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TMI Blog2021 (10) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... r since the assessee has already declared 0.08%, the balance 0.44% can be added to the profit for this assessment year. We direct the Assessing Officer to estimate the income as per above direction considering the fact that the profit has to be assessed based on the actual and in case, it is forced to estimate, it has to be based on past declared profit, which the Revenue has accepted. Therefore, the grounds no.1 and 2 raised by the assessee are partly allowed. Penalty u/s 271(1)(c) - HELD THAT:- In the given case, we noticed that the AO himself estimated the income @ 8% and the same was sustained by the Ld. CIT(A). The assessee filed quantum appeal and in that we have directed the AO to restrict the profit earned by the assessee which was declared and accepted by the Revenue based on earlier assessment years, thus penalty levied by the AO estimating the income is not sustainable. Accordingly, we direct the AO to delete the penalty levied by the AO. X X X X Extracts X X X X X X X X Extracts X X X X ..... h the above order, the assessee preferred appeal before the first appellate authority. 4. The learned CIT(A) after considering the submissions of the assessee and rejected the submissions of the assessee, sustained the estimation of net profit @ 8% with the following observations:- "However, keeping in view of the submissions made by the assessee who was carrying on the business of trading in iron and steel under whom proprietorship of M/s., Vaibhav Enterprises and in 2004 his brother Mr. Hasmukh Shah introduced the assessee to Mr. Amarchand Sharma. As per the version of the assessee, Mr.Amarchand Sharma offered him to float a proprietary concern M/s. Harsh Corporation under his name for a monthly remuneration of ₹ 20,000/-. As per the assessee's own submissions, the entire FIS of the said concern was managed by Mr. Amarchand Sharma including issuing of bills, invoices, placing. orders, maiking payments, maintaining books of accounts, etc. As per assessee's submissions, Mr. Amarchand Sharma was the beneficiary of M/s. Harsh Corporation. The assessee used. to give blank signed cheques to Amarchand Sharma of the current bank account. The assessee used to sign documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Ltd for F.Y. 2011-12. The assessee could furnish copy of annual return filed for Alpha Steel Tubes Pvt Ltd for F.Y. 2009-10 and for Amar Tubes Pvt Ltd for F.Y. 2011-12, from which it could not be ascertainable that the assessee had transactions with both these entities. Neither assessee could produce Mr. Amarchand Sharma before the AG to prove the assessee's stand. The AG issued summons u/s. 131 of the I.T. Act at the request of the appellant to prove the stand taken by the assessee. However, at this juncture nothing more can be done as the assessee himself admitted that he had signed the documents relating to M/s. Harsh Corporation, the cheques, but whereas he could not produce his witness Mr. Amarchand Sharma. The appellant could not produce the signed audited financial statements as well. Neither he could furnish his copy of ITR and financial statements for A.Y. 2008-09 onwards. The return application filed by the assessee through e-filing portal were downloaded and it is noticed that the assessee has shown turnover of ₹ 11,71,94,614/- in the ITR for F.Y. 2010-11 and ₹ 16,20,33,452/- for F.Y. 11-12 which clearly contradicts the assessee's stand that he came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27,69,32,010/- which works out to ₹ 2,21,54,561/- is hereby confirmed, dismissing all his grounds of appeal." OUR SUBMISSION The Ld. AO added and CIT(A) confirmed ₹ 2,21,54,561/- on adhoc basis i.e. 8% net profit of Gross turnover of ₹ 27,69,32,010/- without considering all the material facts available on record. A comparative chart showing net profit of existing and previous assessment years is produced below for your perusal:- Sr. no. A.Y. Turnover (`) N.P. (`) N.P. (%) 1. 2010-11 11,74,91,614 7,25,326 0.62 2. 2011-12 16,20,33,452 6,78,487 0.42 3. 2012-13 27,69,32,010 2,29,142 0.08 From the above comparative profit chart of previous years, it can be noted that the average profit rate for previous assessment years 2010-11 and 2011-12 comes at 0.52% (0.62 + 0.42/ 2). Normally, to estimate the profit of any assessee, the previous years profit ratios are used and not the subsequent years profit ratio. Also it would be pertinent to mention here that the previous years Net Profit was accepted by the Ld. assessing officer. However, we note that Ld. assessing officer has made addition on basis of subsequent years profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer must make an estimate, and to that extent he must make a guess; but the estimate must be related to some evidence of material and it must be something more than mere suspicion. The assessing officer must make what he honestly believes to be a fair estimate of the proper figure of assessment and for this purpose he must take into consideration such materials as the assessing officer has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which the assessing officer thinks will assist him in arriving at a fair and proper estimate. [Emphasis Supplied] 7. Therefore, in the instant case, when the assessee did not produce the books of accounts, the assessing officer was not helpless. The assessee has been filing returns every year. In fact, he has produced five years returns. It is from that they took the turnover because the turnover offered by the assessee for the year 200910 was comparable with the past five years turnover as reflected in the returns filed. They acted on that. However, he refused to act on the profits shown in the said returns. No reasons are given for not relying on the said profits at the same tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o kindly accept the book result shown by assessee. HUMBLE PRAYER In view of the above facts, circumstances and the referred judicial pronouncements, the appellant humbly requests your goodself to consider the above submission and extend a sympathetic consideration." 7. The learned Departmental Representative relied upon the order passed by the authorities below. 8. Considered the rival submissions and perused the material on record. We notice that the assessee has two line of business. The Assessing Officer estimated the income due to non-availability of the information at the time of assessment. We notice that even the learned CIT(A) has sustained the addition. What is relevant is the actual income earned by the assessee and authorities are expected to determine the actual income earned by the assessee and tax the same. In case, it is not determinable, they have to bring on record the proper reasons and justify the determination of actual profit. They cannot resort to estimate without properly justifying the same. In the given case, the assessee has dealt with the trading only through banking channel. It is not proved anything against the assessee that it has involved any bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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