2022 (11) TMI 412 - AT - Income Tax

Estimation of income - GP estimation - whether CIT(A) has erred in granting relief to the assessee in reducing the gross profit rate at 0.5% as against at 3% estimated by the AO? - HELD THAT - As in assessee s own case on almost similar set of facts wherein similar estimation was made by AO in AY 2013-14 2021 (12) TMI 1287 - ITAT SURAT and on appeal before CIT(A) similar additions was restricted to 1% and on further appeal by assessee. Considering the decision of Tribunal in assessee s own case on similar facts in preceding year and respectfully following the same, the estimation made by ld. CIT(A) is increased from 0.5% to 1% of total turnover. Thus, the grounds of appeal raised by the Revenue are partly allowed.

Summary

Issues:
1. Estimation of gross profit rate for assessment year 2014-15.
2. Rejection of books of account under Section 145(3) of the Income Tax Act.
3. Appeals by the Revenue against the orders of the Commissioner of Income Tax (Appeals).

Analysis:

Issue 1: Estimation of Gross Profit Rate
The appeals by the Revenue were directed against separate orders of the Commissioner of Income Tax (Appeals) for the assessment year 2014-15. The Revenue contended that the Commissioner erred in reducing the gross profit rate from 3% to 0.5% without considering all facts. The Assessing Officer estimated a 3% gross profit on the total turnover, adding Rs. 4.81 crores. The Commissioner, however, considered the submission of the assessee, noted the gross profit rates from previous years, and estimated the gross profit at 0.5%, granting relief to the assessee. The Revenue, aggrieved by this decision, filed the present appeal before the Tribunal.

Issue 2: Rejection of Books of Account
The Assessing Officer rejected the books of account of the assessee under Section 145(3) due to lack of verification and justification of profit. Despite multiple opportunities, the assessee did not provide necessary documents, hindering the verification process. The Assessing Officer estimated a 3% gross profit on the turnover, leading to substantial additions. The Commissioner, on appeal, considered the audited nature of the books, previous gross profit rates, and the lack of dispute on the transactions' veracity. The Commissioner restricted the addition to 0.5% of the turnover, leading to the Revenue's appeal before the Tribunal.

Issue 3: Appeals by the Revenue
In both appeals, the Revenue raised common grounds related to the estimation of gross profit rates and rejection of books of account. The Tribunal, after considering the facts and decisions in similar cases, partly allowed the Revenue's appeals. The Tribunal increased the gross profit rate estimation from 0.5% to 1% of the total turnover, aligning with the decision in the assessee's own case from the preceding year. The Tribunal upheld the Commissioner's decision to restrict the addition, emphasizing the lack of evidence provided by the assessee throughout the proceedings.

In conclusion, the Tribunal partly allowed the appeals by the Revenue, adjusting the gross profit rate estimation and emphasizing the importance of providing necessary evidence during assessments and appeals to support the declared profits and transactions.