KRISHNA DISTRIBUTORS PARTNERSHIP FIRM,LUCKNOW vs. INCOME TAX OFFICER, WARD 1(2), LUCKNOW

This is an appeal filed by the assessee against the order of learned CIT(A), Bareilly dated 21/03/2022 pertaining to assessment year 2017-18. In this appeal the assessee has taken number of grounds however, the crux of grounds of appeal is twofold; one of which is the wrong rejection of books of account by the authorities below and the second is the wrong application of net profit margin which the Assessing Officer had applied @8% of the gross receipts and which the learned CIT(A) had restricted to 1%.

2. Learned counsel for the assessee, at the outset, submitted that the reason for rejection of books of account was that the assessee had not maintained cash book properly and further on the basis that the notices issued u/s 133(6) to debtors remained unserved to the debtor. Learned counsel for the assessee submitted that the assessee was dealing in distribution of SIM cards of Uninor company and had retailers spread over various areas and the salesmen of the assessee used to collect cash from various persons and on the basis of statement submitted by them detailing cash collections, the assessee used to record the entries in the cash book and therefore, the allegation of the authorities below, that cash book was not properly maintained is, not correct and in this respect my attention was invited to page 243 of the paper book where the statement of salesman dated 08/11/2016 was placed and wherein the collection made by various salesmen were recorded. My attention was also invited to cash book of 08/11/2016, placed at page 103 of the paper book where such amount of Rs.1,09,912/- collected from various persons as noted in the statement, was recorded. Similarly, my attention was invited to page 248 of the paper book where the collection sheet for 09/11/2016 was placed and where the amount received was mentioned to be Rs.2,40,870/-. My attention was also invited to cash book page 103 of 09/11/2016 where the same amount of Rs.2,40,870/- was mentioned. It was submitted that the nature of business of the assessee was such that cash book was being maintained on this basis only whereas there is no mistake in the cash book and all the receipts have been recorded in the cash book. As regards the other objection of the Assessing Officer that the notices issued u/s 133(6) to debtors remained unserved, Learned counsel for the assessee submitted that the company Uninor had closed its business as per the order of Hon'ble Supreme Court and the persons to whom notices were issued may have changed their business/profession therefore, this cannot be the reason for rejection of books of account as the Assessing Officer did not point out any defect in the books of account. Regarding merits of the addition, Learned counsel for the assessee submitted that the Assessing Officer had made the addition by applying net profit rate of 8% which the learned CIT(A) has restricted to 1% which is again arbitrary and unjustified keeping in view the fact that the profit margin in such type of business is very low and in fact for the last so many years the average net profit declared by the assessee was 0.26% and which was accepted during scrutiny proceedings and during the year under consideration the net profit margin has been declared at 0.61%. Therefore, it was prayed that the results declared by the assessee were true and based on the books of account and therefore, the appeal filed by the assessee may be allowed.

(Order pronounced in the open court on 16/08/2022)

Sd/. ( T. S. KAPOOR ) Accountant Member Dated:16/08/2022 *Singh