2018 (10) TMI 1302 - HC - Income Tax

N.P. determination - ITAT confirmed the net profit rate of 15% while estimating the income of the new business unit - Held that - It has come on record that the assessee did not produce any evidence and it is on the basis of a statement made by one Rajeev Agarwal, who was a member of the assessee s firm that an estimate was made taking the net profit rate of the assessee to be 20%, which was after consensus reached at 15%. This is recorded in the order of the CIT and the Tribunal has taken this into account. The assessee was also granted relief on this basis. Such being the case, we are of the opinion that no question of law arises in this matter and the facts are also concluded.

Summary

Issues:
1. Justification of confirming net profit rate of 15% without allowing depreciation and interest on borrowing for new business unit.
2. Determination of net profit rate without allowing interest on loans and depreciation in the 2nd year of a new business.

Analysis:
1. The appellant challenged an order of the Tribunal regarding the estimation of income for the Assessment Year 2008-2009. The main contention was the justification of confirming a net profit rate of 15% for a new business unit without considering depreciation of plant and machinery and interest on borrowing or loans. The appellant argued that the order was passed without providing an opportunity to present relevant facts.

2. The arguments put forth mainly revolved around factual aspects. Upon examination, it was revealed that only one ground related to the details of interest payments by the assessee company was pressed before the Commissioner and the Tribunal. The assessment was based on an estimate derived from the net profit rate of 20%, later adjusted to 15% after consensus. This adjustment was made based on a statement by a member of the assessee's firm, Rajeev Agarwal. The Tribunal considered this information and granted relief to the assessee accordingly.

3. The High Court, after reviewing the facts and orders of the Commissioner and the Tribunal, concluded that no question of law arose in the matter. It was established that the assessee did not produce any evidence other than the statement by Rajeev Agarwal, leading to the consensus on the net profit rate. The Court found that the facts were conclusive, and as such, the appeal was deemed to be without merit and dismissed without costs.