2019 (11) TMI 1063 - HC - Income Tax

Determination of rate of Gross Profit - notice u/s 153A - Assessee showed its gross profit at 4.75% during the Financial Year 2010-11 - AO consequently, recalculated the gross profit @ 6% - HELD THAT - The Tribunal has rejected the appeal preferred by the Revenue on the premise that the Assessing Officer has not doubted and, therefore, not rejected the books of accounts presented by the assessee. Consequently, it was not open to the AO to proceed to make an assessment of the net profit of the assessee on the basis of the comparison made with the industry trade. In our view, the reasoning adopted by the Tribunal appears to be sound, and therefore, no question of law arises for our consideration in the present appeal.

Summary

Issues:
1. Appeal by the Revenue against the order of the Income Tax Appellate Tribunal.
2. Assessment of taxable income based on gross profit rate.
3. Dismissal of appeal by the Tribunal due to non-rejection of books of accounts.

Analysis:
1. The appeal was filed by the Revenue against the order of the Income Tax Appellate Tribunal regarding the respondent assessee's assessment for the Assessment Year 2011-12. The Tribunal dismissed the appeal by the Revenue against the order passed by the CIT (Appeals) on the grounds that the Assessing Officer did not doubt or reject the books of accounts presented by the assessee. Therefore, the Tribunal held that it was not appropriate for the Assessing Officer to assess the net profit of the assessee based on a comparison with industry standards. The High Court concurred with the Tribunal's reasoning and concluded that no question of law arose for consideration in the appeal. Thus, the appeal by the Revenue was dismissed.

2. The respondent assessee, involved in the distribution of potable liquor as part of the "Chadha Group," had undergone a search under Section 132 of the Act, followed by a notice under Section 153A. The assessee filed its income tax return showing a taxable income of &8377;19,67,70,190, with a gross profit rate of 4.75% for the Financial Year 2010-11. The Assessing Officer recalculated the gross profit at 6% and made additions to the taxable income based on this recalculated rate. However, the CIT (Appeals) allowed the appeal filed by the assessee, leading to the Revenue's appeal to the Tribunal. The Tribunal's decision to dismiss the Revenue's appeal was based on the non-rejection of the assessee's books of accounts by the Assessing Officer, which precluded the assessment of net profit solely on industry comparison grounds.

3. The Tribunal's rejection of the Revenue's appeal was primarily due to the fact that the Assessing Officer did not question the authenticity of the books of accounts maintained by the assessee. As a result, the Tribunal held that the Assessing Officer could not proceed to determine the net profit based on industry standards without proper grounds for rejecting the books of accounts. The High Court concurred with the Tribunal's reasoning, emphasizing that no legal question arose for consideration in the appeal by the Revenue. Consequently, the appeal was dismissed, upholding the Tribunal's decision on the matter.