ASST CIT 24(1), MUMBAI vs. SHRI. DEEPAK NAVIN SHAH, MUMBAI

The only issue in this appeal of assessee is against the order of CIT(A) restricting the addition made by the Assessing Officer by applying the profit rate at 5% of the bogus purchase. For this assessee has raised following ground: - “1. Whether on the facts and circumstances of the case, and in law, the Ld. CIT(A) erred in restricting the addition at 5% as against 7% made by the Assessing Officer, pertaining to the unaccounted sales, without appreciating the fact that the information was received from Central Excise Department that the assessee has made unaccounted sale of ₹2,90,57,030/- and the assessing officer has opted 7% as the net profit on the unaccounted sales, which is offered by the assessee as net profit for the AY 2009- 10."

Briefly stated facts are that the assessee engaged in the business of manufacturing of chairs, tables and other furniture. The AO has been informed vide letter bearing No. DDIT “4.1.1 The ground of appeal numbers 1 to 7 relate to the addition of ₹ 8,79,164/- being 7% of ₹ 1,25,59,483/- made by the AO on estimation basis. I have carefully considered the submissions of the appellant as well as the findings of the AO in his assessment order and find no infirmity in the decision taken by the AO. The assessee has accepted in Pan 7 of the Assessment Order for AY 2010-11 dated 28/12/2016 that it had hidden undisclosed sales of 1,25,59,483/- which was declared before the Central Excise Authorities confessing that there was no 4.1.2 The appellant during the course of appellate proceedings submitted Audited books and a chart showing average Net profit ratio of 2.87% for the 5 years preceding the relevant AY. It has also been submitted by the appellant that the industry average varies between Net profit ratio of 2.5% to 4 %. Hence, considering the submissions of the appellant in the interest of justice and lair play, while protecting the interest of revenue, it would be reasonable if the NP ratio is taken at 5%. The AO is therefore directed to allow the NP ratio at 5%. Hence, the Ground of appeal is Partly allowed.”