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Facts
The Revenue filed appeals against a common order by the CIT(A) for AY 2017-18 and 2019-20. The Assessing Officer estimated net profit at 5% and 8% respectively, after a survey found discrepancies and the assessee's admitted net profit during the survey. The CIT(A) deleted these additions, holding that estimation without rejecting books of accounts is not sustainable.
Held
The Tribunal held that the CIT(A) was justified in deleting the additions as the net profit offered by the assessee was based on their books of account, and no adverse material was found to reject these books. Therefore, the grounds raised by the Revenue were dismissed.
Key Issues
Whether the CIT(A) was justified in deleting the addition of net profit estimated by the Assessing Officer without rejecting the books of account.
Sections Cited
Section 5, Section 2(22)(e)
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Before: Shri S.S. Viswanethra Ravi & Shri S.R. Raghunatha
O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
These two appeals filed by the Revenue are directed against common order dated 18.09.2023 passed by the ld. Commissioner of Income Tax (Appeals) – 19, Chennai for the assessment years 2017-18 & 2019-20.
Since issues raised in both the appeals are similar based on the 2. same identical facts, with the consent of the both the parties, we proceed to hear both the appeals together and pass consolidated order for the sake of convenience.
First, we shall take up - AY 2017-18 for adjudication.
We find that the Appellant-Revenue raised two grounds of appeal amongst which the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in deleting net profit estimated at 5% by the Assessing Officer.
Brief facts leading to the case are that the assessee is a firm. A survey was conducted on 26.02.2019 and according to the Assessing Officer, the assessee admitted net profit is at 5% in the survey. On an examination of books of account, the Assessing Officer found various discrepancies and added the difference of net profit shown by the assessee in the books and the net profit disclosed by the assessee in the survey to the total income of the assessee. The ld. CIT(A) held the estimation of net profit without resorting to rejection of books of accounts is not sustainable and directed the Assessing Officer to delete the addition. We find that the details of earlier and subsequent year’s turnover, gross profit, net profit, etc. placed on record in the form of table at page 17 of the paper book. Taking into consideration of the same, we are of the opinion that the net profit offered by the assessee is based on the books of account and find no adverse reference made to books of accounts nor rejected the same, therefore, we agree with the reasons recorded by the ld. CIT(A) in accepting the contention of the assessee and is justified. Therefore, we find no infirmity in the order of the ld. CIT(A). Thus, the grounds raised by the Revenue are dismissed.
AY 2019-20 6. According to the Assessing Officer, the assessee admitted net profit at 8% in the survey and found not acceptable the net profit offered by the assessee at 6.01%. Thus, the Assessing Officer added the difference of net profit shown by the assessee in the books and the net profit admitted by the assessee in the survey to the total income of the assessee. We find, admittedly, except sworn statement, no material was found during the survey. The ld. CIT(A) held the estimation of profit without resorting to rejection of books of accounts is not sustainable in law and directed the Assessing Officer to delete the addition. The assessee furnished actual turnover and other details and offered net profit on sale at 6.01%. In the absence of any corroborating material against the assessee and considering the details of turnover, etc. of earlier years, we are of the opinion that the net profit admitted by the assessee is based on the books of account is justified, as discussed above, the Assessing Officer did not make any adverse reference regarding the books and thus, we agree with the reasons recorded by the ld. CIT(A) in accepting the contention of the assessee, which is justified. Therefore, we find no infirmity in the order of the ld. CIT(A). Thus, the grounds raised by the Revenue are dismissed.
In the result, both the appeals filed by the Revenue are dismissed. Order pronounced on 18th December, 2024 at Chennai.