Income Tax Appellate Tribunal - Indore
Swift Compulinks Pvt. Ltd., Bhopal vs Assessee
1
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER
And
SHRI R.C. SHARMA, ACCOUNTANT MEMBER
ITA No. 199/Ind/2012
A.Y. 2007-08
Swift Compulinks Pvt. Ltd
(Through Director Mr.Samir Kapur)
Bhopal
PAN - AAIC 53228H :: Appellant
Vs
ACIT 3(1)
Bhopal :: Respondent
Appellant by Shri H.P. Verma and
Shri Ashish Goyal
Respondent by Shri Keshav Saxena
Date of hearing 5.7.2012
Date of pronouncement 5.7.2012
O R D E R
PER JOGINDER SINGH , judicial member
The assessee is aggrieved by the impugned order dated 2nd December, 2011 passed by the learned CIT(A) on the ground that the learned first appellate authority erred in confirming the 2 addition of Rs.5,51,359/- which is arbitrary, uncalled for, therefore, be quashed.
2. During hearing of this appeal, we have heard Shri H.P. Verma, along with Shri Ashish Goyal, ld. Counsel for the assessee and Shri Keshav Saxena, learned CIT DR. The crux of arguments on behalf of the assessee is that due to stiff competition in the market, the net profit decreased and the two cases cited before the CIT(A) wherein net profit at about 1% was shown by those assessees were not considered in proper perspective. On the other hand, the learned CIT DR strongly defended the impugned order by submitting that a well reasoned order has been framed by the learned CIT(A) which deserves to be upheld.
3. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is a private limited company, is in the business of trading of computer and accessories, maintains its books of accounts on mercantile system of accounting, declared income of Rs.84,360/- in its return filed on 19.11.2007. During the year, the assessee showed gross profit rate at 6.40% and net profit at 0.69% against the total turnover of Rs.2,12,32,622/-. The 3 learned Assessing Officer was of the view that the profit shown by the assessee is towards lower side, therefore, he made addition of Rs.5,51,359/- by averaging the net profit rate at 3.28% from the assessment years 2004-05 to 2007-08. On appeal, the addition was affirmed which is under challenge before this Tribunal. In view of these facts, we are reproducing hereunder the relevant portion from the impugned order for ready reference :-
"2. In the 2 grounds of appeal, rejection of book result and addition of Rs. 5,51,359/- is challenged. On comparison of the trading results with the 3 earlier financial years, the A.O. found that the appellant company has shown steep fall in net profit ratio from 4.46% in F.Y. 2005-06 to 0.68% in F.Y. 2007-08. Assessee could not explain the steep fall in net profit hence the A.O. rejected the book result and estimated net profit at 3.28% i.e. average rate of net profit in immediate past 3 years and made an addition of Rs. 5,51,359/- to total income. Before me, it is submitted that the steep fall in net profit ratio is caused due to increasing competition in computer hardware market. The appellant have also cited 2 cases wherein net profit at about 1% is shown. After examining the issue it is found that the appellant has taken a plea which is general in nature. Competition is not new in the computer hardware and accessory trade. The appellant had shown net profit at the rate of 4.46% just 1 year back before the year in appeal. The business has not changed in any aspect. The two case cited in the written argument were not cited before the A.O. hence the facts of the two cases could not be examined by the A.O. nor they can be examined in this appeal. In view of the above it is held that the 4 rejection of book result is valid and addition of Rs. 5,51,359/- is confirmed."
For better appreciation of facts, we are summarising the facts as under :-
A.Yrs. Turnover Closing stock Gross profit Net profit (in Rs.) (in Rs.) (in Rs.) (NP (in Rs.) percentage of turnover 2004-05 7303358 868447 226737 3.10% 2005-06 5960807 310780 472170 265906 4.46% 2006-07 15823673 1077219 1347607 362945 2.29% 2007-08 21232622 1040654 1376625 145071 0.68 If the comparison of total turnover, closing stock, gross profit, net profit and percentage of profit from the assessment year 2004-05 to 2007-08 mentioned in assessment order and the conclusion drawn in the impugned order are kept in juxtaposition and analysed, admittedly the net profit shown in the impugned assessment year is quite low in comparison to total turnover of Rs.2,12,32,622/-. It is further observed that for the assessment year 2005-06, the net profit rate is 4.46% and in the immediate previous year it is 2.29%. No justifiable reason has been adduced at any stage by the assessee for such steep decrease in the net profit except by taking a general stand that there is a competition in the market. In view of these facts, we find no infirmity in the 5 stand of the learned CIT(A). It is affirmed resulting into dismissal of the appeal of the assessee.
Finally, the appeal of the assessee is dismissed. This order was pronounced in the open Court in the presence of ld. Representatives from both sides at the conclusion of the hearing on 5.7.2012.
Sd sd (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 5.7.2012
Copy to: Appellant, Respondent, CIT, CIT(A), DR, Guard File Dn/-