PRADIPTA KUMAR PRADHAN,KHURDA vs. ITO, KHURDA WARD, KHURDA

This is an appeal filed by the assessee against the order of CIT(A)-1,

Bhubaneswar, dated 11.4.2016, for the assessment year 2011-12.

erred in confirming the action of the Assessing Officer estimating the net

profit @ 4% on the turnover.

authorities and materials available on record. In the instant case, the facts

of the case are that the assessee derives income from wholesale trading in

2 ITA No. 22/CT K/ 2017 Asse ssment Year :20 11- 201 2 lubricants, tyres, tubes & filters. A survey under section 131A of the Act

was conducted in the business premises of the assessee on 23.9.2010. The

assessee filed the return of income on 25.11.2011 showing income of

Rs.10,66,200/-. The Assessing Officer assessed the total income at

Rs.29,46,690/- after estimation of profit and addition of income from other

sources. During the course of assessment proceedings, the Assessing

Officer asked the assessee to produce sale register, purchase register and

stock register with all bills/vouchers in support of purchases & sales and

also the cash book. The assessee did not furnish the same. The Assessing

Officer proposed to complete the assessment u/s.144 in absence of books

of account. No books of account were produced. Therefore, the Assessing

Officer completed the assessment u/s.144 invoking the provisions of

section 145(3) of the Act and estimated the profit @ 4% of the turnover.

before the CIT(A). The CIT(A) observed that during the course of

assessment proceedings, the assessee failed to produce the cash book,

ledger and stock register for examination even though specifically asked

for by the Assessing Officer. In the absence of these vital books of account,

the correctness of the profit disclosed by the assessee as per books could

not be verified. He further observed that the correctness of the closing

stock which has a definite bearing on the taxable profit also could not be

verified in the absence of the stock register. The Assessing Officer resorted

to section 145(3) of the Act and estimated the profit @4% of the turnover.

3 ITA No. 22/CT K/ 2017 Asse ssment Year :20 11- 201 2 He observed that in the circumstances of the assessee's case, the invoking

of section 145(3) by the Assessing Officer was perfectly justified. He

observed that the only issue which remains to be decided is whether the

estimation of profit @4% of the turnover was reasonable and not excessive.

The assessee has disclosed a profit of 1.69% for the year under appeal

which appears to be too low in the line of trade, the assessee is carrying

on. The estimation of profit @4% by the Assessing Officer appears to be

quite reasonable. The assessee deals in lubricants, tyres, tubes etc., the

profit in the trading of which is in the vicinity of 4 to 5%. Keeping in view

all these relevant factors, the CIT(A) held that the Assessing Officer was

justified in estimating the net profit at 4% of the turnover in the absence

of production of books of account.

failed to produce books of account and other relevant registers for

verification before the Assessing Officer and CIT(A). He submitted that the

assessee is a wholesale trader in lubricants and, therefore, in this line of

trade, generally net profit @ 1 to 2% is shown and hence, estimation of net

profit @ 4% was excessive.

submitted that in the given facts and circumstances of the case, the order

of the CIT(A) was fully justified and should be upheld.

4 ITA No. 22/CT K/ 2017 Asse ssment Year :20 11- 201 2 7. I find that the assessee has not challenged the rejection of book

results of the assessee by the Assessing Officer in absence of production of

books of account and other relevant registers and bills and vouchers. The

grievance of the assessee is that the estimation of net profit @ 4% is

excessive. I find that the CIT(A) has observed that the assessee has shown

net profit @ 1.69%. In the above facts and circumstances of the case, I

am of the considered view that it will meet the ends of justice, if the profit

of the assessee is estimated by applying the rate of 3%. Therefore, I

modify the order of the CIT(A) accordingly and partly allow the ground of

the appeal of the assessee.

SR.PRIVATE SECRETARY ITAT, Cuttack