601 orders · Page 13 of 13
The High Court held that the ITAT was justified in accepting the findings of the Commissioner. The Commissioner's decision to reduce the net profit rate from 10% to 6% was based on the material on record, specifically the net profit rates of the assessee in earlier and subsequent years, which were significantly below 6%. Therefore, no fault was found with the Commissioner's procedure or the ITAT's upholding of it. Regarding the addition of Rs. 6,50,35,836/- on account of trade payables, the Court noted that the Commissioner had rightly set aside the AO's order. The Commissioner held that these payables were not cash credits under Section 68 but were directly linked to the assessee's purchases. As per settled law, sundry trade creditors cannot be disallowed once a flat net profit rate is applied. The ITAT upheld this, noting that the increase in trade payables is linked to the purchase and consumption of raw material, and no further disallowance is warranted. The Court agreed that the AO was not justified in making the addition under Section 68, as there was no concealment of income. The ITAT rightly upheld the Commissioner's well-reasoned order. The appeal was accordingly dismissed, with no substantial question of law arising.
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