2019 (7) TMI 1674 - AT - Income Tax

Rejection of books of accounts - NP estimation - HELD THAT - As noticed that the assessee is engaged in various sectors of business wherein the rate of net profit may not be at a similar line. We also notice that the assessee could not produce complete bills and vouchers and sector-wise books of accounts before the AO. Looking to the voluminous nature of the business carried on by the assessee and considering the arguments advanced by both the sides, we restrict the net profit to 6% on the gross turnover of the assessee of ₹ 40,10,71,312/- as against 6.5% applied by the CIT(A) on gross receipts. We further make it clear that from the net profit of 6%, no further any depreciation shall be allowed.

Summary

Issues Involved:
1. Assessment of net profit rate for the assessee for the assessment year 2012-2013.

Detailed Analysis:

Issue 1: Assessment of Net Profit Rate
The appeal was filed by the assessee against the order of the CIT(A) for the assessment year 2012-2013. The assessee derived income from various sources and filed a return declaring income. During the assessment proceedings, the AO observed discrepancies in the details provided by the assessee regarding the business operations. The AO rejected the books of accounts under Section 145(3) and framed the assessment applying a net profit rate of 7% on the gross receipts. The CIT(A) later reduced the net profit rate to 6.5%, providing relief to the assessee. The assessee further appealed to the Income Tax Appellate Tribunal (ITAT) challenging the net profit rate set by the CIT(A).

Analysis:
The ITAT considered the submissions made by both the assessee and the revenue. The assessee argued that in the previous assessment year, the CIT(A) had accepted a net profit rate of 5%, questioning the justification for the 6.5% rate in the current year. The assessee proposed a net profit rate of 6% for the current assessment year. On the other hand, the revenue supported the CIT(A)'s decision to maintain the 6.5% net profit rate based on the nature of the assessee's business. The ITAT noted the diverse sectors in which the assessee operated and the lack of complete documentation provided to the AO. Considering the arguments and the previous CIT(A) order accepting a 5% net profit rate, the ITAT decided to restrict the net profit to 6% on the gross turnover, deviating from the CIT(A)'s 6.5% rate. The ITAT clarified that no further depreciation would be allowed from the 6% net profit. As a result, the appeal of the assessee was partly allowed by the ITAT.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the assessment and decision-making process by the authorities involved.