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Assessee by None Revenue by Shri Abhishek Gautam – Sr-DR Date of hearing 06.05.2022 Date of pronouncement 06.05.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of ld. Commissioner of Income tax (Appeals)-Valsad dated 05.12.2017 for assessment year 2013-14, which in turn arises out assessment order passed by Assessing Officer under section143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The assessee has raised following grounds of appeal:- “01. The order of assessment is contrary to the facts and prejudicial to the assessee.
02. On appreciation of the facts and circumstances of the case and law, the additions made by the Learned Assessing Officer and confirmed by the Learned Commissioner of Income Tax (Appeals) are contrary to law and based on erroneous understanding of the facts.
(A.Y.13-14) Zeeshan A Shaikh 03. On appreciation of the facts and circumstances of the case and law the Learned Commissioner of Income Tax (Appeals has erred in confirming the action of the Learned Assessing Officer adopting net profit at the rate of 2.50% of the turnover on ad-hoc basis for determining the taxable income in the case of the appellant as against 0.13% as disclosed by the appellant in its return of income.
The appellant craves to add, amend, modify or alter the above grounds of appeal at any stage of appellate proceedings.”
Brief facts of the case are that assessee is proprietor of prop. of M/s A.H. Traders and engaged in the business of trading of waste paper. The assessee filed his return of income for assessment year (AY) 2013-14 on 23.09.2013 declaring income of Rs.10,31,845/-. The case of assessee was selected for scrutiny. During scrutiny assessment, Assessing Officer noted that the assessee has shown profit ratio of 0.13% on total turnover of Rs.9,56,08,175/-. The Assessing Officer further noted that in the preceding year, assessee has shown profit ratio @ 0.34% on total turnover of Rs.90,09,62,971/-. The turnover of assessee is above the prescribed limit for auditing books of account as per Section 44AB of the Act. The Assessing Officer further noted that the assessee has shown purchase from Un-Registered Dealer (URD for short). No purchase bills or challans were filed to substantiate for the (A.Y.13-14) Zeeshan A Shaikh purchase of huge amount of Rs.9,65,08,175/-. The Assessing Officer issued show cause notice as to why the addition of 15% of Un-Registered Dealer be not made and added to the income of the assessee. The assessee filed its reply dated 16.03.2016 and stated that waste paper and other similar scraps are collected by the small time vendors who are popularly known as “raddiwallas”. Some of the raddiwallas are illiterate people moving from place-to-place for their livelihood. They belong to the poorest strata of the society and are not maintaining any bank account. They purchases waste paper from day-to-day basis accumulate the same in quantities and ultimately sell to the end user i.e., paper mill. For the purchase price of waste paper fixed by Gujarat Paper Mills Association the rate of waste paper is around Rs.8,000/- per tonnes. There are 45-50 small scale paper mills in the Vapi Industrial town. The Paper Mills Association sometime fixed the purchase price for ensuring uniform rate which impact the cost of raw materials. The assessee also submitted that the net profit around 0.5% of the turnover. The assessee carrying out the same business from last twelve years. 3 (A.Y.13-14) Zeeshan A Shaikh 3. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer recorded that assessee has not furnished any details of sale amount and the nature of business involving raddiwallas. All purchases are made in cash, while payment for sells are received in cheque. No identity to verify the person from whom assessee purchased were furnished. In absence of any evidence, the Assessing Officer on the basis of decision of ITAT Ahmedabad Tribunal in and 139/Ahd/2012 dated 30.11.2015 in the case of Shri Abdul Farid Khan adopted net profit @ 2.5% of the total turnover. Accordingly, after rejecting the books of account the additions were made. The Assessing Officer worked out the disallowance of Rs.22,57,637/-.
4. The Assessing Officer also made other addition of Rs.6 lakh under the head “income from other sources” before making addition, Assessing Officer noted that assessee has given advance of Rs.50 lakh to M/s L.B. Enterprises and have not charged any interest thereon. The Assessing Officer issued show cause notice as to why interest was not charged on such huge amount. The assessee submitted that he is not charged 4 (A.Y.13-14) Zeeshan A Shaikh any interest on M/s L.B.Enterprises. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer worked out the disallowance of interest @ 12% and worked out the addition of Rs.6 lakh under the head “income from other sources”. On appeal before Ld. CIT(A), the addition on account of low gross profit was upheld, however, the other addition of Rs.6 lakh was deleted. Further aggrieved, the assessee has filed present appeal before this Tribunal.
None appeared on behalf of assessee despite the service of notice through registered post with acknowledge due (RPAD) on more than one occasions. Therefore, we left no option except to the hear the submission of Ld. Senior Departmental Representative (Sr. DR) for the Revenue and decide the appeal on the basis of materials available on record.
The Ld. Sr. DR for the Revenue supported the order of Assessing Officer. The Ld. Sr. DR submits that assessee has shown a very nominal margin on the turnover of more than Rs.9.00 crores. The assessee has offered a meagre income of Rs.10.31 lakh only. The assessee has not shown any evidence to substantiate abnormal low margin in the trade of waste 5 (A.Y.13-14) Zeeshan A Shaikh paper business. The Assessing Officer made addition on the basis of decision of ITAT Ahmedabad Tribunal in the case of Shri Abdul Farid Khan (supra). Ld. Sr. DR for the Revenue submits that assessee does not deserve any further relief.
We have considered the submission of Ld. Sr-DR for the Revenue and perused the materials available on record carefully. We find that during the assessment, the Assessing Officer made gross profit addition after giving full opportunity to assessee and after rejecting books of account.. We find that rejection of books of account is not challenged by assessee either before Ld. CIT(A) or before us. We further find that Assessing Officer while making estimation of gross profit followed the order of ITAT Ahmedabad Tribunal in the case of Shri Abdul Farid Khan (supra), wherein the assessee besides was also in the similar trade. Neither before the Ld. CIT(A) nor before us the assessee has filed any single document nor came forward to explain about grounds of appeal
as raised by assessee. Therefore, in absence of any cogent evidence or explanation, we have no option except to affirm the order of Ld. CIT(A), who affirmed the order of Assessing Officer. 6 (A.Y.13-14) Zeeshan A Shaikh
8. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 06/05/2022 at the closing of hearing and by placing the result on the Notice Board.