2021 (11) TMI 1125 - HC - Income Tax

Assessment of Income of assessee - gross profit rate shown by the assessee is 29.29% as compared to the gross profit fate of 27.87% shown in the immediately preceding year - technical mistakes in maintaining the books of accounts - HELD THAT - ITAT has found that during the year under consideration, the gross profit rate shown by the assessee is 29.29% as compared to the gross profit fate of 27.87% shown in the immediately preceding year. The ITAT is of the opinion that the gross profit rate shown during the very year is much better than the gross profit of preceding year and, in such circumstances, there is justification for complete decline of contract expenditure claimed by the asssessee, which goes to constitute the gross profit rate. ITAT has further taken into consideration the profit and loss accounts of the assessee for comparison of expenses and found that the same are in order. After finding the gross profit shown by the assessee as reasonable, the ITAT has found that the assessee s claim of interest expenditure and depreciation is required to be allowed. In our opinion, the ITAT after thoroughly examining the material available on record has assessed the income of the assessee and according to us, the same is essentially a question of fact and appreciation of evidence. After going through the entire material available on record, the ITAT has come to the conclusion, which in our view is not liable to be interfered with. Learned counsel for the Revenue has failed to point out any perversity in the finding of fact recorded by the ITAT. No substantial question of law requiring adjudication by this Court under Section 260-A

Summary

Issues Involved:
1. Assessment of total income on adhoc basis without considering proper books of accounts.
2. Determination of income on adhoc basis despite technical mistakes in books of accounts.
3. Reasonableness of estimating the net profit rate by the Assessing Officer.

Analysis:
1. The appellant Revenue filed appeals against orders by ITAT regarding the assessment year 2016-17. The main issue was the assessment of total income at Rs.50 lakh on an adhoc basis without considering proper books of accounts. The Assessing Officer rejected the books of accounts due to lack of documentary evidence and estimated net profit at 7.6% of total turnover. The CIT(A) directed to estimate profit at 10.32% before depreciation, resulting in recomputed income of Rs.15,73,12,882 for the assessee. The ITAT, however, directed to assess income at Rs.50 lakh, dismissing the Revenue's appeal. The Revenue contended that ITAT erred in not considering facts and evidence from the assessment order.

2. The second issue raised was the determination of income on an adhoc basis despite technical mistakes in the books of accounts. The ITAT observed technical mistakes but also noted a better gross profit rate during the year under consideration compared to the preceding year. It justified the decline of contract expenditure claimed by the assessee. The ITAT found the expenses in order and allowed interest expenditure and depreciation. The court held that ITAT's assessment of income was based on a factual analysis and evidence appreciation, dismissing the Revenue's argument of faulting the Assessing Officer's findings.

3. The third issue questioned the reasonableness of estimating the net profit rate by the Assessing Officer. The ITAT considered the gross profit rate shown by the assessee during the year and the preceding year, finding the gross profit rate reasonable for declining the contract expenditure. It also analyzed the profit and loss accounts, concluding that the interest expenditure and depreciation should be allowed. The court upheld ITAT's assessment as a question of fact and evidence appreciation, finding no substantial question of law for adjudication under Section 260-A of the Income Tax Act, 1961.

In conclusion, the High Court dismissed the appeals as devoid of merit, upholding the ITAT's assessment based on factual analysis and evidence appreciation, finding no grounds for interference in the findings.