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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM
BEFORE SHRI SHAMIM YAHYA, AM (Assessment Year: 2013-14) Mittal Polyplast Private Limited ITO-2(2)(3) 22/24, Gami House, Modi Street, Vs. Aayakar Bhavan, M. K. Road, Mumbai-400 001 Mumbai-400 020 PAN/GIR No. AADCM 8149 C (Appellant) : (Respondent) : None Appellant by : Shri S. K. Bepair Respondent by Date of Hearing : 21.08.2018 Date of Pronouncement : 05.09.2018 O R D E R Per Shamim Yahya, A. M.: This appeal by the assessee is directed against order of the learned Commissioner of Income Tax (Appeals)-5, Mumbai (‘ld.CIT(A) for short) dated 22.03.2018 and pertains to the assessment year (A.Y.) 2013-14.
The grounds of appeal read as under:
1. That the assessment order u/s 143(3) of the Income Tax Act. 1961 ("the Act") dated 30.03.2016 passed by the Assessing Officer ("AO") and the additions/disallowances made therein are illegal, bad in law and without jurisdiction. That the AO and the Commissioner of Income Tax (Appeals) ('kCIT(A)") 2. have grossly erred on facts and in law in passing the orders without giving a sufficient and reasonable opportunity to the assessee to be heard. The orders have been passed in violation of principles of natural justice. 3. That, on the facts and circumstances of the ease, the C1T(A) has erred in law and on facts in upholding the assessment order u/s 143(3} of the Act and the additions/disallowances made therein. 4. That, on the facts and circumstances of the case, the AO has erred on facts and in law in rejecting the Net Profit ratio of 0.13% as declared by the appellant on a total turnover of Rs. 6.25 Crore during the year under consideration as per its Mittal Polyplast Private Limited audited accounts and arbitrarily estimating the same at 1% without any basis and making an addition of Rs. 5.44.253''-.
5. That, on the facts and circumstances of the case, the CIT(A) has erred on facts aiA in law in upholding the rejection of NP ratio by the AO has consider NP ratio or the basis of earlier assessment year. A.Y. 2012-13. The AO as well as the CIT(A) have failed to consider the explanation rendered by the appellant for decline of NP ratio for the year under consideration.
6. That, on the facts and circumstances of the case, the AO and CIT(A) have failed to properly construe and judiciously interpret the evidence filed and materials available on record, hence the addition/disallowance made is uncalled for.
That interest U/s 234B, and 234C of the Income Tax Act. 1961 has been wrongly and illegally charged and has been wrongly worked out. - ,
Brief facts of the case are that the assessee is engaged in the business of trading polyplast, inkjet printers and inkjet photo paper. In the course of assessment proceedings, the Assessing Officer (‘A.O.’ for short) asked the assessee to explain a reduction in the profit as compared to the previous year. In absence of explanation the A.O. held that it is clear that the assessee has inflated the expenses to reduce the profit. Hence, the A.O. made an estimated addition by holding that the profit should be 1% making the profit at Rs.6,25,000/-.
Upon the assessee's appeal, the ld CIT(A) noted that assessee has not appeared before him. He proceeded to confirm the addition.
Against the above order, the assessee is in appeal before the ITAT.
I have heard the ld. Departmental Representative (ld. DR). None appeared on behalf of the assessee despite notice.
Mittal Polyplast Private Limited 7. Upon careful consideration I find that the A.O. has made the addition on ad hoc basis. He has noted that since there is a reduction in the rate of profit as compared to previous year, the assessee must have inflated the expenses. Despite making this observation there is no whisper whatsoever whether the assessing officer has found any deficiency in the vouchers. As held by Hon’ble Punjab & Haryana High Court in the case of Pandit Bros. vs. CIT [1954] 26 ITR 159 (P & H) a reduction in profit rate can give rise to further investigation, it cannot be the sole reason for addition. In the background of aforesaid discussion and precedent, I set aside the orders of the authorities below and delete the addition.
In the result, this appeal by the assessee stands allowed.
Order pronounced in the open court on 05.09.2018