.14,85,421/- as against Rs.2,22,81,308/- made by the AO.
Aggrieved with such order of the CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds:- “
The Assessing Officer, Asstt. Commissioner of Income Tax Circle 6(2), New Delhi has been directed by the Pr.CIT, Delhi-2, New Delhi vide authorization dated 21.04.2017 to file appeal in the above mentioned case before the ITAT, New Delhi on the following grounds of appeal
1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in allowing additional evidence produced by the assessee and in negating the action of the AO of estimating the income of the assessee at 15% of the gross receipt i.e. Rs.2,22,81,308/- ignoring the fact that the assessee had failed to substantiate its claim by producing/furnishing the requisite documents/information during the assessment as well as remand proceedings.
2. The appellant craves leave for reserving the right to amend, modify, alter, ground(s) of appeal at any time before or during the hearing of this appeal.”
The ld. DR strongly challenged the order of the CIT(A). He submitted that the assessee has filed the return declaring total income at Rs.27,60,390/- and the AO had determined the total income of the assessee at Rs.2,22,81,308/- by estimating the profit at 15% of the turnover at Rs.14,85,42,058/-. Referring to the order of the CIT(A), he submitted that the ld.CIT(A) has sustained an addition of Rs.14,85,421/- only over and above the returned income as against the income determined by the AO at Rs.2,22,81,308/-. Referring to para 2.11.4 of the order of the CIT(A), he submitted that the net profit before tax shown by the assessee for A.Y. 2007-08 was 4.26%, for A.Y. 2008-09 - 5.24%, and for A.Y. 2009-10, it was 5.94%. Therefore, it is not understood as to on what basis the ld.CIT(A) has arrived at the profit rate of 2.84%, i.e., 1.14% declared by the assessee and further addition of 1% as per his direction. He submitted that the ld.CIT(A) has not 3 properly adjudicated the issue and the assessee was non-cooperative at the assessment stage and, therefore, the order of the CIT(A) be reversed and that of the order of the AO be restored or the matter may be set aside to the file of the AO for fresh adjudication.
The ld. counsel for the assessee, on the other hand, heavily relied on the order of the CIT(A). Referring to the affidavit of Shri Ramesh Chand Pihal, General Manager of the assessee company, copy of which is placed at pages 76 and 77 of the paper book, he submitted that he had visited the Income-tax Department along with the Accountant for attending the scrutiny case on 23rd March, 2015, but, since the concerned officer was busy, they could not show the documents to Mr. Jitender Kumar, Inspector of the Ward. Referring to the various papers in the paper book, he submitted that full details were filed before the CIT(A) who has called for a remand report and, thereafter only he has passed the order accepting the offer of the assessee of additional income of 1% of the turnover. Referring to the copy of the assessment orders for A.Y. 2011-12 and 2012-13, copies of which are placed at paper book pages 123-132, he submitted that in both the years the book results have been accepted. In A.Y. 2011-12, the addition was only on account of disallowance u/s 43B and for A.Y. 2012-13 the disallowance is on account of 20% of computer expenses shown under the head ‘Administrative expenses.’ He accordingly submitted that the order of the CIT(A) is fully justified under the facts and circumstances of the case and, therefore, the same should be upheld and the grounds raised by the Revenue should be dismissed.
We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the assessee in the instant case, did not file the requisite details before the AO for which the AO held that the genuineness of the claim made in the P&L Account and the correctness of the income as computed by the assessee remained unsubstantiated. He, therefore, rejected the book results and estimated the profit at 15% of gross receipt at Rs.14,85,42,058/- and, accordingly, determined the total income at Rs.2,22,81,308/- as against the returned income of Rs.27,60,390/-. We find, the ld.CIT(A), on the basis of the offer given by the assessee to buy peace and to avoid future litigation, sustained the addition of 1% of the turnover over and above the returned income. We do not find any basis on such offer made by the assessee which was accepted by the ld.CIT(A). A perusal of page 15 of the order of the CIT(A) shows that the assessee had filed the profit details of the past years which are as under:-
Therefore, when, in the preceding three years the net profit rate had varied from 4.26% to 5.94%, it is not understood as to how and why the ld.CIT(A) has accepted the offer given by the assessee of additional income of 1% of the turnover which makes the net profit rate of 2.84%. Considering the totality of the facts of the case and considering the fact that net profit rate from A.Y. 2007-08 to 2009-10 varied from 4.26% to 5.94% and the net profit rate for the current year was shown at 1.84%, estimation of net profit rate of 4.5% under the facts and circumstances of the case will meet the ends of justice. Accordingly, the order of the CIT(A) is modified and the AO is directed to adopt the net profit rate of 4.5% on the turnover of Rs.14,85,42,058/- as the net income of the assessee. The grounds raised by the Revenue are accordingly partly allowed.
In the result, the appeal filed by the Revenue is partly allowed. The decision was pronounced in the open court on 08.04.2021.