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2020 (4) TMI 537 - AT - Income TaxAddition on account of estimated net profit - assessee case was selected for scrutiny u/s 143(2) - AO rejected the books of accounts of assessee and estimated net profit @ 0.17% of the turnover - HELD THAT - Assessee produced paper book no. S-6, which contains the excise returns of the production, details of input-output and work-in-progress. This was sent by speed post and a copy of the speed post receipt dated 13.12.2016 has been produced before ld CIT(A). Hence, these details were submitted before the AO by the assessee - contention of the AO that the information required by him, were not produced during the course of the assessment proceedings, are untenable and not supported by the facts, which are on record. Hence, AO was not correct in rejecting the books of accounts - we decline to interfere with the order of CIT(A) in deleting the aforesaid additions. His order on this issue is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. Brought forward loss adjustment ignoring the section 14 - HELD THAT - CIT(A) directed the AO to allow brought forward losses, as per the provisions of section 72 therefore we do not find any infirmity in the order of ld CIT(A) in directing the AO to allow brought forward losses, in accordance to law. Hence, we confirm the order of ld CIT(A). Appeal of the Revenue is dismissed.
Issues Involved:
1. Justification of the deletion of the addition of ?20,624,601 on account of estimated net profit. 2. Legality of allowing the brought forward loss adjustment ignoring Section 14 of the Income Tax Act. 3. Request to set aside the order passed by the CIT(A) and restore the assessment order passed by the Assessing Officer. Detailed Analysis: 1. Justification of the Deletion of the Addition of ?20,624,601 on Account of Estimated Net Profit The Assessing Officer (AO) rejected the books of accounts of the assessee for the Assessment Year 2014-15, estimating net profit at 0.17% of the turnover due to the non-production of books of accounts, details of purchases, and sales. The AO noted discrepancies in the gross profit ratio compared to the previous year and the reluctance of the assessee to provide required documents, leading to the rejection of the books of accounts. The AO calculated the net profit based on the GP% and NP% of FY 2012-13, resulting in an assessed net profit of ?20,624,601. The CIT(A) overturned the AO's decision, noting that the assessee had indeed submitted all required details during the assessment proceedings, including purchase/sale details, electricity consumption, and excise returns. The CIT(A) found the AO's contention that the information was not produced to be untenable and unsupported by facts on record. Consequently, the CIT(A) deleted the addition based on net profit estimation, stating that the AO was not justified in rejecting the books of accounts. The Tribunal upheld the CIT(A)'s decision, confirming that the AO was incorrect in rejecting the books of accounts and estimating the income based on erroneous presumptions. The Tribunal noted that the assessee had provided substantial evidence of submissions made during the assessment proceedings, which were ignored by the AO. 2. Legality of Allowing the Brought Forward Loss Adjustment Ignoring Section 14 of the Income Tax Act The second issue raised by the Revenue was the CIT(A)'s alleged error in allowing the brought forward loss adjustment, ignoring Section 14 of the Income Tax Act. The CIT(A) directed the AO to allow brought forward losses as per the provisions of Section 72 of the Act. The Tribunal found no infirmity in the CIT(A)'s order, confirming that the brought forward losses should be allowed in accordance with the law. 3. Request to Set Aside the Order Passed by the CIT(A) and Restore the Assessment Order Passed by the Assessing Officer The Revenue requested to set aside the CIT(A)'s order and restore the assessment order passed by the AO. However, the Tribunal dismissed this request, upholding the CIT(A)'s findings and confirming the deletion of the addition based on net profit estimation and the allowance of brought forward losses. Conclusion The Tribunal dismissed the appeal of the Revenue, confirming the CIT(A)'s decision to delete the addition of ?20,624,601 based on net profit estimation and to allow the brought forward loss adjustment as per Section 72 of the Income Tax Act. The Tribunal found that the AO was not justified in rejecting the books of accounts and estimating the income based on erroneous presumptions. The order of the CIT(A) was upheld, and the grounds of appeal of the Revenue were dismissed.
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