Income Tax Appellate Tribunal - Chandigarh
Sh. Mukesh Kumar Sharma, Mandi vs Ito, Sunder Nagar on 6 February, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
'SMC' BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
ITA No. 1278/CHD/2016
Assessment Year: 2010-11
Shri Mukesh Kumar Sharma, Vs The ITO,
Prop. Sharma Trading Co., Sunder Nagar (HP).
VPO - Sandhol,
Tehsil - Sarkaghat,
Distt. Mandi (HP).
PAN: BYIPS5601N
(Appellant) (Respondent)
Appellant by : Shri Ashwani Kumar
Respondent by : Shri S.K.Mittal, DR
Date of Hearing : 02.02.2017
Date of Pronouncement : 06.02.2017
O R D E R
Thi s appeal by a ssessee has been di rected agai nst the order of l d. CI T( Appeal s) Pal ampur dated 28.09.2016 for assessment year 2010-11, chal l engi ng the appl i cati on of net profi t rate of 10% on the total turnover as agai nst 5% decl ared by the assessee.
2. Bri ef facts of t he case are tha t the assessee fil ed return of i ncome at Rs. 3,60,828/- by appl yi ng net profi t rate of 5% of gross turnover of Rs. 72,16,556/-. The assessee i s deal i ng i n sal e and purchase of steel , steel sheets and cement etc. The case was sel ected for scruti ny because as per AI R i nformati on recei ved i n the Revenue Department, assessee had depo si ted Rs. 33,11, 600/- i n 2 cash i n hi s Savi n g Bank Account r el evant to the as sessment year under appeal . The assessee has not mai ntai ned any books of account. The Assessi ng Offi cer compl eted the assessment proceedi ngs by appl yi ng a rate of 12% of the total turnover.
3. The assessee su bmi tted before l d. CI T( Appeal s) that the assessee deal s i n sal e of steel on retai l basi s i n remote vi l l age of Mandi Di stri ct and profi t margi n in steel is bet ween 2 to 3% and profi t have been decl ared at 5% under secti on 44AF of the Act. The Assessi ng Offi cer wi thout bri ngi ng any materi al on record, appl i ed hi gher net profi t rate of 12%. The l d. CI T( Appeal s) noted that assessee di d not mai ntai n the detai l s of busi ness acti vi ti es and no books of account have been mai ntai ned. Si mi l arl y, Assessing Offi cer has no t brought any evi dence on record to substanti ate hi s acti on for appl yi ng net profi t rate of 12%. The contenti on o f the assessee that profi t was estimated by appl yi ng provi si ons of Secti on 4 4AF was re jecte d because thi s provi si on i s rel ated to turnover of Rs. 40 lacs onl y. The l d. CI T( Appe al s) , ho wever, consi dered the appl icati on of 12% net profi t r ate as e xcessi ve and reduced th e same to 10%. The appeal of the assessee was partl y al l o wed.
4. After consi deri ng ri val submi ssi o ns, I am of the vi e w appl i cati on of net profi t rate of 10% i s e xcessi ve i n the facts and ci rcumstances of the case. The case was sel ected for scruti ny because cash was found deposi ted i n the bank account of the assessee. The assessee e xpl ai ned before the 3 authori ti es bel o w that i t was the s al e onl y and on t he same, no adverse i nfer ence has been d ra wn agai nst the assessee. I t i s al so a fact that assessee di d not mai ntai n books of account for hi s r etai l busi ness. The assessee has decl ared returned i ncome of Rs. 3,60,828 /-. Therefore, c onsi deri ng the nature of busi ness of the assessee and i ncome decl ared i n the return of i ncome and that no adverse i nference had been dra wn agai nst the assessee for deposi t of t he cash i n hi s bank account, i t woul d be reasonabl e and proper to di rect the author i ti es bel o w to ap pl y net profi t rat e of 7% as agai nst 10% di rected by the l d. CI T( Appeal s) . The orders of authori ti es bel o w to that e xtent a re set asi de and modi fi ed and Assessi ng Offi cer is di rected to compute busi ness i ncome of the assessee by appl yi ng net profi t rate of 7%.
5. I n the resul t, appeal of the assessee i s partl y al l o wed.
Order pronounced i n the Open Court.
Sd/-
(BHAVNESH SAINI) JUDICIAL MEMBER Dated : 6 t h February,2017.
'Poonam' Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT,DR Assistant Registrar, I TAT Chandigarh