ILLIYAS BADSHA SHAIKH,,SANGLI vs. INCOME-TAX OFFICER, WARD - 1(2),, SANGLI

This bunch of appeals relating to the same assessee on similar issues were heard together and are being disposed of by this consolidated order for the sake of convenience.

The assessee in ITA No.1228/PUN/2018, relating to assessment year 2003-04 has raised the following grounds of appeal:- 1. The learned CIT(A) erred on facts and in law in upholding the decision of the AO for estimating gross profit at the rate of 10% instead of 4.25%. He failed to appreciate the facts and submissions made in this behalf. 2. The learned CIT(A) erred on facts and in law in upholding the decision of the AO for making addition of Rs.72,000/- on account of salary expense. He failed to appreciate the facts and submissions made in this behalf.

The first issue raised in all the appeals is against estimation of gross profit in the hands of assessee.

Briefly, in the facts of the case, Survey action under section 133A of the Act was carried out at the business premises of assessee on 20.11.2009. During the course of Survey, statement of assessee was recorded. The assessee was engaged in the manufacturing and trading of Murmura (puffed rice). On the basis of impounded documents, reasons were recorded for reopening the assessment. Since no return of income was filed by the assessee, the Assessing Officer was of the view that income chargeable to tax had escaped assessment within meaning of section 147 of the Act. Thereafter, notice under section 148 of the Act was issued to the assessee. The assessee furnished return of income declaring total income of ₹ 22,110/-. The assessee pointed out that no regular books of account were being maintained in respect of business activities. The assessee had declared turnover of ₹ 1,23,58,028/-, on the basis of cash deposited in the bank account and credit sales on the said

The CIT(A) has upheld the order of Assessing Officer, against which the assessee is in appeal.

The learned Authorized Representative for the assessee before us pointed out that there is no merit in the order of Assessing Officer in this regard as the assessee was carrying on the business on wholesale basis, whereas the comparison was made with the results shown by a concern engaged in retail sale of the items which were being manufactured by the assessee. He also furnished tabulated chart before us and pointed out that similar gross profit rate has been shown from year to year and only in assessment year 2015-16 when

The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below.

We have heard the rival contentions and perused the record. The issue which arises in the present appeal is that after application of provisions of section 145(3) of the Act, the GP rate to be applied in the hands of assessee. The assessee was admittedly, engaged in the manufacture and sale of puffed rice on wholesale basis. The margin of profit earned on goods sold on wholesale basis is lower when compared to the margin of profit earned by retailers on the sale of same goods. The assessee before us has filed tabulated details of its turnover for the years and similar gross profit earned at 4.25% to 4.50% being declared from year to year. The gross profit declared by assessee has been estimated on the turnover declared by the assessee from year to year. The Assessing Officer has accepted the turnover declared by the assessee but has not accepted the gross profit rate applied by him. In fairness and in totality of the above said facts and circumstances, we deem it fit to restrict gross profit rate to 6%. The Assessing Officer is directed to compute the income in the hands of assessee in all the years under consideration. Accordingly, ground of appeal No.1 raised by the assessee in all the years is partly allowed.

Further, the assessee has raised ground of appeal No.2 against disallowance of salary under section 40A(2) of the Act in assessment years

In the result, all the appeals of assessee are partly allowed.