Income Tax Appellate Tribunal - Jaipur
M/S. Shree Balaji Enterprises, Jaipur vs Assistant Commissioner Of Income Tax, ... on 6 February, 2019
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,"A" JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 1276/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2013-14
M/s Shree Balaji Enterprises cuke The ACIT,
3 KA, 22, Jawahar Nagar, Vs. Circle-5
Jaipur. Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABEFS 3243 E
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj l@
s Assessee by : Shri P.C. Parwal (C.A.)
jktLo dh vksj ls@ Revenue by : Shri K.C. Gupta (J.CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 04/02/2019
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 06/02/2019
vkns'k@ ORDER
PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 27.08.2018 of ld. CIT (A), Jaipur for A.Y. 2013-14. The assessee has raised the following grounds as under:-
"1. The rectification order passed by Ld. CIT(A) u/s 154/250 is illegal & bad in law.
2. The Ld. CIT(A) has erred on facts and in law in estimating the N.P. rate of 5% (after depreciation & interest to partners) on the gross receipt as against N.P. rate of 15% on gross receipt subject to depreciation & interest to partners assessed by AO which was reduced to 10% by CIT(A) in order dt. 23.03.2018 against which ITA No. 1276/JP/2018 M/s Shree Balaji Enterprises Vs. ACIT appeal filed by the department was dismissed by Hon'ble ITAT vide order dated 03.08.2018 subject to observation tat relief granted by CIT(A) would not have the effect of reducing the returned income.
2.1 The Ld. CIT(A) has erred on facts and in law in applying N.P. rate of 5% on the gross receipt after depreciation & interest to partners but at the same time not directing to exclude FDR & NSC interest of Rs. 10,46,613/- while rectifying his order u/s 154"
2. The grievance of the assessee against the impugned order is that while passing the original order dated 23.03.2018 the ld. CIT(A) restricted the trading addition made by the AO to 10% as against the net profit adopted by the AO at 15% of total receipt before depreciation and interest/ remuneration to partners was further received while passing the order U/s 154 of the Act. The said first order of ld. CIT(A) was challenged by the Revenue before this Tribunal and the only ground raised by the Revenue is that the ld. CIT(A) is not justified in restricting the net profit from 15% to 10% which has resulted in determination of income less than the return income. The Tribunal vide order dated 03.08.2018 observed that net profit adopted by the ld. CIT(A) would not affect the returned income of the assessee and therefore, the impugned order of the ld. CIT(A) was not found to be illegal on that ground though the appeal of the Revenue was dismissed 2 ITA No. 1276/JP/2018 M/s Shree Balaji Enterprises Vs. ACIT due to low tax effect in view of the CBDT Circular No. 3/2018. The ld. AR has further contented that the ld. CIT(A) subsequently after the order of this Tribunal has passed the impugned order U/s 154 of the Act and revised the net profit from 10% before the depreciation and interest to partners to 5% after depreciation and interest to partners which has resulted an addition to the total income of the assessee. Thus, the ld. CIT(A) travelled beyond the jurisdiction U/s 154 of the Act.
3. On the other hand, the ld. DR has relied upon the impugned order and submitted that the ld. CIT(A) has stated that there was typographic mistake while passing the earlier order dated 23.03.2018 regarding the net profit percentage and the correct net profit estimated by the ld. CIT(A) is 5% after depreciation and interest to partners as held in the impugned order passed U/s 154 of the Act.
4. We have considered the rival submissions as well as relevant material on record. The Assessing Officer during the assessment proceeding U/s 143(3) of the Act rejected the books of accounts of the assessee by invoking the provisions of section 145(3) of the Act and consequently estimated the income of the assessee by adopting the net profit at 15% before depreciation and interest/remuneration to partners. The assessee challenged the said order of the Assessing 3 ITA No. 1276/JP/2018 M/s Shree Balaji Enterprises Vs. ACIT Officer before the ld. CIT(A). The ld. CIT(A) while passing the order dated 23.03.2018 restricted the net profit adopted by the AO to 10% before depreciation and interest/remuneration to partners. Since, there was no addition to the total income of the assessee after the order of the ld. CIT(A) dated 23.03.2018, therefore, assessee did not challenge the said order, however, the Revenue filed the appeal which was decided by this Tribunal vide order dated 03.08.2018 in ITA No. 734/JP/2018. The grounds raised by the Revenue reproduced by the Tribunal in para 1 as under:-
"1. Whether on the facts and in the circumstances of the case, the CIT(A) is justified in restricting the N.P. from 15% to 10% which has resulted in determination of income less than the income shown by the assessee in the return."
The only grievance of the revenue was restricted the N.P. from 15% to 10% apart from that it has reduced the total income less than the return income of the assessee. The Tribunal while considering the appeal of the Revenue has observed and decided in para 3 to 5 vide order dated 03.08.2018 has held as under:-
"3. We have heard the rival contentions and perused the materials available on record. We may clarify that the relief granted by the ld. CIT (A) restricting the net profit from 15% to 10% would not affect the returned income of the assessee and hence the impugned order of the ld. CIT (A) would not have the 4 ITA No. 1276/JP/2018 M/s Shree Balaji Enterprises Vs. ACIT effect of reducing the returned income. It is observed that the demand/ tax effect in the Revenue's appeal in question is below Rs. 20.00 lacs. Under the powers vested by section. 268A(1) of the I T Act, CBDT has recently issued Circular No. 3/2018 dated 11th July, 2018 (F No. 279/Misc. 142/2007-ITJ(Pt) instructing the authorities below that departmental appeal should not be filed before ITAT where the demand/tax effect does not exceed Rs. 20 lacs. The circular is specifically mentioned to be applicable for all pending appeals.
4. Subject to some exceptions, it is further directed by CBDT that all the departmental appeals pending before ITAT where the demand/tax effect is not exceeding than 20 lacs should be either withdrawn or not pressed by the departmental representatives.
5. The present appeal is not covered by any exceptions mentioned in the said CBDT circular. Since the tax demand in dispute in this departmental appeal is below the limit set out by CBDT for the appeal, the appeal of the assessee is not maintainable in view of CBDT Circular No. 3 of 2018 dated 11.07.2018. Accordingly the appeal of the Department is dismissed as not pressed/withdrawn."
Therefore, the grievance of the Revenue that the income of the assessee would be reduced less than the return of income as a result of the order of the ld. CIT(A) dated 23.03.2018 has been dealt with by the Tribunal with observed that the estimation of the income by adopting the N.P. at 10% by the ld. CIT(A) would not affect the return of income of the assessee and therefore, the same would not have the effect of reducing the return of income. The Tribunal has not gone into the merit of the issue as the low tax effect the Revenue was not exceeding the 5 ITA No. 1276/JP/2018 M/s Shree Balaji Enterprises Vs. ACIT limit provided under CBDT Circular No. 3/2018. After the said order dated 03.08.2018 the ld. CIT(A) has passed the impugned order dated 27.08.2018 whereby revised the N.P. for estimation of income of the assessee. It is pertinent to note the question arises whether the revision of N.P. passed U/s 154 of the Act would fall in the category mistake apparent on record which can be rectified U/s 154 of the Act or it would amount to revision/review of the order decision of the ld. CIT(A). While passing the original order dated 23.03.2018 the ld. CIT(A) has considered the issue of estimation of income of the assessee as under:-
"As regards the percentage to be applied, the AR submitted that in the previous 3 years where scrutiny was undertaken small routine additions have been made. The submission of the AR needs to be rejected because in this year, the AO, through a detailed analysis had brought out defects in the books and the same have to be accepted, the facts of this year are different and once the books are rejected after proper analysis, the profit percentage has to be estimated. As per the chart of the previous year profits the profit percentage returned on a turnover of 9.75 crores which is similar in this year to 11.7 crores is at 4.92%. In the other 2 years that is 2011-12 and 2012-13 the same is 0.38% and 3.51% on a increased turnover of 21 crores and 24.1 crores approximately. The AO noted that the appellant has shown trading sales turnover of Rs. 6,34,48,293/- with a GP of Rs. 2,65,93,567/- or a Gross Profit ratio of 41.9% and its net profit is 19,47,153/- or a mere 1.68% of receipts of Rs. 11,77,11,454/- from both trade sales and contracts. Relying on the case of Choudhary Brothers ITA No. 879/JP/2011 of the jurisdictional Tribunal wherein 11.5% was confirmed and opining that 6 ITA No. 1276/JP/2018 M/s Shree Balaji Enterprises Vs. ACIT appellant was also into trading made an estimate of NP% at 15%. However considering the past history of the case and the discussion as above and the defects in the books of the accounts, the NP percent is estimated at 10% which shall be reasonable in view of the defects pointed in the books of accounts which could not be controverted by the appellant. The ground of appeal is partly allowed."
Thus, it is clear that the ld. CIT(A) has analyzed the past history of the assessee and noted that in the preceding two years i.e. 2011-12 and 2012-13 the assessee has declared N.P. @ 0.38% and 3.51%. Further, though on the higher turnover in the comparison in the year under consideration. After considering of these facts as well as the decision of this Tribunal wherein the N.P. @ 11.5% was considered as reasonable the ld. CIT(A) held that the N.P. is estimated as 10% it shall be reasonable in view of the books of accounts rejected by the AO. The ld. CIT(A) has revised the N.P. while passing the impugned order U/s 154 of the Act as under:-
"As regards the percentage to be applied, the AR submitted that in the previous 3 years where scrutiny was undertaken small routine additions have been made. The submission of the AR needs to be rejected because in this year, the AO, through a detailed analysis had brought out defects in the books and the same have to be accepted, the facts f this year are different and once the books are rejected after proper analysis, the profit percentage has to be estimated. As per the chart of the previous year profits, the profit percentage returned on a turnover of Rs.7 ITA No. 1276/JP/2018
M/s Shree Balaji Enterprises Vs. ACIT 9.75 crores which is similar in this year to Rs. 11.7 crores is at 4.92%. In the other 2 years, that is, 2011-12 and 2012-13, the same is 0.38% and 3.51% on an increased turnover of Rs. 21 crores and Rs. 24.1 crores approximately. The AO noted that the appellant has shown trading sales turnover of Rs. 6,34,48,293/- with a GP of Rs. 2,65,93,567/- or a Gross Profit ratio of 41.9% and its net profit is 19,47,153/- or a mere 1.68% of receipts of Rs. 11,77,11,454/- from both trade sales and contracts. Relying on the case of Choudhary Brothers ITA No. 879/JP/2011 of the jurisdictional Tribunal wherein 11.5% was confirmed and opining that appellant was also into trading made an estimate of GP% at 15%. However, considering the past history of the case and the discussion as above and the defects in the books of the accounts, the NP percent (after depreciation and interest to partners) is estimated at 5% which shall be reasonable in view of the defects pointed in the books of accounts which could not be controverted by the appellant. The ground of appeal is partly allowed."
Therefore, it is nothing but revision of earlier decision on the point of estimation of income by taking percentage of net profit. The earlier ld. CIT(A) has modified the N.P. adopted by the AO at 15% to 10% though the AO has accepted the said N.P. before the depreciation and interest/remuneration to partners. However, in the impugned order the ld. CIT(A) has revised the N.P. from 10% to 5% but after depreciation and interest/remuneration to partners therefore, it is change the decision and not rectification of mistake on the part of the ld. CIT(A). Accordingly, the impugned order passed by the ld. CIT(A) is beyond the 8 ITA No. 1276/JP/2018 M/s Shree Balaji Enterprises Vs. ACIT scope of rectification of mistake U/s 154 of the Act. Even otherwise when the keeping in view the past history of the assessee the N.P. declared by the assessee at 2.47% is in the line of the average net profit of the preceding years. The ld. CIT(A) has given the details of the N.P. of the current year as well as preceding year has held as under:-
A.Y Gross Receipt Net Profit N.P.Rate
2010-11 97516812 4797555 4.92%
2011-12 211870008 804402 0.38%
2012-13 241659668 8493483 3.51%
2013-14 117711454 2910033 2.47%
Thus, the average of the preceding three years i.e. 2010-11 to 2012-13 comes to 2.93% and therefore, the N.P. declared by the assessee in the year under consideration at 2.47% is not substantially in variance from the average of the preceding years. Accordingly, the impugned order of the ld. CIT(A) passed U/s 154 of the Act is set aside.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 06/02/2018 Sd/- Sd/-
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(Vikram Singh Yadav) (Vijay Pal Rao)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 06/02/2018.
*Santosh.
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to: 9 ITA No. 1276/JP/2018
M/s Shree Balaji Enterprises Vs. ACIT
1. vihykFkhZ@The M/s M/s Shree Balaji Enterprises, Jaipur.
2. izR;FkhZ@ The Respondent- ACIT, Circle-5, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File {ITA No. 1276/JP/2018} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 10