MOHD. YUSUF,GHAZIABAD vs. ITO, WARD- 2(2), NOIDA
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that a mere fall in the net profit rate is not a ground to increase the profit rate, especially when the AO did not find any defects in the documents submitted by the assessee or reject the books of account.
What were the facts?
The Assessing Officer (AO) increased the assessee's net profit by 1% of turnover, amounting to Rs. 10,20,056, due to a decline in the net profit rate compared to the previous year. The CIT(A) reduced this addition by 50%.
What were the issues?
Whether the AO was justified in increasing the net profit rate solely based on a decline in the profit margin compared to the previous year, without rejecting the assessee's books of account or pointing out specific defects.
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES “SMC” : DELHI
Before: SHRI BHAVNESH SAINI
For Assessee : -None- For Revenue : Dr. Anjula Jain, Sr. D.R. Date of Hearing : 16.10.2018 Date of Pronouncement : 16.10.2018 ORDER PER BHAVNESH SAINI, J.M. This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-1, Noida, Dated 27.02.2018, for the A.Y. 2013-2014.
Briefly, the facts of the case are that assessee is a proprietor of M/s.Eutech Metal Development, Ghaziabad and engaged in the business of Export of Scaffolding Items and 2 ITA.No.3946/Del./2018 Mohd. Yusuf, Ghaziabad. derived income from business or profession. The assessee furnished various details in respect of computation of income and other relevant documents as called for by the A.O. which were verified by the A.O. The A.O. noted that the assessee has shown only 1.34% net profit in assessment year under appeal as compared to 3.39% in the immediately previous year, thus there is a decline of 2.05% in the net profit sharing ratio. The A.O. also noted that though the gross receipts/turnover of the assessee has increased by 3.87 times of the previous year i.e. Rs, 2,63,17,531/- to Rs, 10,20,05,638/- and also there is an expenses increase of 1.65%, therefore, assessee was issued show cause notice as to why the assessment order should not be passed after increasing the net profit sharing ratio by 2.05% of the gross receipts/turnover. The A.O. was not satisfied with the explanation of the assessee. The A.O. however, increased the profit by 1% and made the addition of Rs.10.20,056/-. The Ld. CIT(A) reduced the addition by 50% and restricted the addition to Rs.5,10,028/-.
3 ITA.No.3946/Del./2018 Mohd. Yusuf, Ghaziabad. 3. None appeared on behalf of the assessee despite notifying the date of hearing through Registered post.
After hearing the Ld. D.R, I am of the view that addition is wholly unjustified. The A.O. recorded that assessee filed required documents and responded to the queries raised by the A.O. The A.O. has not pointed out any defect in the documents submitted by the assessee in respect of income declared in the return of income. The books of account of the assessee have not been rejected by the A.O. No specific defects have been pointed-out in maintenance of the books of account by the assessee. Further, mere fall in the net profit rate by itself is no ground to increase the net profit rate as compared to the preceding assessment year. The profit cannot be static each year. Therefore, there was no justification for the authorities below to increase the profit rate for the purpose of making the addition against the assessee. In view of the above, I set aside the Orders of the authorities below and delete the entire addition.
4 ITA.No.3946/Del./2018 Mohd. Yusuf, Ghaziabad. 5. In the result, appeal of the Assessee is allowed.
Order pronounced in the open Court.
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