Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Mahavir Singh, JM & Shri M. Balaganesh, AM]
Per Shri Mahavir Singh, JM:
This appeal by revenue is arising out of order of CIT(A)-XXIV, Kolkata vide Appeal No. 1132/CIT(A)-XXIV/C-1/12-13 dated 18.02.2013. Assessment was framed by DCIT, Circle-1, Kolkata u/s. 144 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2008-09 vide his order dated 06.12.2010.
The only issue in this appeal of revenue is against the order of CIT(A) in restricting the net profit rate @ 5.25% instead of 6% applied by AO. For this, revenue has raised following ground no.1: “1. That on the facts and circumstances of the case the Ld. CIT(A) was not justified in restricting the net profit @ 5.25% instead of 6% and thereby giving relief of Rs.42,22,400/- to the assessee.”
3. We have heard Ld. Sr. DR and gone through facts and circumstances of the case. Briefly stated facts are that the assessee undertakes contract of Railways for electrical jobs in its traffic system. The contract work consists of installing and maintaining a major part of automated signal system and computerized counting of axel revolution rate and controlling many other vital parameters of rail road traffic. The assignment of contract is hard to achieve for (a) fiercely competitive tendering, (b) demands of the highest standard or performance of the electrical systems creating fool proof safety conditions for round the clock traffic (c) all country operations along desolate remote tracts under austere conditions. The AO during the course of assessment proceedings rejected the books of account after noting major defects in the books of Eldyne Electro Systems Pvt. Ltd.. AY 2008-09 account, which is not challenged before Tribunal. The AO adopted the net profit rate on the basis of assessed net profit for FY 2003-04 relevant AY 2004-05 at 6.51% which was after disallowances. The assessee before CIT(A) furnished the GP and NP ratio for the period from FY 2002-03 to 2007-08 which is as under: Financial Year Turnover G. P. N.P. Remarks 2002-03 10.01 20.06% 4.23% 6.51% after disallowances 2003-04 12.07 19.20% 4.08% 2004-05 10.52 26.57% 4.33% 2005-06 26.45 15.39% 4.42% 2006-07 36.98 26.15% 5.78% 2007-08 (instant year) 56.3 22.11% 4.92% The AO after rejecting the books of account completed the assessment u/s. 144 after adopting net profit rate at 6% of the gross contract receipt of Rs.56,29,86,743/- against application of GP rate of 6%. The assessee preferred appeal before CIT(A), who restricted the net profit rate at 5.25% by observing in para 2.3.3 as under: “2.3.3. The A.O. has also observed that the appellant company did not comply to the notice issued u/s.142(1). Considering the various defects mentioned above, the A.O. has rejected the books of accounts and completed the assessment u/ s.144 after adopting the net profit at 6% of gross business income of Rs.56,29,86,743/-. During the course of the appellate proceedings, the Ld. AIR has argued that (i) none of the defects mentioned by the A.O. can be treated as an accounting error from the principles of commercial accounting, (ii) the net profit rate of 6% of the turnover adopted by the A.O. is based on the net profit after additions/disallowances during A.Y. 2002-03 and (iii) the A.O. did not give any allowance for the increase in the turnover of the appellant company. The A.O. has not established any of the defects which have been summarized above. The Ld. AIR has furnished necessary explanations in respect to the above defects pointed out by the A.O. The Ld. A/R has explained that the percentage of the N.P. in respect to Turnover is 4.08%, 4.33%, 4.42% and 5.78% for F.Y. 2003-04, 04-05, 05-06 and 06-07 respectively. The Ld. A/R has also stated that the average profit rate for five years comes to 5.2%. The Ld. A/R has explained that the turnover during the assessment year 2008-09 is Rs.56.30 crores as against the turnover of Rs.10.01 crore in the assessment year 2003-04. Considering the facts of the case and also the explanations furnished by the Ld. A/R, I am of the opinion that it would be fair and reasonable if the net profit is estimated at 5.25% of the turnover instead of 6% of the turnover for A.Y. 2008-09. Thus the net profit is estimated at 5.25% of the turnover which comes to Rs.2,95,56,804/- (5.25% of Rs.56,29,86,743/-). Accordingly, the A.O. is directed to assess the profit from business at Rs.2,95,56,804/- instead of Rs.3,37,79,204 / -. The appellant gets a relief of Rs.42,22,400/- (Rs.3,37,79,204/- - Rs. 2,95,56,804/- ). This ground of appeal is partly allowed.”
4. We find from the facts of the case and after hearing Ld. DR that the net profit rate varies from 4.08% to 5.78% and average of these years comes to 4.62%. We find that the CIT(A) has estimated the net profit after considering the turnover of the assessee at 5.25%, which is quite reasonable. Even otherwise, the Ld. Sr. DR could not point out any defect in the facts narrated
Eldyne Electro Systems Pvt. Ltd.. AY 2008-09