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TMI Blog2016 (8) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... rinivasan, CA For The Respondent : Shri Sunil Kumar Agarwal, Jt. CIT(DR) ORDER This appeal by the assessee is directed against the order dated 28.12.2015 of the CIT(Appeals)-7, Bengaluru for the assessment year 2005-06. 2. The assessee, an individual, is carrying on a business of providing security guards and running a detective agency. The assessee filed his return of income for the year under appeal reporting an income of ₹ 3,08,770/-. It is submitted that the return of income filed by the assessee was accompanied by the report of an accountant u/s.44AB of the Act. The total revenue or turnover shown for the year under appeal was ₹ 53,27,417/- and ultimately, the assessee had shown a net income of ₹ 3,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 16.02.2010. However, the CIT(A) held that the explanation of the assessee that the entire receipts are extended away cannot be accepted and therefore, he proceeded to hold that the Gross Profit (GP) reckoned at 38,98% of the receipts (as shown by the assessee in his account) requires to be assessed in place of addition of ₹ 40,79,790/-. Accordingly, the CIT(A) modified the addition to ₹ 15,80,302/- and determined the income of the assessee at ₹ 18,89,072/-. 6. Aggrieved by the order of the CIT(A), the assessee preferred an appeal before the ITAT in ITA No.712/Bang/2010. It is submitted that the Department accepted the order of the CIT(A) as mentioned above and there was no appeal filed by the Department before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the totality of facts income consideration and compute the net income of the assessee. 7. In the set aside proceedings, the AO called for certain details from the assessee. After consideration of the details filed by the assessee, the AO determined the income of the assessee by the impugned order dated 30.3.2013, at ₹ 18,89,072/- based on the extent of income sustained by the CIT(A) in the first round. 8. On further appeal before the CIT(A), the assessee submitted that the AO has clearly overlooked the observations of the ITAT that, it was not sufficient if only wages and direct expenses are considered for making the addition. In fact, this was what the CIT(A) had done while passing the appellate order dated 16.02.2010, estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time, the contention of the assessee that there are circumstances that agency / contractor has to incur other expenses for the purpose of carrying on the business, it is likely that there are other expenses apart from wages and direct expenses which has not been considered before making the addition in the total income of assessee. These expenses may be of business promotion expenses, medical expenses (staff), miscellaneous expenses and telephone charges. The CIT(A) held that the total expenses debited under these heads is ₹ 2,22,736/- for the total turnover of ₹ 53,27,417/- shown in the profit and loss account which comes to 4.18% of undisclosed turnover of ₹ 40,79,790/- can be allowed as additional expenses. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y prays that the appeal may be allowed and Justice rendered, and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. 11. The ld. counsel for the assessee submitted that the CIT(Appeals) ought to have determined the income of the assessee on the basis of net profit earned in accordance with the directions of the ITAT. Reliance was placed on the decision of the Hon ble Madhya Pradesh High Court in CIT v. Balchand Ajit Kumar, 263 ITR 610 (MP) , wherein it was held that the total sale could not be regarded as profit of the assessee. The net profit rate had to be adopted and once it was adopted, it could not be said that there was perversity of approach. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the related expenditure on the payment made to security guards is also not claimed as a deduction. The AO did not appreciate the contention of the assessee and the CIT(Appeals) took a different view with respect to determination of income. The Tribunal had held that the entire receipts cannot be stated to be the income of the assessee because the assessee would have to pay the wages and also incur other expenses for the purpose of carrying on of the business of the assessee. Hence the Tribunal directed the AO to consider the totality of facts and compute the net income of the assessee. Following the decision of the Hon ble Madhya Pradesh High Court in CIT v. Balchand Ajit Kumar (supra) and the Hon ble Bombay High Court in the case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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