PANKAJ METALS,MUMBAI vs. ACIT- 19 (2), MUMBAI

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ITA 6788/MUM/2018Status: DisposedITAT Mumbai14 July 2021AY 2012-134 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that a GP percentage of 0.55% would meet the ends of justice, directing the AO accordingly. This decision was made after considering the assessee's explanation for the higher GP in the previous year due to write-off of business creditors.

What were the facts?

The assessee, a commission agent, declared a lower GP of 0.46% in AY 2012-13 compared to 0.83% in AY 2011-12. The AO rejected the books and estimated GP at 0.83%, while the CIT(A) reduced it to 0.65%.

What were the issues?

Whether the AO and CIT(A) erred in estimating the gross profit without appreciating the assessee's books of accounts and the reasons for the fall in GP.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 145(3),Section 44AB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C‘ BENCH

Before: SHRI MAHAVIR SINGH & SHRI M.BALAGANESH

For Appellant: Shri Nishit Gandhi
For Respondent: Ms. Shreekala Pardeshi
Hearing: 01/07/2021Pronounced: 14/07/2021

आदेश / O R D E R PER M. BALAGANESH (A.M):

1.

This appeal in A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-7, Mumbai in appeal No.CIT(A)-7/IT-190/148/2017-18 dated 14/09/2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/03/2015 by the ld. Asst. Commissioner of Income Tax-19(2), Mumbai (hereinafter referred to as ld. AO).

2.

The assessee has raised the following grounds:-

1. In the facts and in the circumstances of the case, the ld. AO erred in making addition of Rs.3755996/- on account of fall in G.P. from 0.83% in A.Y.2011-12 to 0.46% in A.Y.2012-13 and the Ld. CIT erred in restricting the addition to Rs.1941743/- by estimating the G.P. at 0.65% as against the actual G.P. of 0.46% without appreciating that the appellant maintains all the books of accounts including quantity register and the same are audited u/s. 44AB of the Income Tax Act, 1961 and the higher G.P. in A.Y.2011-12 was on account of write off of business creditors of Rs.1820007/- which is 0.32% of turnover.

2. In the facts and in the circumstances of the case, the ld. AO erred in estimating the G.P. without appreciating the fact that the assessee has furnished the quantitative tally from which no mistake was found leading to estimation of G.P. and the learned CIT erred in estimating the G.P. at 0.65% as against the actual G.P. 0.46% on adhoc basis. 3. The appellant craves leave to add, amend, alter or delete any or all grounds of appeal

4. The appellant prays for appropriate relief.

3.

We have heard rival submissions and perused the materials available on record. The only issue that needs to be decided by us is with regard to estimation of profit to be taxed in the hands of the assessee. We find that assessee is a partnership firm engaged in business of trading in aluminum, metal and electrical goods as a commission agent. The assessee in the A.Y.2012-13 had filed its return of income on 30/09/2012 declaring total income at Rs. Nil after claiming set off of brought forward business losses from earlier years. The assessee furnished the books of accounts including the quantitative details together with the tax audit report before the ld. AO. The said book results had been rejected by the ld. AO in view of certain deficiencies u/s.145(3) of the Act. The assessee had declared gross profit of 0.46% of turnover during the year under consideration as against gross profit of 0.83% of turnover in A.Y.2012-13 (i.e. immediately preceding assessment year). The assessee had also stated that it had earned higher GP of 0.83% in A.Y.2011-12 on account of write back of business creditors of Rs.18.20 lakhs. The assessee further pleaded that but for the said write back of business creditors of Rs.18.20 lakhs, the gross profit for A.Y.2011-12 would be only 0.51% of turnover. The ld. AO however, ignored all these contentions of the assessee and proceeded to estimate the gross profit at 0.83% and after granting deduction for indirect expenses determined the net profit and made addition of Rs.37,55,996/- to the business income of the assessee. This profit percentage was reduced by ld. CIT(A) to 0.65%. The ld. AR before us pleaded for adoption of the same GP percentage of 0.51% to be adopted for this assessment year 2011-12.

3.1. Considering the totality of facts and circumstances of the case, we hold that adoption of GP percentage of 0.55% would meet the ends of justice and we direct the ld. AO accordingly. Accordingly, the grounds raised by the assessee are partly allowed.

4.

In the result, appeal of the assessee is partly allowed.

Order pronounced on 14/07/2021 by way of proper mentioning in the notice board.

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