M/S. ANAM PESTICIDES PVT.LTD.,AHMEDABAD vs. THE INCOME TAX OFFICER,WARD-1(1)(1), AHMEDABAD

M/s. Anam Pesticides Pvt. Ltd. vs. ITO Asst. Year –2021-22 - 2– 4. On the facts and in the circumstances of the case the CIT Appeal has erred both on facts and in law, in making additions with no error or defect whatsoever was found/unearthed as a result of scrutiny.

5. On the facts and circumstances of the case, the learned CIT APPEAL has erred, both on facts and in law, by making additions to the returned income solely on the basis of test check verification of a single party statement of third party disregarding the documents available.

9. On the facts and in the circumstances of the case the CIT Appeal has erred both on facts and in law, by violating the principle of natural justice by not providing opportunity for cross- examination of the person, whose statements have been relied upon by the CIT APPEAL.

M/s. Anam Pesticides Pvt. Ltd. vs. ITO Asst. Year –2021-22 - 4– 6. Before us, the Counsel for the assessee submitted that Ld. CIT(A) has not given any findings regarding the assessee’s contention on rejection of books of accounts. The Counsel for the assessee drew our attention to Page 12 of the Ld. CIT(A)’s order, wherein the assessee had made a specific contention that in the instant case, there was no default found in the books of accounts maintained by the assessee and accordingly, the basis of rejection of books of accounts maintained by the assessee was arbitrarily. However, the Counsel for the assessee submitted that in the instant case, Ld. CIT(A) did not give any finding regarding the rejection of books of accounts by the Assessing Officer. Secondly, the Counsel for the assessee submitted that when the sales have been accepted as being correct (and the addition has been made by taking a percentage of the total sales / turnover), then due credit of purchases should also be given to the assessee. It was submitted that just because the parties from whom the purchases were made, could not verified does not mean that the assessee had not made the purchases at all, especially in light of the fact that the figure of turnover / sales has not been disturbed by the Revenue Authorities. Thirdly, the Counsel for the assessee drew our attention to Page 15 of the Ld. CIT(A)’s order wherein it was submitted by the assessee that the turnover of the assessee had increased by more than 70 times during the year under consideration as compared to the previous year and hence the profit ratio had also accordingly fallen. The Counsel for the assessee submitted that the assessee is operating on high volume and low profit margin basis. The Counsel for the assessee submitted that against a turnover of 5.5 lakhs in 2018, the assessee’s turnover had increased to 25.99 crores during the year under consideration. Accordingly, it was highly unjustified to have applied a net profit rate at 12% looking into the assessee’s set of facts. Further, the Counsel for the assessee submitted that in the instant facts, no justification has been given as to why the net profit rate of 12% was applicable in the assessee’s particular set of facts.

8. On going through the facts of the instant case, we observe that while passing the order, Ld. CIT(A) has not given any specific findings on why the books of accounts had been rejected by the Assessing Officer. We observe that during the course of appellate proceedings, detailed submissions were filed by the assessee challenging the rejection of books of accounts by the Assessing Officer. However, while passing the order, Ld. CIT(A) completely omitted to give any finding with respect to the assessee’s contention / challenge to rejection of books of accounts by the Assessing Officer. Secondly, we observe that during the course of appellate proceedings, the assessee has furnished a table stating that in this case the assessee’s turnover had increased almost 70 times from Rs. 35.46 lakhs in the previous Financial Year to Rs. 25.99 crores in the impugned assessment year under consideration. The assessee had also submitted that the assessee was earning a net profit rate in the vicinity of approximately 1% of the total turnover. However, despite the aforesaid table submitted by the assessee, the Ld. CIT(A) estimated the net profit rate of 12% of the bogus purchases, without giving any specific finding as to why the net profit rate of 12% was attracted in the assessee’s set of facts. The assessee had relied on several judicial precedents in which the net profit rate of 1% to 2% had been taken by various Courts / Tribunals. However, while passing the order, Ld. CIT(A) did not give any specific finding on the applicability / non-applicability of the judicial precedents relied upon by the assessee. Further, we also note that it is a well-settled law that just because the parties from whom purchases have been made are unverifiable does not mean that the purchases itself are bogus, specifically when the figure of sale / turnover have not been disputed by the Tax Authorities. Accordingly, in light of the above observations, in the interest of justice, the matter is hereby restored to the file of Ld. CIT(A) to give a specific finding on assessee’s challenge to rejection of books of accounts under Section 145(3) of the Act and also to give a finding / basis of the correct net profit rate, taking into consideration the assessee’s set of facts and the judicial precedents on the subject.

Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 22/05/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT आयकर आयु�(अपील) / The CIT(A)- 4. 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,