2012 (3) TMI 139 - AT - Income Tax

Calculation of Profit - 4.5% of Net Profit - Assesee contended net profit in transportation business ranges 2 to 3 percent even as per 44AE maximum income per truck is 3500 per month - Held That - The above NP ratio were applied by assessee in earlier two years thus AO is directed to compute the income of the assessee at NP rate of 4.25%. Calculation of Profit - Asseesee argued Net profit @1.75% not justified - Business doubled - Held That - Having regard to the entirety of the facts and circumstances of the case and submissions made by the ld. AR regarding the hike in expenditure and turnover of molasses, as also to meet the ends of natural justice, the AO is directed to apply net profit rate at 1.50% . Thus, the assessee gets partial relief.

Summary

Issues Involved:
1. Dispute over the net profit rate applied by the Assessing Officer.
2. Challenge to the net profit rate and income computation in the case of two different businesses.
3. Rejection of books of account and computation of income based on net profit rate.

Issue 1: Dispute over Net Profit Rate:
In the assessee's appeal, the contention was regarding the net profit rate applied by the Assessing Officer (AO) in estimating the income from transportation business. The AO had applied a net profit rate of 4.51%, which the assessee argued was on the higher side. The Appellate Tribunal found that a net profit rate of 4.25% would be fair and reasonable based on the specific factual submissions made by the assessee. Consequently, the AO was directed to compute the income at the revised net profit rate.

Issue 2: Challenge to Net Profit Rate and Income Computation:
The appeal also involved a challenge to the net profit rate and income computation in the case of M/s Aastha Trading Co. The assessee contended that the net profit rate of 2% applied by the AO was not justified due to a significant increase in turnover and various business factors affecting profitability. The CIT(A) reduced the net profit rate to 1.75%, but the Appellate Tribunal further adjusted it to 1.50% considering the overall circumstances and submissions made by the assessee.

Issue 3: Rejection of Books of Account and Income Computation:
The rejection of books of account by the AO under Section 145(3) of the Income-tax Act led to the computation of income based on net profit rates for different businesses. The assessee's income from M/s Aastha Trading Co. was computed by applying a net profit rate of 2%, which was contested by the assessee due to changes in business dynamics affecting profitability. The CIT(A) and subsequently the Appellate Tribunal adjusted the net profit rate to reflect the changing business conditions and directed the AO to apply a revised rate for accurate income computation.

In conclusion, the Appellate Tribunal partly allowed the assessee's appeal by adjusting the net profit rates for both the transportation business and trading business, ensuring a fair and reasonable computation of income. The revenue's appeal was dismissed based on the findings and adjustments made in the assessee's appeal.