M/S. C.L. GULHATI & SONS LIMITED,JAMMU vs. DEPUTY COMMISSIONER OF INCOME TAX - CIRCLE-1, JAMMU

From case records, it emerges that the assessee failed to furnish return of income. The various notices issued by Ld. AO during the course of assessment proceedings remained un-responded. The assessee acted as authorized dealer of M/s Tata Motors Ltd. and it was dealing in heavy vehicles and passenger car division. The assessee also dealt in spare parts. It transpired that the bank credits were Rs.119.34 Crores which was stated to be out of regular business transactions. The assessee worked out total deposits of Rs.124.71 Crores. After adjusting inter-bank credits, net deposits were Rs.110.68 Crores. The assessee tabulated profitability for earlier years wherein the assessee reflected varying net profit rates. The rate of net profit for FY 2011-12 was 0.05% whereas the assessee had loss in FYs 2013- 14 to 2015-16. The assessee pleaded for estimation of net profit rate as per past trends. Left with no option, Ld. AO estimated income of 1% against net deposits of Rs.110.68 Crores and assessed income of Rs.110.68 Lacs. The Ld. CIT(A), considering assessee’s submissions, reduced the estimation to 0.5% against which the assessee is in further appeal before us.

From the fact, it clearly emerges that the assessee has miserably failed to comply with the statutory requirement of maintaining books of account as well as filing its Income Tax Returns despite having huge turnover. Under these circumstances, lower authority did not have any option but to estimate the income of the assessee. Except for past trends of profitability, nothing has been placed before any of the lower authorities to show the quantum of income as earned by the assessee. Similar is the position before us. We find that there is no consistency in the past trends and the assessee has incurred profit in FYs 2011-12 & 2012-13 whereas it has incurred losses in subsequent years. This being the case, the onus was more on assessee to comply with statutory requirements. In the absence of such an exercise or any other material justifying adoption of past trends, the plea of Ld. AR for reduction in profit could not be accepted. The estimation as made by ld. CIT(A), in our opinion, is quite fair and reasonable considering the nature of assessee’s business requiring no interference on our part.