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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’, NEW DELHI
Before: SH. H.S. SIDHU
The assessee has filed the appeal against the impugned order dated 08.08.2016 passed by Ld. CIT(A)-5, Delhi relevant to assessment year 2012-13 on the following ground:- “On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in partially sustaining disallowance u/s. 69C of the Income Tax Act, 1961 amounting to Rs. 19,19,401/- even after acquiescence to the Assessee’s case in principle. The action being arbitrary, erroneous, unlawful and unjust must be quashed with directions for relief.” 2. In this appeal there is a delay of 24 days in filing the appeal before the Tribunal and in this behalf the assessee has filed the application seeking condonation of delay in filing present appeal. After perusing the application for condonation of delay, I find plausible reasons for delay of 24 days in filing the appeal before the Tribunal, hence, the delay in dispute is condoned.
The brief facts of the case are that the assessee company is engaged in the business of building and contractor. The assessee filed its e-return declaring income of Rs.3,20,070/- on 28.09.2012. The case of the assessee was selected for scrutiny through CASS and statutory notices were served. In response to the same, the Ld. AR of the assessee attended the hearing and filed the necessary documents. On perusal of the submissions, it was noticed by the AO that during the relevant assessment year the assessee had done the contract work/job work/revenue from operation for Rs.2,62,93,166/- for which the assessee purchased material worth Rs.1,90,63,350/-. During the assessment proceedings, the assessee was asked to produce the original bills of material purchased for Rs.1,90,63,350/-. In spite of sufficient opportunities, the assesssee failed to produce the original bills. But on 13.3.2015, the A/R of the assessee attended and filed written submissions stating that one of the Directors of the assessee company is not traceable and efforts are being made to get the bills. On 16.3.2015, the A/R of the assessee attended the proceedings and only three original bills totaling to Rs.5,23,805/- were produced. With regard to other bills no plausible explanation was offered and no bills were produced for verification. Presuming that the assessee has no explanation of offer in this regard the AO proceeded to add an amount of Rs.46,34,890/- to the total income of the assessee, being 25% of the total material purchased (Rs.1,90,63,350 - Rs.5,23,805) as unexplained expenditure within the meaning of section 69C of the IT Act, to cover any leakages and to avoid any loss of revenue and completed the assessment at Rs. 49,54,960/- u/s. 143(3) of the I.T. Act, 1961 vide order dated 18.3.2015. Against the assessment order dated 18.3.2015, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 08.8.2016 has sustained the addition of Rs. 19,19,401/- on account of trading results, by applying the GP rate of 7.3% on estimation basis being average of 02 preceding years. Against the impugned order dated 8.8.2016, assessee is in appeal before the Tribunal.
Ld. A.R. for the Assessee has stated that due to inevitable circumstances and the difficulties, the assessee failed to produce the stock register and the valuation of stock against which the Ld. CIT(A) drew the distrustful inferences and rejected the account books under section 145(3) of the Act and disposed off the appeal and determined the assessable income in the manner contemplated under the Act and assessed income at 7.3% of Gross Receipts of Rs. 2,62,93,166/- by applying the provisions of section 145(3) r.w.s. 144 of the I.T. Act and directed the AO to apply the average GP rate of the preceding two years i.e. 7.3% as the GP rate on the turnover for the year against and thus sustained income at Rs. 19,19,401/-. It was further submitted that Ld. CIT(A) while passing impugned order miserably failed to appreciate that for adding income on estimation basis only the net income which is taxable income was required to be considered and therefore instead of making addition to the returned income at average of Gross Profits, only the average of net profit which was around 2.27% should have been considered.
On the contrary, Ld. DR heavily supported the order of the Ld. CIT(A) and submitted that Ld. CIT(A) has reasonably estimated the GP rate @ 7.3% and sustained the addition of Rs. 19,19,401/-, which does not need any interference.
I have considered the rival submissions and gone through the orders of lower authorities as well as the Paper Book filed by the Assessee which contains pages 1 to 75 in which he has attached the Synopsis of the case; list of dates and events; detailed argument / written submission; Annexure-1 – copies of Audited Balance Sheet for AY 2012- 13 & AY 2011-12 with all Anexure; Annexure-2 – copies of replies / submissions made by the assessee company before the AO; Annexure-3-copy of appeal order dated 8.8.2016 passed by the Ld. CIT(A)-5, New Delhi and Annexure-4 – copy of assessment order dated 18.3.2015. I find that the sole issue for adjudication is estimation of GP
rate @ 7.3%. Keeping in view of the facts and circumstances of the case and in the interest of justice, I deem just and proper to estimate the GP rate @5% instead of GP rate @7.3%. I hold and direct accordingly. The AO is directed to re-compute the assessee’s GP @ 5% and made the addition accordingly.
In the result, the appeal of assessee is partly allowed. The decision is pronounced on 13-01-2020.
Sd/-
(H.S. SIDHU) JUDICIAL MEMBER
Dated: 13.01.2020
“SRB”