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Income Tax Appellate Tribunal, “C(SMC
This appeal preferred by the assessee is against the order of the Ld. CIT(A)-13, Kolkata dated 17.04.2018 for AY 2011-12.
The main grievance of the assessee is against the action of the Ld. CIT(A) in confirming the gross profit addition made by the AO at 48%. Brief facts of the case are that assessee is engaged in the business of readymade garments, clothes of brands like Raymonds and sarees. The assessee firm was surveyed on 01.10.2010 and the assessee agreed during the survey 52% of gross profit on the turnover as on that date and has paid the tax also for it. The present dispute is in respect to the gross profit of the turnover between 01.10.2010 and 31.03.2011. The assessee had shown for this particular period gross profit rate of 25.97% which was not accepted by the AO. And after having rejected the books, he estimated the gross profit rate at 48% keeping in view the surrender made by the assessee during the survey. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who confirmed the action of the AO. Aggrieved, the assessee is before us.
M/s. Lal Fashions., AY 2011-12 3. We have heard rival submissions and gone through the facts and circumstances of the case. The facts are not repeated for the sake of brevity. The only dispute is with regard to the gross profit of the assessee for the period between 01.10.2010 and 31.03.2011. Since the assessee during survey on 01.10.2010 agreed for gross profit rate at 52%, the AO after rejecting the books of account estimated the income at 48% of the turnover. We take note of the earlier and subsequent result of the assessee which is given in the form of chart at page 4 of the paper book which is reproduced as under: AY Gross Sales Percentage of GP Percentage of NP Accepted in Assessment 2012-13 96,01,307.69 25.15% 3.40% YES 2011-12 102,59,033.56 35.36% 18.57% NO 2010-11 93,29,982.61 10.48% 0.88% YES We note that in the earlier assessment year 2010-11, the assessee had shown gross sale of Rs.93,29,982/- and has shown a gross profit rate of 10.48% wherein net profit @ 0.88% was offered by the assessee and that was accepted by the department. For AY 2012-13 (subsequent assessment year) assessee had shown gross sales of Rs.96,01,307/- and has shown a gross profit rate at 25.15% and net profit rate at 3.40% which was accepted by the department, whereas in the relevant assessment year under consideration, the assessee has shown gross sale of Rs.102,59,033/- and has shown a gross profit percentage of 35.36% (for the whole year) and net profit of 18.57% which has not been accepted by the Department. We note that this 35.36% gross profit is for the whole year and for the period from 01.10.2010 to 31.03.2011 gross profit was shown as 25.97%. Even though, we acknowledge that the AO has power to reject the books and estimate the income of the assessee, it has to be an exercise fairly conducted by the AO. The estimation cannot be arbitrary and it has to be based on relevant materials or results from comparables which are in the same kind of business like that of the assessee. We note that the AO has not brought any comparables to justify his action of estimating 48% gross profit. In the absence of any other third party comparables, the assessee’s result of the earlier and subsequent assessment year can be taken into consideration for fair estimation of G.P. We note from the chart given above, the assessee has shown good result in this year, compared with the earlier AY 2010-11 and subsequent A.Y.2012-13 which we note has already been accepted by the M/s. Lal Fashions., AY 2011-12 Department. Assessee has shown in this year gross profit rate of 35.36% and net profit of 18.57% when it had only 10.48% gross profit for AY 2010-11 and net profit of 0.88% whereas in the subsequent year it was only 25.15% gross profit and 3.40% of net profit, therefore, we hold that G.P. % shown in this assessment year was better when compared with the earlier & subsequent A.Y’s. So we direct deletion of the addition and direct the AO to accept the gross profit as computed by the assessee. No addition is thus warranted in the facts and circumstances as discussed above. Appeal of assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 28th December, 2018.