HIREN BECHAR PATEL,ULHASNAGAR vs. ITO WD 2(5), THANE

O R D E R

PER AMARJIT SINGH, JM:

Ground No. I The Commissioner of Income Tax (Appeals)-3, Thane [hereinafter referred to as CIT(A)] erred iii passing the order without appreciating the material available on record. Ground No.2 A.Y.2012-13 The CIT (A) erred in computing the addition on account of low gross profit at Rs.2,55,360/- instead of Rs.I,12,220. The Appellant submit that since the Appellants had offered the profit of Rs. 1,43,140/- the same ought to have been reduced from the estimated profit of Rs.2,55,360/-. Ground No.3(a) The CIT (A) erred in confirming the disallowance of Rs.33,35,090/- on the ground that the Appellant has not been able to prove the credit balance payable to creditors for the purchase of goods. The Appellant submit that the creditors were genuine as the sales during 2010-2011 and 2011-2012 were out of the said purchases and no addition can be made purely on the basis of surmises and conjectures. Ground No.3(b) Without prejudice to ground no.3(a), the Appellant submit that since the AO has estimated the gross profit margin, no disallowance can be made on account of purchases made during the year. Ground No.4 The CIT (A) erred in confirming the addition of Rs.45,00,000/- on account of unexplained cash credit. The Appellant submit that the credit of Rs.45,00,000/- is genuine and explainable and therefore is not covered by the provisions of section 68. The Appellants crave leave to, add to, alter or amend the above grounds of appeal or to add a new ground of appeal at any time before hearing of the appeal. ”

3. The brief facts of the case are that the assessee filed its return of income on 24.01.2013 declaring total income to the tune of Rs.5,48,704/-. The return was processed u/s 143(1) of the I.T. Act, 1961 on 15.04.2013. Thereafter, the case was selected for scrutiny under CASS. Notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee derived income from resale of consumer products and food grains under the name and style of M/s. Patel Low Price Super Market. Assessee also derived income from salary at Rs.5,00,000/- from Patel Retail Pvt. Ltd. and interest income at Rs.1,403/- from bank. The assessee has shown the 2 A.Y.2012-13 income from business at Rs.1,43,140/- after deduction under Chapter VIA of Rs.95,839/-. The assessee has offered total income to the tune of Rs.5,48,700/-. The assessee has shown the sale in sum of Rs.25,53,598/- and net profit has been shown at Rs.1,43,140/-. The assessee was asked to produce the proof in respect of sales and purchases but necessary evidence was not produced, therefore, the AO estimated the profit on sale @ 10% to the tune of Rs.2,55,360/-. The assessee has shown the sundry creditors of Rs.55,41,390/- against total purchase in sum of Rs.16,50,920/-. On seeing, the balance-sheet of previous year, the outstanding sundry creditors as on 31.03.2011 were at Rs.38,90,470/-. The assessee was asked to explain the credit but assessee only proved the identity of the creditors having aggregate credit in sum of Rs.22,06,300/-, therefore, the remaining credit was added to the income of the assessee. The assessee has also shown unsecured loan of Rs.45,00,000/- but failed to prove the confirmation, therefore, the said amount was also added to the income of the assessee. It was also noticed that the assessee deposited an amount of Rs.27,53,447/- in his bank account lies with Axis Bank. Ambernath Branch and an amount of Rs.4,20,000/- in Jai Hind Co-op Bank Ambernath. In reply, the assessee explained that he drawn the cash loan of Rs.31,00,000/- from one Smt. Sanjivani Suresh Salunke who was an agriculturist and the balance cash was out of his business receipts. However, in support of his claim he also filed the confirmation letter Smt. Suresh Salunke but failed to explain the cash deposit in the bank, therefore, the amount of Rs.31,00,000/- was also added to the income of the assessee. The total income of the assessee was assessed to the tune of Rs.1,15,96,010/-. Feeling aggrieved, the assessee 3 A.Y.2012-13 filed an appeal before the CIT(A) who dismissed the appeal of the assessee, therefore, the assessee has filed the present appeal before us.

ISSUE No. 1 4. Issue no.1 is formal in nature which nowhere required any adjudication.

ISSUE No. 2 5. We have heard the arguments advanced by the Ld. Representative of the parties. On account of filing the present appeal delayed, it is explained by Ld. Representative of the assessee that the CIT(A) has passed the order on 21.11.2016 but the assessee received the copy of order on dated 26.12.2016, therefore, the present appeal is not delayed. The Ld. Representative of the assessee has filed the affidavit in this regard. The assessee has also filed the copy of acknowledgment which speaks about the receipt of order as on 26.12.2016. Since the appeal is within the period of 60 day’s w.e.f. receipt of the copy order, therefore, there is no delay of filing the present appeal. Under this issue the assessee has challenged the confirmation of the addition of offered profit in sum of Rs.1,43,140/- in the estimated profit of Rs.2,55,360/-. The Ld. Representative of the assessee has argued that the AO has estimated the net profit @ 10% of the sale in sum of Rs.25,53,598/-i.e.2,55,360/- but the AO nowhere reduced the profit shown by assessee in sum of Rs.1,43,140/-,therefore, the profit declared by assessee is hereby liable to be reduced from the estimation of profit in accordance with law. However, on the other hand, the Ld. Representative of the Department has refuted the said contention. On appraisal of the order 4 A.Y.2012-13 passed by the AO, we find that the AO has assessed the estimated profit @ 10% on total sale in sum of Rs.25,53,598 i.e 2,55,360/-. The AO did not give any credit to the profit in sum of Rs.1,43,140/- shown by assessee in his return of income. Since the profit has been assessed by AO @ 10% of the total sale then in the said circumstances, the credit is liable to be given of the net profit shown by assessee of Rs.1,43,140/-. We find from computation of total income by the AO in the assessment order, the AO has not started the computation from the returned income of the assessee. Hence, there is no question of giving reduction for profit already shown by assessee in the sum of Rs.1,43,140/-. Hence, the issue no. 2 is decided in favour of the revenue.