M/S SUSEE AUTO SPARES (P) LTD.,MADURAI vs. ACIT, CORPORATE CIRCLE, MADURAI

Aforesaid appeal by assessee for Assessment Year (AY) 2018-19 arises out of the order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 12-11-2022 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s 144B of the Act on 20-04-2021. The grounds taken by the assessee read as under:-

The Ld. AR advanced arguments and furnished profit rate chart for various years. The Ld. Sr. DR also advanced arguments and justified the estimation of income. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3. The assessee being resident corporate assessee is stated to be engaged in trading of auto spare parts. In this year, the assessee reflected net loss of Rs.211.79 Lacs with negative Net Profit (NP) rate of -14.41%. It was noted that the assessee did not maintain quantitative details of traded goods. The assessee submitted that it was dealing in more than 6000 items of auto spare-parts items and it was impossible to maintain stock register. However, Ld. AO observed that the assessee had sales turnover of Rs.1472.29 Lacs which were lower than the purchase value. The assessee submitted that higher interest cost and lower turnover had negative impact on margins leading to heavy losses. Finally, rejecting the books of the assessee u/s 145(3), Ld. AO estimated profit rate of 8% on value of cost of material consumed for Rs.1501.49 Lacs which translated into profit estimation of Rs.120.11 Lacs. The gross loss of Rs.29.20 Lacs as declared by the assessee was further added to the income of the assessee. The total income thus estimated by Ld. AO aggregated to Rs.149.32 Lacs. Appellate Proceedings 4. The Ld. CIT(A) noted that the during FYs 2015-16 & 2016-17, the assessee reflected Gross Profit Rate of 9.21% and 7.7% respectively whereas it went down to -1.9% during this year. In subsequent year, it went up-to 8.9%. The assessee did not furnish any valid reason for sudden fall in GP rate. No specific reasons were adduced and a general statement that decline in turnover led to gross loss would not establish anything in favor of the assessee. There was further decline in sales in subsequent FY 2018-19 but still the assessee reflected GP rate of 8.9%. Accordingly, the estimation of Ld. AO was confirmed against which the assessee is in further appeal before us. Our findings and Adjudication 5. The undisputed fact that emerges is that the assessee has not maintained any quantitative details of stock. Another fact is that the sales turnover of the assessee has continuously been declining and ultimately, the business has been closed down in May, 2019. From the tabulation as placed on record, it could be seen that for FY 2016-17, the assessee has declared Net Profit Rate of 0.24% whereas in this year, the Net Profit Rate NP rate is (-)14.41%. In subsequent year, this rate is -6.80%. Upon perusal of comparative Profit & Loss Account for FY 2014-15 to 2017-18 as placed on record, it could be observed that the assessee is having high borrowing costs as well as high miscellaneous expenses. The same would show that the assessee is having high indirect costs.

The appeal stands partly allowed. Order pronounced on 6th July, 2024 Sd/- Sd/- (ABY T. VARKEY) (MANOJ KUMAR AGGARWAL) �ाियक सद" /JUDICIAL MEMBER लेखा सद" / ACCOUNTANT MEMBER चे5ई Chennai; िदनांक Dated :06-08-2024 DS आदेशकीIितिलिपअ'ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयु>/CIT Madurai. 4. िवभागीय�ितिनिध/DR 5. गाडCफाईल/GF