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TMI Blog2018 (8) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to his quoted recording also. Thus, in our considered view, the Assessing Officer was not correct in holding that the assessment was made u/s.144 of the Act and consequently in disallowing deduction for partner’s interest and remuneration. We, therefore, delete the said disallowance and allow this ground of appeal of the assessee. Rejections of books of accounts u/s 145 - customers from whom advances have been received did not confirm the balances at year-end, rather he could have added those advances only instead of rejecting the books of accounts - Held that:- From the perusal of net profit shown and accepted by the department in the preceding five assessment years, we find that the highest net profit shown was 0.25%. It is an established position of law that after rejection of book results of the assessee, the Assessing Officer cannot make a wild guess but has to estimate the income of the assessee on the basis of past accepted results. We find that in assessment year 2007-08, the assessee had shown the highest net profit at 0.25%. Therefore, we modify the order of the CIT(A) and direct the Assessing Officer to compute the income of the assessee for the year under consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ium rewards as extracted from tally package have been submitted during the assessment proceedings which are derivatives of cash book that to when books of accounts have not been rejected. 3. At the time of hearing, no arguments were advanced by ld A.R. of the assessee. Therefore, this ground of appeal is dismissed for want of prosecution. 4. Ground No.2 of appeal reads as under: That, CIT(A) erred in law in confirming the additions of ₹ 73,09,872/- and ₹ 4,38,350/-under suppressed sale and payments to partners respectively by not discussing the submissions made along with legal citations, thereby making biased, unreasoned and illegal order. 5. The Assessing Officer observed that the sales figure shown in profit and loss account vis- -vis VAT return are as under: Item As per VAT return As per income tax return Difference Purchase (Rs.) 41,70,23,934 41,41,36,492 28,87,442 Sale (Rs.) 43,14,30,522 42,41,20,650 73,09,872 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration is ₹ 43,14,30,522/- whereas the sale as per audited accounts of the assessee is ₹ 42,41,20,650/-. Thus, he inferred that the assessee has suppressed sales of ₹ 73,09,872/- in its return of income. Therefore, the Assessing Officer added the entire ₹ 73,09,872/- to the income of the assessee. 11. On appeal, the CIT(A) confirmed the action of the Assessing Officer. 12. Before us, ld A.R. of the assessee submitted that there was mistake in the VAT return filed by the assessee but could not point out the actual nature of the mistake. In absence of details of the mistake, the said argument cannot be accepted. However, we find force in the arguments of ld A.R. of the assessee that the entire sale proceeds cannot be treated as income of the assessee and only income element imbedded in the sale can be brought to tax. Our above view finds support from the decision of this Bench of the Tribunal in the case of Suresh Kumar Sahu vs ITO (ITA No.44/CTK/2016 for A.Y. 2010-2011) order dated 28.10.2016, which was passed following the decision in the case of R.R. Carrying Corporation vs ACIT, (2009) 126 TTJ 240(Cuttack). 13. From the audited accounts f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of ₹ 3,36,350/- and remuneration of ₹ 1,02,000/- paid to partners were in accordance with the terms of the deed of partnership and was within the permissible limit prescribed u/s.40(b) of the Act. 22. We find from the impugned order of assessment that the assessee has complied with the notice issued u/s.142(1) of the Act. The Assessing Officer himself has recorded in the assessment order as under: In response to various notices issued u/s. 143(2) and 142(1) of the Act, Sri J.K. Mishra, FCA and AR and Sri Sarbeswar Palai, FCA . AR of the assessee appeared before the ITO, Ward- 5(2), Bhubaneswar and before the undersigned from time to time. The case was discussed with them. The ARs of the assessee have produced the details of statutory audit reports, ledger copies of purchase sale, reconciliation statements of UCO, HDFC ICICI bank accounts, ledger copies of business promotion expenses, general repair and maintenance, consultancy charges, boundary wall repaid, accounting charges, bank interest, travelling expenses, sundry creditors, sundry debtors, extra premium reward, sale of MS HSD and photocopies of EPF and ESI challans etc. 23. We find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnology and Management has confirmed that it has to receive a sum of ₹ 3,08,221/- as per their books of account. But in the list furnished by the assessee mentioning advance received from customers, it is seen that the assessee-firm was to pay a sum of ₹ 1,00,000/- to the above party. From the above, the Assessing Officer concluded that the assessee-firm does not maintain proper books of account in respect of its business activities. Therefore, the books of account claimed to have been maintained for the asst. year 2012-13 was rejected by invoking the provisions of section 145 of the income Tax Act, 1961. 29. From the audit report it was seen that the assessee-firm has declared net profit at 0.06% on the turnover. The net profit declared by the assessee appears to be very low in comparison to the other traders of similar line of business. Therefore, the net profit shown at 0.06% was not accepted and deem it proper to estimate the net profit of the assessee- firm at 1% of the total turnover. Accordingly, the net profit of the assessee-firm was computed at ₹ 37,01,524/- subject to allowance of interest and remuneration to the partners. Depreciation as claimed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts of the appellant u/s.145 of IT. Act, 1961 as the correct profit cannot be determined on the basis of books of accounts. I find that the assessing officer is well within his authority in rejecting the books of accounts of the appellant. However, I find that the percentage of the net profit taken by the assessing officer @1% of turnover is of higher side, after considering the earlier years percentage of net profit to turnover. In my considered view, the net profit percentage of 0.5% of total turnover will be more appropriate. Accordingly, the assessing officer is directed to determine net profit of the appellant @0.5% of the turnover. The grounds of appeal are partly allowed. 31. Before us, the only submission of ld A.R. is that in the preceding assessment years, the assessee has shown highest net profit of 0.25%, therefore, the order of the CIT(A) directing the Assessing Officer to compute the income of the assessee by applying the rate of 0.5% to the turnover is higher and same should be accordingly reduced to 0.25% of the turnover. 32. Ld D.R. supported the order of the CIT(A). 33. We have heard the rival submissions, perused the orders of lower authorities and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute the income of the assessee for the year under consideration by applying net profit rate of 0.25% and partly allow the ground of appeal of the assessee. 37. Ground No.4 of appeal read as under: That, learned CIT(A) erred on facts and in law in confirming disallowance of ESI contribution of ₹ 6,976/- and EPF contribution of ₹ 47,278/- since the amounts are deposited before due date of filing the return of income. 38. The facts of the case are that the Assessing Officer found that the assessee has not deposited an amount of ₹ 6976/- being employee s contribution to ESI and ₹ 47,278/- being employee s contribution to EFP within the due date prescribed under the respective Act and, therefore, he made addition to the income of the assessee. 39. On appeal, the CIT(A) confirmed the action of the Assessing Officer following the decision of Hon ble Gujarat High Court in the case of Gujarat State Road Transport Corporation, 366 ITR 170(Guj). 40. Before us, ld A.R. submitted that as the employee s contribution is deposited before the due date of filing return of income u/s.139(1), therefore, same deserves to be allowed. 41. Ld D.R. supported t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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