2022 (5) TMI 726 - AT - Income Tax

Estimation of assessee's income by adopting net profit ratio 12% of net contract receipts - whether it is excessive and unreasonable? - HELD THAT - As respectfully following the aforesaid order of coordinate Bench of ITAT, Delhi in the case of Nand Kishore Pundir 2015 (7) TMI 1403 - ITAT DELHI in the specific facts and circumstances of the case before us, we direct the Assessing Officer to determine assessee's income by adopting net profit ratio of 8% on the net contract receipts of the assessee. - Decided in favour of assessee.

Summary

Issues:
1. Appeal against impugned appellate order dated 02.01.2018 of Ld. CIT(A) for Assessment Year 2007-08.
2. Estimation of assessee's income at 12% of net contract receipts.
3. Disregard of comparable cases by the Assessing Officer.
4. Discrepancy in applying net profit rate below 12%.
5. Request for estimation of income at 8% of net contract receipts.
6. Decision based on the order of a coordinate Bench of ITAT, Delhi.

Analysis:
- The appeal was filed against the impugned appellate order dated 02.01.2018 of Ld. CIT(A) for Assessment Year 2007-08. The original assessment completed under section 143(3) of the Income Tax Act resulted in an income of Rs. 9,19,980, as opposed to the returned income of Rs. 1,58,170. The CIT Karnal set aside the initial assessment and a fresh assessment was conducted, estimating the income at Rs. 25,45,350 by applying a net profit rate of 12% on net contract receipts.
- The assessee contended that the estimation of income at 12% of net contract receipts was excessive and unreasonable. The Ld. AR highlighted that the Assessing Officer disregarded comparable cases where a lower net profit rate was applied, without providing any valid reasons. The Ld. CIT(A) also failed to intervene despite the existence of ITAT orders favoring a lower net profit rate for similar cases.
- During the hearing, the Ld. AR requested the estimation of income at 8% of net contract receipts, citing a precedent set by a coordinate Bench of ITAT, Delhi in a similar case. The Ld. Sr. DR for Revenue did not object to this request, leaving the decision to the Bench.
- Following the precedent set by the coordinate Bench of ITAT, Delhi, the Tribunal directed the Assessing Officer to determine the assessee's income by adopting a net profit ratio of 8% on the net contract receipts.
- The appeal was disposed of based on the above directions, treating all grounds of appeal as resolved. The decision to estimate the income at 8% was made in accordance with the specific facts and circumstances of the case. The appeal was partly allowed for statistical purposes.