2018 (12) TMI 186 - AT - Income Tax

Trading addition - net profit rate of 5% applied by the AO while estimating the profit of the assessee from extra ordinary sales - Held that - In support of contention, assessee has filed the details of gross profit rate and net profit rate declared by the assessee for the immediately preceding three years as well as immediately succeeding two years. It is, however, observed that the CIT(A) has not decided this issue on merit vide his impugned order passed ex parte. It is also observed that written submission was filed by the assessee during the course of appellate proceedings before the CIT(A) as mentioned by the CIT(A) himself in paragraphs 2 of his impugned order. CIT(A) has not taken the same into consideration while disposing of the appeal of the assessee and there is no decision rendered by him on the merit of the issue involved in this case. Therefore, consider it fair & proper and in the interest of justice to set aside the impugned order of the CIT(A) passed ex parte and remand the matter back to him for disposing of the appeal of the assessee afresh after giving the assessee one more opportunity of being heard. Appeal of the assessee is treated as allowed for statistical purpose.

Summary

Issues:
1. Trading addition confirmed by Ld. CIT (Appeals)
2. Application of net profit rate by AO
3. Dismissal of appeal by Ld. CIT (A) due to non-compliance
4. Consideration of written submissions by Ld. CIT (A)

Analysis:
1. The appeal was filed against the Ld. CIT (Appeals) order confirming a trading addition made by the AO. The AO observed a difference in contract receipts, which the assessee explained as income from extraordinary sales. However, the AO found the explanation unsubstantiated and applied a net profit rate of 5% to estimate the profit from the extraordinary sales, resulting in an addition of ?23,12,145 to the total income of the assessee.

2. The assessee contended that the net profit rate applied by the AO was excessive and unreasonable. The counsel for the assessee provided details of gross and net profit rates for previous and subsequent years. The Tribunal noted that the Ld. CIT (A) did not decide this issue on merit, as the appeal was dismissed ex parte. Therefore, the Tribunal set aside the Ld. CIT (A) order and remanded the matter back for a fresh decision after giving the assessee an opportunity to be heard and considering the written submissions.

3. The appeal was dismissed by the Ld. CIT (A) due to non-compliance by the assessee with the notices issued for hearings. The Tribunal found it fair and proper to set aside the ex parte order and provide the assessee with another opportunity to present their case before the Ld. CIT (A) for a decision on the merits of the appeal.

4. The written submissions filed by the assessee during the appellate proceedings were not considered by the Ld. CIT (A) while disposing of the appeal. The Tribunal emphasized the importance of considering all relevant submissions and giving the assessee a fair chance to present their case. The appeal was treated as allowed for statistical purposes, and the matter was remanded for a fresh decision by the Ld. CIT (A).