2016 (7) TMI 1092 - HC - Income Tax

Enhancement of the Net Profit Rate - Held that - Once the Revenue, being bound by the circular of the C.B.D.T., New Delhi, has withdrawn its appeal seeking enhancement of the Net Profit Rate, inter se the same parties, it cannot be allowed to reagitate the issue. However, such observation on our part would not preclude the Revenue from moving any application for revival of the aforereferred appeal since the liberty for the same was granted by this Court while permitting the appeal to be withdrawn.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal applying Net Profit Rate, Concealment of interest accrued on income tax refunds, Application of Net Profit Rate by Assessing Officer, Appeal for enhancement of Net Profit Rate by Revenue

Analysis:
The appellant challenged the order of the Income Tax Appellate Tribunal (Tribunal) invoking Section 260-A of the Income Tax Act, 1961. The main issue was the application of Net Profit Rate at 6% by the Tribunal without considering past records and arbitrary addition to declared income. The Tribunal based its decision on the fact that 83-90% of purchase vouchers were available, but ignored evidence of the appellant providing complete details of sundry creditors and past Net Profit Rates. The appellant sought a reduction in Net Profit Rate to 2.5%, which was not considered. The Tribunal also added interest accrued on income tax refunds to the taxable income due to alleged concealment by the appellant.

The Assessing Officer had initially rejected the appellant's books of accounts for not producing complete original vouchers and muster-rolls. Subsequently, a Net Profit Rate of 12% was applied. The appellant claimed to have provided relevant documents like original purchase vouchers, attendance cards with complete details, and past Net Profit Rates, but the Commissioner and Tribunal did not consider these adequately. The Tribunal, without sufficient reasoning, applied a Net Profit Rate of 6% based on a previous order, disregarding the appellant's evidence of lower rates in earlier years.

The Revenue had also appealed against the Tribunal's decision, seeking an enhancement in the Net Profit Rate to 12%. However, the Revenue later withdrew the appeal due to tax implications, but sought permission to revive it if necessary. The High Court noted that since the Revenue had withdrawn the appeal seeking enhancement, they could not re-agitate the issue with the same parties. The Court set aside the Tribunal's order and remitted the matter back for a fresh decision, allowing the Revenue to file a revival application if needed.

In conclusion, the High Court allowed the appeal, setting aside the Tribunal's order and remanding the matter for a fresh decision on merits. The Court clarified that the Revenue could file an application for revival of the appeal seeking enhancement of the Net Profit Rate. The decision highlighted the importance of thorough scrutiny and consideration of all material placed before the Tribunal in accordance with the law.