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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY, & SHRI G. PAVAN KUMAR
आदेश / O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER:
This appeal is filed by the Revenue aggrieved by the order of the Ld. Commissioner of Income Tax (Appeals) in 16 dated 22.08.2016 passed u/s. 250(6) r.w.s. 143(3) of the Act.
The Revenue has raised four grounds in its appeal, however the crux of the issue is that the Ld. CIT(A) has erred in estimating the income of the assessee at 8% of its turnover rejecting the addition made by the Ld. AO without any basis.
The brief facts of the case are that the assessee is an individual engaged in wholesale pharmaceutical business in the name and style of M/s. Novachem Pharma, filed his return of income electronically on 27.09.2012 declaring income of Rs.5,53,820/-. Initially the return was processed u/s.143(1) of the Act and thereafter the case was selected for scrutiny through CASS and finally assessment was completed u/s.143(3) of the Act on 30.03.2015, wherein the Ld. AO made addition of Rs.42,11,323/- towards inflating purchases, Rs.28,80,050/- for payment made by cash invoking Section 40A(3) of the Act, Rs.20,39,072/- due to non- availability of conformation statement from creditors and finally Rs.6,84,520/- for want of evidence towards business promotion expenses.
On appeal, the Ld. CIT(A) deleted the addition of Rs.28,80,050/- made towards cash payments because it was established that the assessee had paid through banking channel.
The Ld.CIT(A) also deleted the addition with respect to sundry creditors because the genuineness of the substantial sundry creditors M/s. Megasys Biotek Pvt Ltd and M/s. Lancer Pharmaceuticals Pvt Ltd was established as they were paid by cheque during the month of April 2012 i.e., in the subsequent assessment year. With respect to the addition made for Rs.42,11,323/- it was observed by the Ld. CIT(A) that there was some duplication in the books of accounts which was pointed out by the assessee before the Ld. AO and the Ld. AO has failed to look into those aspects. Therefore considering the nature of business the Ld. CIT(A) estimated the income of the assessee at 8% of the total turnover Rs.2.36 crores which works out to Rs.18.88 lakhs.
Before us the Ld. DR vehemently argued in support of the Ld. AO whereas the Ld. AR relied on the orders of the Ld. CIT(A).
We have heard the rival submissions and carefully perused the materials available on record. From the facts of the case it is appears that both the Ld. AO and the Ld. CIT(A) has not arithmetically computed the profit of the assessee from the books of accounts after rectifying the mistakes. Further the assessee is engaged in the business as wholesale dealer in pharmaceuticals and has declared nominal profit of Rs.5,53,820/- though its turnover is Rs.2.36 crores. Considering the nature of business, we are of the considered view that 10% profit on the sales turnover of Rs.2.36 crores would suffice in order to meet the ends of justice and to simplify the matter. Accordingly we hereby sustain the addition of Rs.23,60,000/- (10% of the turnover) as against the addition of Rs.1,03,68,785/- made by the Ld. AO and the amount of Rs.18.88 lakhs sustained by the Ld. CIT(A).
In the result appeal of the Revenue is partly allowed.
Order pronounced on 15th March, 2017 at Chennai.