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TMI Blog2017 (6) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... s in confirming an addition of Rs. 12,98,019/- a) by allowing only the employee and selling expenses @ 3% of the turnover as deduction and b) by estimating the net profit @ 10.75% of the turnover as against 7% estimated by the AO though considering the same to be on higher side by holding that the appellant must suffer for all the infractions ignoring the reason explained for such infraction, the facts of the case and the net profit ratio of the earlier years. Thus the addition so made without any enhancement notice should be deleted. 2. Without prejudice to the above ground, if the profit of business is to be estimated, it should be estimated on the basis of net profit declared and assessed in the preceding years instead of computing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of material on record under best judgment assessment u/s 144. First of all, AO held that the assessee being a partnership firm is required to maintain proper books of account and also define and determine the share of profits. In absence of such a mandatory requirement as contained in section 184(5), AO held that no deduction on account of payment of interest, salary, bonus, etc. paid can be allowed out of the income assessed in the hands of the firm. He thus, proceeded to estimate the assessee's business income after observing and holding as under:- " Last assessment year, the assessee had stated the total sales at Rs. 2,01,07,479/- during the period from 1.4.2009 to 31.03.2010 relevant to asst, year under consideration the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 25/05/2009 which states the following discounts to the dealer: Birthday Scheme @ 4.75% Trade Discount @ 6.00% Cash Discount @ 2.00% Thus a total of gross discount/commission of 12.75% is given to the distributor. Since assessee is not incurring any expenditure on maintenance of books of account & vouchers it would be very reasonable to assess net profit @ 7% resulting into taxable income of Rs. 15,40,000/-." 3. Before the Ld. CIT (A), the assessee submitted that there were only two partners in the firm, Shri Dharampal Gulati; and Smt. Meenakshi Mohan (Managing Partner). Since the husband of managing partner (Smt. Meenakshi Mohan) was terminally ill for the considerable period of time, and had died during the pendency of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was same allegation of non maintenance of books of accounts. Instead of going by the precedence of the earlier, the Assessing Officer has estimated the G.P. rate of 12.75% and net profit rate of 7% of Rs. 2,20,00,000/- resulting into addition of Rs. 15,40,000/-. 4. In the remand report the Assessing Officer's submission in this regard has been as under:- "Illegal addition of Rs. 15.40.000.00 as business income The addition was made in two accounts:- 1) By increase of the turnover to Rs. 2,20,00,000.00 from 1,20,76,727.00 2) By increase of the GP from 6% to 12.75% and NP from 2.46 to 7%. In support of the turnover, the assessee has furnished Sale tax assessment order, sale and vat return, copy of purchase account in Dharam Leela Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uneration and drawings and are disallowed u/s 184(5). As per this view, the profit chargeable to tax comes to Rs. 12,98,019/-, which is 10.75% of the sales turnover. I am aware that the amount is on the higher side, and even higher than the GP / N'P margins declared and accepted in earlier years. But, the appellant has failed to file the return, failed to pay due taxes, failed to maintain books of account, and failed to get its account audited, for all these infractions, the appellant must suffer. The appellant has also failed to file particulars to support its claim of GROSS PROFIT & NP ratios and evidences to support its claim of expenses, therefore these rates are not to be accepted. Res judicata is not applicable to these proceedings. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken at 3% of the turnover, the same is not being challenged by the assessee. 8. On the other hand the ld. DR strongly relied upon the order of the ld. CIT and submitted that, when the assessee has failed to gets the accounts audited and no proper books of accounts has been maintained, therefore, the estimate made by the ld. CIT (A) at 10.75% of the turnover is quite justified. 9. We have heard the rival submissions and perused the relevant finding given in the impugned order. Here in this case, it is not disputed that the best judgment assessment u/s 144 is justified in law and on facts due to not maintenance of books of accounts and failing to gets the account audited. The turnover of the assessee as per the sales tax return has been a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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