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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SHRI R. K. PANDA & MS. SUCHITRA KAMBLE
: Shri S. S. Rana, CIT-DR Department by Assessee by : Shri Kapil Goel, Adv. Date of hearing : 05-09-2018 : 20-09-2018 Date of pronouncement O R D E R
PER R. K. PANDA, AM :
This appeal filed by the Revenue is directed against the order dated 12.03.2015 of the CIT(A)- 1, Gurgaon relating to assessment year 2011-12. The assessee has filed the Cross Objection against the appeal filed by the Revenue. For the sake of convenience, these were heard together and are being disposed of by this common order.
The grounds raised by the Revenue are as under :-
“1. On the facts and circumstances of the case, the Ld. CIT(A) has erred in fact and in law in not accepting the rate of 2% applied by the A.O. to estimate the profit of business carried out by the assessee inspite of the fact that the rate is adopted on the basis of a comparable case.
2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in fact and in law in holding that the net profit rate as shown by the assessee in earlier years should form the basis to estimate the profit in the year under consideration when it is clearly established by the A.O. and accepted by the CIT(A) that the book results shown by the assessee are not reliable.”
The ld. counsel for the assessee, at the outset, submitted that the tax effect involved in the grounds raised by the Revenue is below Rs.20 lakhs. Therefore, in view of the latest CBDT Circular No.03/2018 [F.No.279/Misc.142/2007-ITJ (Pt)] dated 11th July, 2018 which is applicable even to pending appeals, the appeal filed by the Revenue is not maintainable.
The ld. DR on the other hand fairly admitted that the tax effect involved in the impugned appeal is less than Rs.20 lakhs and therefore, the appeal filed by the Revenue has to be dismissed. He, however, requested that if at any point of time it is noticed that the case of the Revenue falls under any of the amended para 10 of the Circular vide Notification dated 20.08.2018, the Revenue should be allowed to file Miscellaneous Application for revival of the appeal.
After hearing both the sides, we find the tax effect involved in the grounds raised by the Revenue in the impugned appeal is admittedly below Rs.20 lakhs. Therefore, the appeal filed by the Revenue is not maintainable in view of the CBDT Circular No.03/2018 dated 11th July, 2018 which is applicable even to pending appeals. However, if the Revenue at any point of time finds that the case of the Revenue falls under any of the clauses as per amended para 10 of the said Circular vide Notification dated 20.08.2018, the Revenue is at liberty to file Miscellaneous Application for revival of the appeal.
In the result, the appeal filed by the Revenue is dismissed in the terms indicated above.
C.O. No.311/Del/2016 (By Assessee) :
The grounds raised by the assessee in Cross Objection are as under :-
“1. That on the facts and in the circumstances of case and in law, the Ld. CIT-A erred in sustaining the addition to the extent of Rs.,51,78,000/- by confirming the action of Ld. A.O. in taking the enhanced receipts on basis 26AS, which stoodfully reconciled.
2. That on the facts and in the circumstances of case and in law, the Ld. CIT-A erred in sustaining the action of Ld. A.O. in invocation of section- 143(3), (Rejection of Books of Accounts) without giving finding that it is impossible to compute taxable income from material on record.”
Facts of the case, in brief, are that during the course of assessment proceedings the Assessing Officer provided a number of opportunities to the assessee to produce books of account along with bills/vouchers but there was no compliance on the part of the assessee. As a result of non-production of books of account, the Assessing Officer examined other documents to facilitate ascertainment of the income of the assessee. While examining one of these documents i.e. Form 26AS, the Assessing Officer found that the gross receipts of the assessee as per Form 26AS were Rs.71,01,51,352/- whereas the assessee has shown gross receipts of Rs.62,66,07,388/-. When asked to reconcile, the assessee succeeded to some extent but he could not reconcile the two accounts completely. The Assessing Officer therefore adopted the gross receipts to be Rs.64,44,99,299/- instead of Rs.62,66,06,933/- due to inability of the assessee to produce books of account and other necessary evidence coupled with his failure to reconcile the gross receipts as per his Profit & Loss Account on the one hand and gross receipts as per Form 26AS. The Assessing Officer accordingly rejected the books of account of the assessee and estimated the profit of the assessee at 2% of the gross receipts which resulted in a total addition of Rs.84,99,091/- to the income of the assessee.
Before the ld. CIT(A), it was submitted that various replies filed by the assessee were never considered by the Assessing Officer properly and the Assessing Officer has wrongly mentioned that complete books of account are not maintained. However, the fact remains that all books of account were produced before the Assessing Officer along with requisite bills and vouchers.
Referring to various decisions, it was submitted that the estimation of profit @ 2% of gross receipt by the Assessing Officer is not justified.
Based on the arguments advanced by the assessee and considering the past results, the ld. CIT(A) restricted such GP rate to 1.5% of the gross receipts by invoking the provisions of section 145(3) of the I.T. Act.
Aggrieved with such part relief granted by the ld. CIT(A), the Revenue filed an appeal against which the assessee has filed the Cross Objection.
We have considered the rival arguments made by both the sides and perused the orders of the authorities below. It is an admitted fact that before the Assessing Officer the assessee could not explain the difference the turnover reflected in the Profit & Loss Account and the amount in Form 26AS for which the Assessing Officer resorted rejection of book results and estimation of the profit by adopting GP rate of 2% of the gross turnover. We find the assessee before the ld. CIT(A) reconciled such difference to some extent but at the same time an amount of Rs.1,78,92,755/- could not be reconciled for which the ld. CIT(A) while upholding the rejection of book results restricted such GP rate to 1.5% as against 2% adopted by the Assessing Officer on the basis of past results. It is the submission of the ld. counsel for the assessee that such GP rate was accepted at 1.23% for assessment years 2008-09 and 2009-10 and 0.96% for assessment year 2010-11. Therefore, as against 0.70% declared by the assessee during the impugned assessment year the adoption of GP ratio at 1.5% by the ld. CIT(A) is on the higher side. We have gone through the past results and find that the turnover of the assessee in assessment year 2008-09 was at Rs.24,59,78,295.53, Rs.29,69,73,739.26 for assessment year 2009-10, Rs.42,07,31,520.56 for assessment year 2010-11 and Rs.62,66,07,387.68 for assessment year 2011-12. We find while turnover of the assessee is increasing from year to year the GP rate is decreasing. It is also not understood as to how the income as per return of income for assessment years 2008-09 and 2009-10 are same at Rs.36,48,898.75 whereas the turnover for assessment year 2008-09 is Rs.24.60 crores and for assessment year 2009-10 is Rs.29.70 crores.
However, it is also an admitted fact that the case of the assessee was under scrutiny for assessment year 2008-09 wherein the book results were accepted with some minor disallowances. Similarly for assessment year 2009-10 the book results were accepted with minor disallowances such as vehicle running expenses and depreciation on motor car. Under these circumstances and considering the past results, we are of the considered opinion that the adoption of gross profit rate of 1.5% appears to be on higher side. Considering the totality of the facts of the case, the estimation of GP rate at 1.25% of the gross receipts for the impugned assessment year, in our opinion, will meet the ends of justice. We hold and direct accordingly. The grounds raised by the assessee in Cross Objection are accordingly partly allowed.
In the result, the appeal filed by the Revenue is dismissed on account of low tax effect and the Cross Objection filed by the assessee is partly allowed. Order pronounced in the open Court on this 20th September, 2018.