2015 (2) TMI 490 - AT - Income Tax

Addition to income made on account of net profit rate applied - CIT(A) deleted the addition - double taxation - Held that - As regards the addition of ₹ 34,48,820/-, the AO has taken gross receipts as per certificate available on record, which in fact, has been treated by the AO as per TDS certificate. But in fact, they were certificates in form 27D for the tax collected and meant for purchases and not for sales. This is the prime mistake which has been done by the AO while framing the assessment. As per TDS certificates, the total receipts from construction has been submitted to be at ₹ 2,57,75,427/- and sale of liquor business at ₹ 36,01,644/-, totaling receipts to ₹ 2,93,77,071/-, which has been reflected by the assessee in his books of account in the profit & loss account. The amount of ₹ 29,76,588/- has been reflected as purchases against tax collection certificate in Form-27D has also been explained by the assessee before the ld. CIT(A). All these materials in the form of TDS certificate as well as Form 27D and profit & loss account were available on record before the A.O. Therefore, it is not correct to say that such material was not available before the A.O. but the AO chose to collect the figures only from Form 27D, which is not correct. On perusal of the profit & loss account on record at PB 59, the gross receipts from construction business has been declared at ₹ 2,57,75,427/- and liquor business at PB 42 has been declared at ₹ 36,01,644/-. The purchases against liquor business are ₹ 29,76,558/- at PB-2 which is a matter of record. If the gross receipts from liquor business are reduced from the total gross receipts then the receipt from construction business comes at ₹ 2,57,75,427/- and the assessee has already declared the net profit from the liquor business at ₹ 93,788/- and from construction business at ₹ 5,87,632/- at PB 42 & 59. Therefore, the addition by the AO will tantamount to double taxation, which in fact is not called for. Therefore, in the facts and circumstances, the ld. CIT(A) has rightly deleted the addition made by the AO. As regards the second addition with regard to an amount of ₹ 5,33,542/-, the assessment record was called for, which was perused and reconciliation of the accounts was placed on record with M/s. Ericson India Pvt. Ltd; Gurgaon, where the opening balance of ₹ 14,25,263/- was also taken into consideration by the AO, which was meant in fact for the preceding year. Few adjustments were part of the reconciliation, as per statement of account of M/s. Ericson India Pvt. Ltd. and receipts as per TDS certificate. We find that the receipts from M/s. Ericson India Pvt. Ltd. were of ₹ 31,92,644/-, which in fact had been declared by the assessee in its total receipts from the contract business, therefore, by applying a net profit rate on the said amount by the AO will tantamount to a double taxation. The assessee having declared receipts in the profit & loss account cannot again be a subject matter of taxation, which the AO has done and the ld. CIT(A) has rightly deleted the said addition. - Decided against revenue.

Summary

Issues:
1. Addition of net profit rate in ex-parte assessment.
2. Deletion of addition based on material evidence.
3. Treatment of paperless return without P&L account and balance sheet.
4. Validity of assessment based on lack of inquiry and material evidence.

Analysis:

Issue 1:
The Revenue appealed against the CIT(A)'s order deleting the addition made on account of net profit rate in an ex-parte assessment for the assessment year 2008-09. The AO applied a net profit rate of 12% on the receipts, resulting in an addition to the income of the assessee. The CIT(A) found that the AO wrongly included certain amounts as receipts, which were actually purchases related to the liquor business. The CIT(A) concluded that the addition of Rs. 34,48,820 was uncalled for and deleted it.

Issue 2:
Regarding the second addition of Rs. 5,33,542, the AO based the assessment on information from M/s. Ericsson India Pvt. Ltd. The appellant argued that the AO's calculation led to double taxation as the receipts were already declared in the profit & loss account. The CIT(A) found merit in the appellant's submission and deleted the addition, emphasizing that the AO's approach was incorrect.

Issue 3:
The Revenue contended that the assessment lacked material evidence due to the absence of books of account, audit report, and balance sheet in the paperless return. The appellant argued that all figures were included in the return, and the AO failed to consider the expenses incurred by the assessee, resulting in double taxation. The Tribunal noted that the balance sheet and profit & loss account were on record, and the AO's reliance solely on Form 27D for gross receipts miscalculated the income.

Issue 4:
The Revenue further argued that the assessment was improper due to the lack of inquiry and material evidence. The Tribunal found that the AO's assessment was flawed as the receipts were already declared in the profit & loss account, and the AO's calculations led to double taxation. The CIT(A)'s decision to delete the additions was upheld, dismissing all grounds of the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the additions based on incorrect application of net profit rates and lack of proper inquiry and material evidence in the assessment process.