SIVALINGAM SURENDHAR,CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R

PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:

This is an appeal filed by the assessee against the Order dated 09.09.2016 of Commissioner of Income Tax (Appeals)-5, Chennai, in for the AY 2012-13 and raised the following grounds of appeal:

ITA No.3094/Mds/2016 :- 2 -:

The order of the Commissioner of Income tax (Appeals)-5, Chennai dated 9/9/2016 is objected to on the following grounds of appeal:

1. The Learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that gross profit rate alone is considered for comparison purposes and the net profit is a varying factor from trader to trader in the same line of business owing to several individual reasons and hence comparison of net profit rate ought not to have been attempted by the Assessing Officer.

2. The Learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that Oil Supplying Companies themselves had fixed a low margin for retailers for selling diesel and petrol and there had been a lot of representations and strikes for a hike in the commission rate to cover the escalating operation costs for a long time.

3. The Learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the Assessing Officer had never communicated the details of comparative cases the Officer has collected and depended upon for adopting a high net profit rate of 1% nor the Commissioner of Income Tax (Appeals) has communicated the cases where net profit of 1% and more had been shown for assessee’s submissions against such high net profit rate.

4. The Learned Commissioner of Income Tax (Appeals) ought to have given due consideration to the falling profit margins in the petroleum and diesel trade which had been placed before the CBDT by the Consortium of petroleum dealers instead of summarily rejecting the submissions of the appellant.

5. The Appellant submits that he has a number of comparative cases wherein the net profit rate had been less than 1% and the Appellant will be placing the details at the time of hearing before the Hon’ble Tribunal.

6. The Appellant craves leave to file additional grounds and or additional evidences as the hearing progresses in case a need arises for the same 7. The appellant under the circumstances submits that the Hon’ble Tribunal may be pleased to reduce the rate of net profit or grant any other appropriate relief to the Appellant in the appeal filed by him.

2.0 All the grounds of the appeal are related to the estimation of income made by the AO. The assesse filed return of income declaring total income of Rs.13,60,130/-. The case was selected for scrutiny and notices are issued u/s.3(2) were issued to the assessee. The AO called for the various details and requested for production of books of accounts, but the assessee has not produced the books of accounts and the details, hence, the AO completed the assessment estimating the net profit @1% of total sales and completed the assessment u/s.144 dated 31.03.2015.

ITA No.3094/Mds/2016 :- 3 -:

3.0 Aggrieved by the order of the AO, the assesse went on appeal before the Ld.CIT(A) and the Ld.CIT(A) dismissed the appeal since the assessee has not furnished any evidence to prove that the profit of the assesse was less than 1%, either with the books of accounts or with the comparable cases.

4.0 Aggrieved by the Order of the Ld.CIT(A), the assessee filed appeal before us. Appearing for the assesse, the Ld.AR argued that the net profit from the Petrol Bunk had been fixed at a very high rate, ignoring the ground reality that the gross profit rate was below 1%. The AO could have realized the fact that the net profit would be far less than 1%. The Assessing Officer though stated that the net profit offered by other assesses had been more, none of the comparable case have been brought on record. The estimate of net profit at 1% had been arbitrary and far above the net profit admitted by any assessee. There were demonstrations, representations, business closure notices etc by the petrol bunk owners for the very low and un-remunerative commission of Rs.0.70 paise per litre of Diesel and just Rs.1.20 per litre of petrol by the Oil Companies. The assessee has no say in the purchase price and selling price of petrol and diesel and the rates had been fixed by the Government of India. The margin fixed by the Government itself was very low and the working expenses were escalating year after year impacting the net profit and hence the Ld.A.R argued that the estimation of income @1% was unreasonable and be deleted and accepted the book result.

ITA No.3094/Mds/2016 :- 4 -:

5.0 Per contra the Ld.D.R. supported the orders of the lower authorities and argued that either before the AO or before the Ld.CIT(A), the assesse has not produced any evidences or comparable cases to show that the income of the assessee was less than 1%. Though the assessee stated that gross profit is less than 1% no documents have been furnished to support the argument. The gross profit is more than 1% for the AYs 2007-08 to 2011-12 & 2014-15 to 2015-16. In the year under consideration, the AO has called for the books of accounts but the assesse failed to produce the books of accounts and the details. There was no evidence with the assesse to prove that the profit of the assessee was less than 1%. The assessee has neither produced books of accounts nor furnished the details and hence the AO has no option except to estimate the income and the AO has rightly estimated the income and be confirmed.

6.0 We heard the rival submissions and perused the material placed on record.

Though, the AO has given reasonable opportunities to the assessee, assessee failed to produce the books of accounts and to substantiate the trading and P&L A/c results. The assesse has not produced any details before the Ld.CIT(A) also. The assessment cannot be completed based on the oral arguments without the supporting books of accounts and relevant evidences. The income of the assessee has to be computed with the books of accounts regularly maintained by the assessee. In the instant

ITA No.3094/Mds/2016 :- 5 -: case, the assesse has not furnished any evidences either before the AO or before the Ld.CIT(A). Before us also, the assesse has not produced any evidences regarding the income and expenditure. As seen from the details furnished before us, the gross profit was around 1% to 4% except in the AYs2012-13 & 2013-14. Though the assessee argued that the commission was less than 1% no agreement was placed before us. From the query during the Bench regarding production of evidences, the Ld.AR of the Appellant has given a negative response. In the absence of any evidence before the AO, the estimation income @1% made by the AO is reasonable and we uphold the orders of the Ld.CIT(A) and dismiss the assessee’s appeal.

7.0 In the result, the appeal of the assessee is dismissed.