2023 (2) TMI 410 - AT - Income Tax

Estimation of net profit - CIT(A) has adopted 6% net profit rate as against 0.25% disclosed by the assessee - As submitted that this Tribunal in assessee s own case for AY 2012-13 2021 (12) TMI 353 - ITAT RANCHI has applied net profit rate of 1% and therefore, for the year under appeal, similar rate may be applied - HELD THAT - Considering the fact that the assessee has himself prayed for the application net profit rate of 6% placing reliance on various judgments including that of Hon'ble Patna High Court in the case of Shyam Bihari 2012 (8) TMI 420 - PATNA HIGH COURT we fail to find any merit in the ground raised by the assessee for applying net profit rate @ 1%. Thus, no interference is called for in the finding of ld. CIT(A). We accordingly dismiss ground nos. 1 2 raised by the assessee. Computation of interest u/s 234B - As contented same should be applied only on the returned income - HELD THAT - As per provision of Section 234B(1) of the Act and Explanation 1 has a direct bearing on this issue we observe that it refers to assessed tax which in case of regular assessment is a tax on total income determined under such regular assessment. Nowhere in this provision, it is stated that Section 234B of the Act, in the case of regular assessment, is to be computed on the returned income and not on the assessed income. Though the assessee has referred to the judgment in the case of Ajay Prakash Verma 2013 (1) TMI 140 - JHARKHAND HIGH COURT however he failed to convince us that the said judgment is applicable in the instant case pertaining to AY 2010-11, for which the position of law is very clear as provided u/s 234B of the Act. Therefore, we are inclined to hold that interest for default in payment of advance tax u/s 234B of the Act in the case of regular assessment needs to be computed on the assessed tax as provided in Explanation 1 to Section 234B(1) of the Act. Thus, ground no. 3 raised by the assessee is dismissed.

Summary

Issues Involved:
1. Justification of adopting a 6% profit rate versus 0.25% disclosed by the assessee.
2. Basis for estimating profit at 6% by CIT(A).
3. Computation of interest under Section 234B of the Income Tax Act, 1961.
4. General grounds for appeal.

Issue-wise Detailed Analysis:

1. Justification of Adopting a 6% Profit Rate versus 0.25% Disclosed by the Assessee:
The assessee contested the CIT(A)'s observation that they requested a 6% profit rate instead of the 0.25% disclosed. The assessee clarified that the 6% rate was cited only to claim a separate deduction for depreciation, not as an acceptance of the profit rate. The Tribunal noted that the assessee's own case for AY 2012-13 applied a 1% net profit rate, but this was specific to a small amount of cash deposit and not the total turnover. Therefore, the Tribunal found no merit in the assessee's contention for a 1% rate and upheld the 6% profit rate applied by CIT(A), dismissing grounds 1 and 2.

2. Basis for Estimating Profit at 6% by CIT(A):
The CIT(A) adopted a 6% profit rate based on the assessee's reliance on judgments from the Patna High Court and ITAT Patna Bench, which supported a 6% estimation in similar cases. The AO had originally estimated an 8% profit rate but failed to point out specific defects in the bills and vouchers submitted by the assessee. Consequently, the CIT(A) directed the AO to compute the profit at 6% of gross receipts after allowing depreciation, resulting in a net addition of Rs. 26,34,060. The Tribunal found no reason to interfere with this finding.

3. Computation of Interest under Section 234B of the Income Tax Act, 1961:
The assessee argued that interest under Section 234B should be charged on the returned income, not the assessed income, citing a decision from the Jharkhand High Court. However, the Tribunal referred to Section 234B(1) and Explanation 1, which define "assessed tax" as the tax on total income determined under regular assessment. The Tribunal concluded that Section 234B interest should be computed on the assessed tax, not the returned income, and dismissed ground 3.

4. General Grounds for Appeal:
Ground 4 was deemed general in nature and required no adjudication.

Conclusion:
The appeal filed by the assessee was dismissed. The Tribunal upheld the CIT(A)'s decision to apply a 6% profit rate and confirmed that interest under Section 234B should be calculated based on assessed tax.