2011 (9) TMI 1099 - HC - Income Tax

N.P. determination - Held that - No substantial question of law arises for the consideration of this Court. It is question of fact keeping in view circumstances of each case as to whether net profit rate of 7% is to be applied or enhanced to the rate of 12%. The Assessing Officer applied the net profit rate as 7% and the said order has been affirmed by the learned Appellate Tribunal. The learned Tribunal has recorded a finding that there is no evidence produced by the revenue to prove that the assessee has the higher profit than the net profit rate of 7%. A perusal of the order passed by the learned Commissioner shows that for the earlier years such as 2001-2002, 2002-03, 2003-04 and 2004-05, net profit rate of 7% was applied. Since the net profit rate was being applied in the previous years as 7%, there is no valid ground to enhance the net profit rate to 12%.

Summary

Issues:
- Assessment of net profit rate for two different assessment years.
- Justification of net profit rate applied by Assessing Officer.
- Comparison of net profit rates applied in previous years.
- Validity of enhancing net profit rate from 7% to 12%.
- Absence of substantial question of law for consideration.

Analysis:
The judgment by the High Court of Punjab and Haryana dealt with two appeals regarding the assessment of net profit rates for different assessment years. The Tribunal had set aside the Commissioner of Income Tax (Appeals) order and upheld the Assessing Officer's decision to levy a net profit rate of 7%. The court noted that the previous assessments for the father of the assessee were done at a net profit rate of 8%, making the 7% rate reasonable. The order enhancing the rate to 12% was deemed unjustified as there was no evidence to support it. The court emphasized that the determination of the net profit rate is a factual matter based on the circumstances of each case.

The court observed that the Assessing Officer's decision to apply a 7% net profit rate was supported by the absence of evidence showing higher profits. Additionally, the Commissioner's order showed that a 7% rate was consistently applied in previous years, further justifying the maintenance of the rate. The court found no legal basis to interfere with the Tribunal's decision, as there was no demonstrated illegality or irregularity in the impugned order.

In conclusion, the High Court dismissed both appeals, emphasizing that no substantial question of law merited consideration. The judgment reaffirmed the importance of factual considerations in determining the appropriate net profit rate for assessments and highlighted the significance of consistency in applying such rates across different years.