SARASWATI GUPTA,HOWRAH vs. I.T.O.,WARD-47(1), KOLKATA

The sole grounds of appeal of the assessee is against the action of Ld. CIT(A) in confirming the addition of GP percentage of 8% of Rs. 2,73,54,650/-.

Brief facts of the case as noted by the AO is that the assessee had filed return of income declaring Rs. 1,96,350/-. Later the case was reopened u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act) on the basis of information of ADIT(Inv) that the assessee had maintained a bank account in the State Bank of India, Salkia, Howrah wherein the assessee has made huge transaction of money on different dates. The AO noted that an amount of Rs. 2,73,54,650/- was deposited in her bank account on different dates. The AO in the assessment order has noted that the Ld. A.R. of the assessee, pursuant to his requisition had filed profits and loss account, balance sheet, computation of income, sales ledger, copy of bank statement as on 10.12.2018. However, according to AO, the assessee could not conclusively substantiate the genuineness of the transaction reflected in the bank account and could not produce documents/evidence to support her activities. Therefore the AO taking note of the deposit as well as withdrawals of cash, took the peak

Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the peak credit of Rs. 10,70,000/ to delete the peak credit of Rs. 10,70,000/- u/s 68 of the Act. However sustained NP at 8% u/s 68 of the Act. However sustained NP at 8% amounting to Rs. 21,88,372/ ing to Rs. 21,88,372/-. Thus giving partial relief to the assessee relief to the assessee. Still not satisfied with the action of the Ld. CIT(A) with the action of the Ld. CIT(A), the assessee is before us.

We have heard both the parties and perused the records. The aforesaid facts are not We have heard both the parties and perused the records. The aforesaid facts are not We have heard both the parties and perused the records. The aforesaid facts are not repeated for the sake of brevity. We note that the assessee is ake of brevity. We note that the assessee is into the business of into the business of trading of iron and steel. According to assessee iron and steel. According to assessee, in this business, sales are made mostly through cash made mostly through cash which are regularly deposited in he deposited in her bank account. She has been depositing the sale She has been depositing the sale consideration and regularly according to Ld. A.R. regularly according to Ld. A.R. withdrawing the amount withdrawing the amount for purchase of goods as per the requirement of the business. as per the requirement of the business. It is noted that the assessee had shown 0.7% he assessee had shown 0.7% NP which according to Ld AR according to Ld AR is the turnover of this kind of business and for is the turnover of this kind of business and for that he drew our attention to the Co-ordinate Bench decision order in in the case ordinate Bench decision order in ITA No. 290/Kol/2015 in the case ordinate Bench decision order in ITA No. 290/Kol/2015 in the case of Amit Jaiswal vs. ITO dated 2.8.2017 wherein the Tribunal for same assessment year of Amit Jaiswal vs. ITO dated 2.8.2017 wherein the Tribunal for same assessment year of Amit Jaiswal vs. ITO dated 2.8.2017 wherein the Tribunal for same assessment year 2011-12 as in this case has taken note of the NP of a similar busin has taken note of the NP of a similar business which is as under: ess which is as under:

Therefore according to Ld. A.R., the NP returned by the assessee Therefore according to Ld. A.R., the NP returned by the assessee Therefore according to Ld. A.R., the NP returned by the assessee is reasonable and cannot be held to be low be low. It was pointed out by Ld. A.R. Shri Miraj that the AO erred in Shri Miraj that the AO erred in estimating the income of the assessee estimating the income of the assessee without pointing out any defect in the books of out any defect in the books of account submitted by the he assessee. According to Ld. A.R., the AO O erred in doing so, since

We note that in the present case the AO without rejecting the books of account submitted by the assessee has estimated NP at 8% which the AO could not have resorted to because in order to estimate the income of the assessee (based on best judgment assessment) as provided for u/s 144 of the Act, the AO has to first of all reject the books of account and then resort to section 145 of the Act and after giving a finding that the assessee has not regularly followed the method of accounting as mentioned u/s 145(1) of Saraswati Gupta AY: 2011-12 the Act or that the assessee has not computed the income in accordance with the accounting standard notified u/s 145(2) of the Act or that the AO is not satisfied about the correctness or completeness of the book maintained by the assessee, then only the AO could have resorted to estimation of the income of the assessee u/s 144 of the Act. Since this condition precedent has not been satisfied as is discernible from the AO’s order and since the Ld. CIT(A) has also not rejected the books of accounts, the estimation made in respect of net profit (NP) is not legally tenable and therefore the addition of NP at 8% at Rs. 21,88,372/- is deleted.

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