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2019 (8) TMI 830 - AT - Income TaxAssessment u/s 144 - estimation of income - trading addition by application of N.P rate @12% on contract receipts subsequently reduced by CIT(A) @8% - HELD THAT - Keeping in mind the judicial guideline available on issue, that after rejection of accounts, the income of the assessee is to be estimated on some reasonable basis for which comparable case and history of the assessee can be taken as a guide. Keeping in mind the entire factual matrix of the case and finding no evidence or reason for application of N.P rate of 8% we consider it fair, reasonable and logical to apply an average rate of two years referred above i.e (A.Y 2009-10 N.P rate of 1.88% and A.Y 2010-11 N.P rate of 5.25%) which gives N.P rate of 3.50% as against 2.04% shown by the assessee on turnover of ₹ 14,35,07,199/-. See SMT. ARCHANA DUTTA, PROP. M/S DUTTA DUTTA CONSTRUCTION, CO. VERSUS ACIT, CIRCLE-3, MATHURA 2018 (5) TMI 954 - ITAT AGRA after due consideration of past history average N.P rate was arrived and applied by the Division Bench. In the referred case, material facts have been found to be same, as assessee therein was also from Mathura and the Assessing officer being the same in person, impugned order was also on same lines and so is the Assessment Year i.e. A.Y. 2011-12 - Decided partly in favour of assessee. Addition u/s 68 - AO has made the addition on account of his finding that M/s Easyway Solutions (P) Limited has no capacity and creditworthiness to advance sum to the assessee and the same is unexplained cash credit assessable in the hands of the assessee u/s 68 - HELD THAT - The assessee has thus discharged his onus in the matter. None of the evidence furnished by the assessee has been found to be nongenuine and the evidence has been discarded on the basis of conjectures and hypothesis only. Nothing prevented the authorities to go beyond the transaction and look into the affairs. The assessee in fact made request both at assessment stage as well as appellate stage for examination of the party, but his request was not acceded to without assigning any reason, much less for valid and convincing reason. The assessee could not be punished merely for the reason that advance was received in cash whereas he could do so under the law, prevailing at that time and therefore, the transaction was fully in accordance with the law. The transaction was duly disclosed in the Audited Balance Sheet. In the totality of facts and in the circumstances of the case we are of the view that assessee has sufficiently discharged the burden which lay upon it in terms of section 68 and no evidence has been brought on records to prove that the amount represents undisclosed money of the assessee. - Decided in favour of assessee.
Issues Involved:
1. Rejection of past history while framing the assessment under section 144. 2. Overlooking binding decisions of higher authorities. 3. Applicability of presumptive rate of 8% under section 44AD. 4. Excessiveness of the 8% profit rate application. 5. Treatment of 'Advance against Property' as 'Unexplained Cash Credits'. 6. Validity of addition under section 68 after rejecting the books of account. 7. Telescoping of additions. 8. Levy of interest under section 234B. 9. Arbitrary observations and conclusions by the authorities. 10. Overall arbitrariness, illegality, and violation of natural justice in the order. Detailed Analysis: 1. Rejection of Past History: The assessee argued that the authorities unjustifiably discarded the past history while framing the assessment under section 144. The Tribunal noted that the assessee's past trading results showed a consistent net profit (N.P) rate between 1.88% and 2.04%, and the authorities applied an 8% N.P rate without any basis or comparable case. The Tribunal found it fair and reasonable to apply an average N.P rate of 3.50% based on past history, reducing the excessive rate applied by the authorities. 2. Overlooking Binding Decisions: The assessee contended that the CIT(A) overlooked binding decisions of the Hon’ble Allahabad High Court and ITAT, Agra Bench. The Tribunal acknowledged the relevance of past judicial opinions, emphasizing that the estimation of income should consider past history, as supported by various case laws cited by the assessee. 3. Applicability of Presumptive Rate under Section 44AD: The CIT(A) erred in applying a presumptive rate of 8% under section 44AD, despite the assessee maintaining audited books of accounts. The Tribunal agreed with the assessee that the case did not fall under section 44AD, as the assessee had maintained proper books of accounts, and thus, the presumptive rate was inapplicable. 4. Excessiveness of the 8% Profit Rate Application: The Tribunal found the application of an 8% profit rate excessive and without evidence. The past N.P rates were significantly lower, and the Tribunal adjusted the N.P rate to 3.50%, considering the past history and judicial guidelines. 5. Treatment of 'Advance against Property' as 'Unexplained Cash Credits': The addition of ?3,00,00,000/- as 'Unexplained Cash Credits' under section 68 was challenged. The Tribunal noted that the assessee provided confirmation, bank statements, and ITR of the creditor, M/s Easyway Solutions (P) Ltd. The authorities failed to examine the creditor and relied on presumptions. The Tribunal held that the assessee had sufficiently discharged its burden under section 68, and the addition was deleted. 6. Validity of Addition under Section 68 after Rejecting Books of Account: The Tribunal observed that once the books of account were rejected, the income estimation should be reasonable and based on some basis. The addition under section 68 was not justified as the assessee had provided sufficient evidence to prove the genuineness of the transaction. 7. Telescoping of Additions: The Tribunal did not find it necessary to address the telescoping issue explicitly, as the primary addition under section 68 was deleted. 8. Levy of Interest under Section 234B: The assessee denied the levy of interest under section 234B, arguing that the income was subjected to TDS. The Tribunal did not provide a detailed analysis on this issue, implicitly suggesting that the primary focus was on the main grounds of appeal. 9. Arbitrary Observations and Conclusions: The Tribunal found that the authorities made various arbitrary observations and conclusions contrary to the facts on record. The rejection of submissions and evidence by the authorities was deemed unjustified. 10. Overall Arbitrariness, Illegality, and Violation of Natural Justice: The Tribunal concluded that the order appealed against was arbitrary, illegal, and contrary to the principles of natural justice. The appeal was partly allowed, providing relief to the assessee by adjusting the N.P rate and deleting the addition under section 68. Conclusion: The Tribunal partly allowed the appeal, adjusting the N.P rate to 3.50% and deleting the addition of ?3,00,00,000/- under section 68, thereby providing significant relief to the assessee. The order emphasized the importance of considering past history and judicial guidelines in income estimation and highlighted the necessity of proper examination and evidence in sustaining additions.
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