SHRI DIPAK GOSWAMI,PURBA MEDNIPUR vs. ITO, WARD - 1, HALDIA, PRESENTLY ITO, WARD - 27(1), HALDIA, PURBA MEDINIPUR

The assessee in the present case is an individual, who is engaged in the business of supply of labour on contract basis and supply of general building materials. The return of income for the year under consideration was filed by him on 29.03.2010 declaring total income of Rs.11,39,370/-. In the said return, the net profit from the business of supply of labour on contract basis was shown by the assessee at Rs.4,68,327/- on the total receipts of Rs.1,43,55,378/- giving net profit rate of 3.26%. The profit ./2017 Assessment year: 2010-2011 Page 2 of 4 from the business of general supply of building materials was shown by the assessee at Rs.8,69,631/- on the total turnover of Rs.5,24,72,936/- giving net profit rate of 1.66%. During the course of assessment proceedings, the assessee was called upon by the Assessing Officer to produce the books of account along with supporting bills and vouchers for verification. The assessee, however, failed to comply with the said requirements. He also accepted that the books of account in respect of his business were not regularly maintained by him. In the absence of the books of account, the Assessing Officer proceeded to determine the income of the assessee on estimated basis by applying net profit rate of 8% on the receipts of the assessee from the supply of labour on contract basis and net profit rate of 2% on the turnover of the business of the assessee of general supply of building materials. Accordingly, the total income of the assessee was determined by the Assessing Officer at Rs.21,97,888/- in the assessment completed under section 143(3) vide an order dated 20.03.2013.

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) found the net profit rate of 2% applied by the Assessing Officer for determining the income of the assessee from the business of general supply of building materials to be fair and reasonable. He, however, found the net profit rate of 8% applied by the Assessing Officer for determining the income of the assessee from supply of labour on contract basis to be excessive and reduced the same to 6%. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

I have heard the arguments of both the sides and also perused the relevant material available on record. In the present appeal filed before the Tribunal, the assessee has not disputed the net profit rate of 2% applied by the Assessing Officer and confirmed by the ld. CIT(Appeals) to ./2017 Assessment year: 2010-2011 Page 3 of 4 estimate the income of the assessee from the business of general supply of building materials and the only dispute raised is relating to the net profit rate applied to determine his income from the business of supply of labour on contract basis, which as reduced by the ld. CIT(Appeals) is 6%. In this regard, the ld. counsel for the assessee has submitted that the net profit declared by the assessee at lower rate in the earlier year was accepted by the Assessing Officer and keeping in view that the net profit declared by the assessee at 3.98% for the immediately preceding year, i.e. A.Y. 2009-10 was also accepted by the Assessing Officer, the rate of 6% applied by the ld. CIT(Appeals) is clearly excessive and unreasonable. I find some merit in this contention of the ld. counsel for the assessee. Even though there was a failure on the part of the assessee to produce the books of account and other supporting documents warranting determination of his business income on estimated basis, such estimate is required to be made on the basis of material available on record and the past history of the assessee’s case. Since the net profit rate of 3.98% declared by the assessee for the immediately preceding year, i.e. A.Y. 2009-10 was accepted by the Assessing Officer, I am of the view that the net profit rate of 6% applied by the ld. CIT(Appeals) is slightly on the higher side and it would be fair and reasonable to apply net profit rate of 5% to estimate the income of the assessee from the business of supply of labour on contract basis. I accordingly modify the impugned order of the ld. CIT(Appeals) on this issue and direct the Assessing Officer to recompute the income of the assessee by applying the net profit rate of 5% to estimate the income of the assessee from the business of supply of labour on contract basis.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on October 13, 2017.