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TMI Blog2018 (3) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... Heard on the question of admission. 2. This income tax appeal has been filed under Section 260-A of the Income Tax Act, 1961 against the order dated 26.5.2017 passed in I.T.A. N0.842/Ind/2016 whereby learned I.T.A.T. partly allowed the appeal of the respondent- assessee and directed that the net profit ratio of 2.5% of total turnover would be just, appropriate and directed the Assessing Officer to calculate the net profit accordingly. 3. The facts of the case are that the respondent assessee has been purchasing cotton and cotton seed through Krishi Upaj Mandi Samiti, Badwah, District- Khargone. It was observed by the Assessing Officer from the purchase register that the same amount was not found reflected in the cash book whereas th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no dispute about the financial results or amount of purchase and the aggregate of disputed purchases is hardly 5% of total purchases. The rejection of books of accounts and estimation of profit consequently is not valid and sustainable. 5. The reply of the Department was that once books of accounts are rejected, the Assessing Officer is empowered to estimate the NP on the total turnover considering the material available with him and prayed for rejection. 6. The learned I.T.A.T relying on the decision in the case of Telelinks versus CIT reported in 377 ITR 158 (P H) the Punjab Haryana High Court has held that rejection of books of accounts is a pre-condition and sine qua non for making estimation of net profit. 7. Relyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 10 held thus - The discretion to determine a net profit rate must necessarily be exercised on the basis of relevant factors which we shall enumerate but before doing so, would clarify that these factors are neither exhaustive nor a final word on relevant factors that may be considered while determining the net profit rate. A few significant factors are the past tax history of the assessee, if available, assessment orders that may have been passed and accepted by the department, the nature of the assessees' KANCHAN 2014.12.11 15:06 I attest to the accuracy and authenticity of this document Chandigarh ITA No. 269 of 2014 business, an appraisal of the value of the contract, prevailing economic conditions vis-a-vis the assessee& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the KANCHAN assessee had not had a fair hearing. The estimate of 2014.12.11 15:06 I attest to the accuracy and authenticity of this document Chandigarh ITA No. 269 of 2014 the gross rate of profit on sales, both by the ITO and the Tribunal, seems to be based on surmises, suspicions and conjectures. It is somewhat surprising that the Tribunal took from the representative of the Department a statement of gross profit rates of other cotton mills without showing that statement to the assessee and without giving him an opportunity to show that statement had no relevancy whatsoever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stimating the profit at 5% of the turnover. 17. The main claim of the learned DR is that the facts and circumstances of the case of Amar Agrawal (supra) are identical with the present case. However, we may point out that from a careful and vigilant reading of the order of the ITAT in the case of Amar Agrawal (supra), we observe that the history of previous years' results was not placed before the Tribunal and thus the same could not be considered by the Tribunal while upholding 5% of NP rate. In the present case we cannot ignore that there are huge job work receipts during the assessment years 2009-10 to 2011-12 which was reduced to 0% in the assessment year 2013-14 and the impact of such receipt on the GP ratio cannot be ignored ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration of the entire facts and circumstances such as average of net profit ratio of immediately and preceding two years i.e. 3.56% huge job work receipts in the earlier assessment years, which substantially reduced during the present assessment year 2011-12, increase in turnover of the assessee, in our considered view, the net profit ratio of 2.5% of total turnover would be just, appropriate and we direct the Assessing Officer to calculate the net profit accordingly. Consequently, ground no.3 of the assessee's appeal is partly allowed with the direction to the Assessing Officer as indicated above. 19. In the result, the appeal of the assessee stands partly allowed. 9. On due consideration of the aforesaid so also the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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