Loading judgment…
Facts
The assessee, engaged in egg trading, reported a turnover of Rs. 78,83,02,845 with a net profit of Rs. 11,78,542 for AY 2018-19. The AO estimated profits at 1% of the turnover due to non-compliance with details, adding Rs. 78,83,028. The CIT(A) reduced this to 0.75%, providing relief.
Held
The Tribunal noted that the assessee did not comply with the AO's requests, leading to profit estimation. While the AO estimated at 1% and CIT(A) at 0.75%, the Tribunal reduced the profit estimation to 0.50% of the total turnover, considering the nature of the business and setting aside the orders of the AO and CIT(A) to recompute profits.
Key Issues
Estimation of profit on low turnover and rejection of books of accounts; Addition on account of low withdrawals.
Sections Cited
Sec 145(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI MAHAVIR SINGH & SHRI AMITABH SHUKLA
आयकर अपीलीय अधिकरण, ‘डी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI श्री महावीर स िंह, उपाध्यक्ष एविं श्री अमिताभ शुक्ला, लेखा दस्य के मक्ष BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील िं./ Year: 2018-19 Sekar Kalaiselvi, The Income Tax Officer, No.2/89, Melapatti Melmugam, Vs. Ward-1(2), Thummankurichi Post, Namakkal. Namakkal, Tamil Nadu-637 003. [PAN: BMKPK3585R] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर े/ Assessee by : None प्रत्यर्थी की ओर से /Revenue by : Shri Keerthi Narayanan, JCIT ुनवाई की तारीख/Date of Hearing : 05.09.2024 घोर्णा की तारीख /Date of Pronouncement : 11.09.2024 आदेश / O R D E R PER AMITABH SHUKLA, A.M :
This appeal is filed against the order bearing DIN & Order No.ITBA/NFAC/S/250/2023-24/1061904862(1) dated 03.03.2024 of the Learned Commissioner of Income Tax [herein after “CIT(A), National Faceless Appeal Center[NFAC], Delhi, for the assessment years 2018-19. Through the aforesaid appeal the assesse has challenged order u/s 250 dated 03.03.2024 passed by NFAC, Delhi. :- 2 -:
2.0 The first issue arising in this appeal is regarding the estimation of profits by the Ld. First Appellate Authority. Ld. Counsel for the assesse informed that the assesse is engaged in the business of trading of Eggs. During the year under consideration the assesse had shown total turnover of Rs.78,83,02,845/- against purchases of Rs.78,58,47,587/- so as to arrive at a net profit of Rs.11, 78,542/-. No opening or closing stock are shown. The Ld. AO had demanded details in support of low net profit viz-a- viz heavy turnover which remained uncomplied by the assesse. The Ld. AO held that the declared profit was far too less in this line of business and after recording his findings in Para-4 of the assessment order proceeded to estimate assesse’s profit at 1% of the total turnover and made addition of Rs.78,83,028/- while rejecting books of accounts. The Ld. First Appellate Authority estimated the profits of the assesse by applying a ratio of 0.75% of the turnover thereby giving the assesse a relief of Rs.19,70,756/-. The Ld. Counsel for the assesse had argued that the profits in this line of business are very low and hence adoption of 1% by the Ld.AO itself was quite high. The Ld. DR vehemently relied upon the orders of the authorities below. It was submitted that the assesse had not furnished the requisite details to the Ld. AO leading to estimation of its book profits. :- 3 -:
3.0 We have heard the rival submissions in the light of material available on records. It is an undisputed fact of the case that the assesse had not complied with details asked for by Ld. AO compelling him to estimate the profits of the assesse. The Ld. AO in para-4 of his order has given his reasoning’s for adopting the turnover at 1%, Principle being non- submission of supporting documents by the assesse and accompanying rejection of books of accounts of the assesse u/s 145(3). The action of the Ld. First Appellate Authority in estimating the profits at 0.75% of the turnover is not based upon any reasoned findings except that he concurs with Ld. AO’s findings. Given the overall facts and circumstances of the case we are of the view that ends of justice would be met if the profits of the assesse are estimated at 0.50% of the total turnover. Accordingly, the order of Ld.AO and Ld.CIT(A) is set aside and the Ld.AO is directed to recompute the profits of the assesse at 0.50% of the total turnover. In the result, all the grounds of appeal raised by the assesse qua estimation of its profits are partly allowed.
4.0 The next issue raised by the assesse is regarding the addition made by the Ld. AO on account of low withdrawals. The Ld. AO noted that the assesse had shown total drawings of only Rs.464/-. The Ld. AO holding the same as inadequate for any person of assesse’s stature, estimated minimum drawings of Rs.50,000/- per month and proceeded to add to Rs.6 :- 4 -: lakhs. The Ld. First Appellate Authority provided 50% relief to the assesse and restricted the addition to Rs.3 lakhs. The Ld. DR relied upon the order of authorities below. Before us the Ld. Counsel for the assesse repeated same set of arguments that the assesse stays in house of her husband and all family expenses are met by her husband who earns income from agriculture activities, interest etc. We have heard rival submissions and considered the issue in the light of material available on records. Whereas, there can be some force in assesse’s arguments of house hold expenses borne by her husband there cannot be any justification for low withdrawals of Rs. 464/-. Accordingly, we are of the view that the decision of the Ld. First Appellate Authority in restricting the Ld. AO’s addition at Rs.3 lakhs reflects a reasonable view of the matter. Therefore, we are of the view that there is no need to interfere with the decision of Ld. First Appellate Authority at this stage. The ground of appeal raised by the assesse is therefore partly allowed. :- 5 -: 5.0 In the result, the appeal is partly allowed.
Order pronounced on 11th, September-2024. (महावीर स िंह) (श्री असमताभ शुक्ला) (Mahavir Singh) (Amitabh Shukla) उपाध्यक्ष / Vice President लेखा सदस्य /Accountant Member चेन्नई/Chennai, ददनािंक/Dated: 11th , September 2024. KB/-