KANDASAMY RAJENDRAN,CHENNAI vs. ACIT NON CORPORATE CIRCLE 6(1), CHENNAI

The assessee filed this appeal against the order of the learned Commissioner of Income Tax (Appeals)-5, Chennai in dated 29.06.2018 for the assessment year 2015-16.

Shri Kandasamy Rajendran, Proprietor of Sri Shanmuga Prime Tannery, the assessee, having a tannery at Trichy, engaged in the various countries and also sells locally. While making the assessment for the assessment year 2015-16, the AO found, inter-alia, that the average Net Profit of last 3 years was at 32.88%. However, the Net Profit ratio for the assessment year 2015-16 was 22.54%. After considering the assessee’s reply etc, he held that since the assessee is in the business for many years, there may not be any possibility of reduction in Net Profit, therefore, he found that the difference between the last three years average Net Profit viz-a-viz current Net Profit was 10.34%. Considering the assessee’s submission, he added 50% of 10.34% i.e., 5.17% on the admitted turnover and completed the assessment. Aggrieved, the assessee filed an appeal before the CIT(A). The Ld.CIT(A) held, inter-alia, that the AO found difficulty in the results though he did not specify rejection of books of accounts in the assessment order, yet he estimated the Net Profit after finding a vital defect in the book results means that he rejected the books of accounts. The Ld.CIT(A) also drew strength from the fact that the AO did not make any other addition or disallowance, therefore the AO had rejected the books of accounts and he confirmed the addition made by the AO. Aggrieved against that order, the assessee filed this appeal. addition without independent examination of facts. The Ld.CIT(A) had failed to consider the fact that there was a decline in export turnover and high reduction in average sales rate EI-tanned leather which would affect all the profit margin. In this regard, the Ld.AR took our attention to the Paper-book wherein, the assessee explained the reason for reduction in his Net Profit, part of which was also extracted by the AO in the assessment order. Taking to various materials in the Paper-book, the Ld.AR made strenuous efforts to say that the AO had not seen the Net Profit associated with the export turnover, Net profit associated with the local turnover vis-a-vis various reasons submitted by the assessee for the low Net Profit on the current year.

We heard the rival submissions. We find prima-facie that the assessee had made an attempt to explain the reasons for its low Net Profit. It appears that the associated facts and circumstances have not been properly examined. The various factors and the corresponding figures given by the assessee needs to be examined

In the result, the appeal of the assessee is allowed for statistical purposes.