SHRI PRATAP NAYAK,BHILAI vs. INCOME TAX OFFICER, WARD- 1(3), BHILAI

The assessee has filed this appeal against the order passed by the CIT(A)-II, Raipur, dated 06.12.2017 for the assessment year 2014-2015, on the following grounds :-

Against the above order of AO, the assessee preferred appeal before the ld. CIT(A), but without success, the ld. CIT(A) upheld the findings of the AO and dismissed the appeal of the assessee.

Now, the assessee is in further appeal before the Tribunal against the order of the ld.CIT(A).

Ld. AR before us submitted that the revenue authorities have grossly erred in appreciating the facts of the case, they mixed the two business activities (1) sale of e-recharge mobile vouchers and (2) sale of Mobile phones of the assessee and concluded, the assessment as well appellate proceedings by applying a single rate of Gross profit % on both the activities. Ld AR further submitted that while recasting Trading and Profit & Loss Account of the assessee for the AY 2014-15 during the assessment proceedings, Ld AO has taken the opening stock of Mobile Recharge Vouchers as that of Mobile phones, commission Income is also wrongly taken as part of P&L instead of trading account and therefore has arrived at a misleading conclusion that the GP of both the activities should be 3.50 %. It was further submitted that Gross Profit % of the Mobile E- Recharge voucher for the earlier assessment years were 3.37% and 3.14% only after considering income from Commission and other income, thus applying a higher percentage of GP - 3.50% after considering income from Commission and other income is uncalled for, unjustified and bad estimation by the Ld AO. Ld AR in order to substantiate the facts have produced a statement showing Trading and Profit & Loss of the assessee for the AY 2014-15, combined as well as only for Mobile E-Recharge

It was the further submission of the Ld AR that the assessee has launched the business of selling of mobile phone in the AY 2014-15 only and was unable to make any profits from this business due to launching of android smart phones and therefor the assessee has stopped dealing in business of selling of mobile phone after the impugned assessment. According to Ld AR, Ld CIT(A) has decided the issue in haste without considering the submissions of the assessee, even the admission of the Ld AO in the remand report that the opening stock of Mobile recharge vouchers was wrongly shown as opening stock of mobile phone in the assessment proceedings was taken on record but have not given any weightage in the appellate order. Ld AR further drew our attention to the order of LD CIT(A) para 6. wherein it was noted by the Ld CIT(A) that the AO vide his remand report has made a comparison with M/s Semi Conductor, who is in the same line of business and has disclosed a gross profit rate of 2.88%, no effect of this finding to the benefit of the assessee was given by the Ld CIT(A), but the rate of GP% applied by the Ld AO of 3.50% was concurred with by the Ld CIT(A) and upheld the order of Ld AO. It was also submitted by the Ld AR that the rate of comparative GP of M/s Semi Conductor cannot be applied in the case of assessee because M/s Semi Conductor is a retailed whereas the assessee was in whole sale trade of the mobile phone. Ld AR for the reasons mentioned herein above has submitted that the order of Ld CIT(A) upholding the order of Ld AO was not justified, arbitrary and baseless.

On the other hand, ld. Sr. DR vehemently relied on the orders of the authorities below. 8. We have considered the rival contentions and perused the relevant material on record. Admittedly, Ld AO had committed certain mistakes in recasting the Trading and Profit & Loss Account while passing the assessment order, however it was also the fact that the assessee was a persistent non-compliant during the assessment proceedings. At the stage of first appeal before the CIT(A), assessee through submissions and representation by AR’s which were further enlightened by Ld AO by 5 submitting a remand report were not appreciated properly by the Ld CIT(A). In view of aforesaid facts and circumstances of the case, we are of the considered opinion that 3.25% Gross profit percentage (on sale of mobile recharge vouchers including commission & other income) i.e. average of 3.37% and 3.14% respectively for previous 2 assessment years 2013-14 and 2012-13, will be the right percentage to be adopted for AY 2014-15 and we order to do so.

With regard to sale of mobile phones, being the first and only year of the business in this line by assessee as submitted by the assessee and not controverted by the revenue, since there is no factual precedence to arrive at a reasonable GP%, was available for our adjudication, the comparative 2.88% of M/s Semi Conductor as provided by Ld AO in his remand report after a reasonable concession on account of assessee’s business as a whole seller and that the comparative was of a retailer, we are of the view and deem it reasonable that assessee’s Gross profit from sell of mobile phone shall be taken at 2% and assessed accordingly.

In backdrop of the aforesaid observations, we set aside the order of the ld. CIT(A) and direct the Ld AO to recalculate the taxable income of the assessee in terms of our observations herein above. Accordingly ground of appeal