2020 (11) TMI 8 - AT - Income Tax

Revision u/s 263 - N.P. rate determination - HELD THAT - Income of the assessee at Karnal have been assessed at very high pitched income. Though the assessment order at Delhi was later on set aside by the Ld. CIT-13, New Delhi, vide Order Dated 23.03.2009 under section 263 of the I.T. Act, 1961, but, on the date of passing the impugned order at Karnal on 30.12.2008 the A.O. should have looked into the assessment order passed at Delhi in respect of the same assessee for the same assessment year. These peculiar facts clearly entitle the assessee that matter should be remanded back to the file of A.O. for fresh consideration When in preceding three years, we have directed the A.O. to apply N.P. rate of 2% only as against the N.P. rate of 8% determined by the A.O. and that contradictory Orders have been passed at Delhi and Karnal, interest of justice requires that entire matter should be reconsidered by the A.O. at Karnal in accordance with Law. We set aside the Orders of the authorities below and direct the A.O. to pass the assessment order de novo in accordance with Law, by giving reasonable, sufficient opportunity of being heard to the assessee. In case A.O. may not be satisfied with the book results of the assessee, he should not estimate the profit of the assessee by applying N.P. rate of 8% in view of our directions given in A.Ys. 2003-04, 2004-05 and 2008-09 above, the A.O. should restrict the profit at 2% only in case of rejection of the book results. Appeal of assessee allowed for statistical purposes.

Summary

Issues Involved:
1. Condonation of delay in filing appeals due to health reasons.
2. Rejection of books of account and application of net profit rate for computing business income.
3. Jurisdictional issue regarding assessment orders passed by different authorities for the same assessee.

Condonation of Delay:
The assessee's appeals for the assessment years 2003-04, 2004-05, and 2008-09 were time-barred by 107 days. The assessee attributed the delay to severe health issues arising from a road accident, preventing timely filing. After considering submissions, the Tribunal found the explanation satisfactory and condoned the delay, emphasizing the small issue involved in the appeals.

Rejection of Books of Account and Net Profit Rate Application:
The appeals challenged the rejection of books of account and the application of an 8% net profit rate for computing business income. The Tribunal noted the assessee's engagement in civil construction with historically low profit margins. The AO rejected the books due to lack of verifiable expenses documentation and applied an 8% profit rate. However, the Tribunal found the 8% rate excessive, considering the assessee's historical profit margins. Citing legal precedents, the Tribunal directed a reduced profit rate of 2% instead of 8% for all the assessment years in question.

Jurisdictional Issue:
In the case of assessment for the AY 2006-07, a jurisdictional issue arose where assessments were made by different authorities for the same assessee. The Tribunal observed a contradiction between assessment orders passed at Delhi and Karnal, leading to a high-pitched income assessment at Karnal. The Tribunal directed a fresh assessment by the Karnal AO, emphasizing the need for a rational approach and consideration of the Delhi assessment order. The Tribunal directed the Karnal AO to apply a 2% profit rate if book results are rejected, aligning with previous directions for other assessment years.

In conclusion, the Tribunal partly allowed the appeals related to the rejection of books of account and net profit rate application for the assessment years 2003-04, 2004-05, and 2008-09. The appeal related to the jurisdictional issue for the AY 2006-07 was allowed for statistical purposes. The Tribunal emphasized fair assessment practices, historical profit margins, and the need for consistency and rationality in income estimation.