2022 (11) TMI 671 - AT - Income Tax

Addition made on various counts including estimation of interest income, estimation of C F commission @ 50% and then estimation of profit on the sales made during the year under the business carried out - HELD THAT - Looking to the consistency of the business, C F charges and commission income being received from limited company and the receipts are duly accounted for in Form no. 26AS and they are also getting reflected in the bank statement and there being no other business carried out under the name of M/s. Chakraborty Enterprise which remained undisclosed and simultaneously also considering the fact that both the lower authorities could not examine the correctness of the assessee s income for the year due to lack of evidences and necessary details, we, in order to put an end to the controversy and in the interest of justice and being fair to both the parties, hold to apply net profit rate of 14% on the total turnover of M/s. Chakraborty Enterprise and against this amount since the assessee has already offered the net profit the remaining amount is the addition confirmed in the hands of the assessee. Thus ground partly allowed. Addition being made for excess wastage of bricks shown by the assessee - HELD THAT - We find that the assessee gave complete production details of the manufacturing of bricks before ld. AO and against the total consumption of 1,29,845 Cubic Feet of soil purchased from West Bengal Government, the assessee manufactured a saleable quantity of 6,18,000 pieces of bricks. AO has only referred to the excess wastage as suppressed sales. However, looking to the consistency of the business carried out by the assessee in the past and the financial statements being audited and accepted by the Revenue authorities, we, in order to bring the end to the controversy and being fair to both the parties estimate a net profit of 8% on the gross turnover of M/s. Maa Bricks Field shown and compute the profit and after deducting the profit offered by the assessee in the profit loss account the remaining amount is the income confirmed in the hands of the assessee. Assessee gets relief of Rs. 7,99,477/-. Thus, ground of the assessee s appeal is partly allowed.

Issues:
Assessment Year 2010-11 - Validity of assessment order - Addition of undisclosed income - Estimation of income and expenses - Addition for excess wastage of bricks - Relief sought by the assessee - Grounds of appeal challenged.

Detailed Analysis:

1. Validity of Assessment Order:
The appeal challenges the assessment order passed under section 250 of the Income Tax Act, 1961 by the Commissioner of Income-tax (Appeals) for the Assessment Year 2010-11. The assessee contends that the orders of the lower authorities are arbitrary, opposed to the law, and bad in law. However, the Tribunal finds no merit in the contention, stating that the Assessing Officer provided sufficient opportunity to the assessee, and a best judgment assessment was made based on the available details. Therefore, the grounds challenging the validity of the assessment order are dismissed.

2. Addition of Undisclosed Income:
The assessment involved additions for undisclosed income, including C & F commission, unaccounted rent income, interest income, and suppressed sales of bricks. The Tribunal notes that the assessee, a C & F agent and brick manufacturer, faced challenges in providing complete details due to lost books of accounts. Despite this, the Tribunal considers the consistency of the business, the proper accounting of receipts, and lack of examination by lower authorities due to insufficient evidence. Consequently, the Tribunal applies a net profit rate of 14% on the turnover, resulting in sustained additions of Rs. 6,09,627, with other additions being deleted partially.

3. Estimation of Income and Expenses:
Regarding the estimation of income and expenses, the Tribunal reviews the past net profit ratios and the details provided by the assessee for the year under appeal. The Tribunal finds that the net profit rate adopted by the Assessing Officer is significantly higher than the historical rates offered by the assessee. Considering the lack of audited financial statements and lost books of accounts, the Tribunal opts to apply a net profit rate of 14% on the total turnover, resulting in a confirmed addition of Rs. 6,09,627. The Tribunal partially allows the grounds challenging these additions.

4. Addition for Excess Wastage of Bricks:
The assessee faced an addition for excess wastage of bricks, with the Tribunal noting the consistent business operations in manufacturing and selling bricks. The Tribunal observes that the Assessing Officer's estimation was not adequately supported by evidence, leading to a reassessment of the net profit on the gross turnover. By considering the production details provided by the assessee and the audited financial statements, the Tribunal computes a profit of Rs. 1,51,894, resulting in a confirmed income of Rs. 69,347. The assessee receives relief of Rs. 7,99,477, and this ground is partly allowed.

5. Relief Sought by the Assessee:
The Tribunal carefully analyzed the submissions, comparative profit charts, and relevant documents presented by both parties. While some additions were sustained, the Tribunal provided relief to the assessee by recalculating the income based on a reasonable net profit rate. The Tribunal aimed to resolve the controversy fairly and in the interest of justice, ensuring a balanced outcome for both parties.

6. Grounds of Appeal Challenged:
The Tribunal addressed each ground of appeal raised by the assessee, evaluating the validity of the assessment order, additions of undisclosed income, estimation of income and expenses, and the addition for excess wastage of bricks. By considering the facts, submissions, and legal provisions, the Tribunal partly allowed the appeal, providing relief to the assessee on certain grounds while confirming additions based on a rational assessment.

In conclusion, the Tribunal's detailed analysis of the issues raised by the assessee in the appeal for the Assessment Year 2010-11 resulted in a partly allowed appeal, balancing the interests of the assessee and the revenue authorities. The judgment provided a thorough examination of the facts, legal arguments, and evidence presented, ensuring a fair and reasoned decision.

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