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TMI Blog2021 (10) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and must be guided by judicial consideration and by rule of justice, equity and good conscience. And also that there must be honest and fair estimate of the proper figure of assessment, for which consideration of local knowledge and repute, besides the previous returns an assessment of the assessee concerned, and all other matters must be taken into account for fair and proper estimate which of course, would fall in the category of guesswork, but a honest guesswork. In the assessee`s case under consideration, we note that assessee did not submit books of accounts. On examination of the profit and loss account of the assessee, the ld CIT(A) noted that total expenditure other than purchases mentioned in the profit and loss account, is a negligible amount of ₹ 2,71,150/- for business turnover of ₹ 2,39,05,01,881/-. Therefore, books of accounts of the assessee cannot be believed. The breakup of these expenses also shows that no expenses were recorded towards transportation. With negligible amount of transportation cost, how the assessee has achieved turnover of ₹ 2,39,05,01,881/-? Therefore, it simply implies that the transactions of purchase and sales are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven appeals of different assessees, a common and identical issue has been raised which is that learned CIT(Appeals) erred in upholding the addition of 1% of gross profit, against the gross profit declared by assessee in books of accounts, say 0.07%.In all five appeals of Revenue (Departmental Appeals), a common and identical issue has been raised which is that learned CIT(Appeals) erred in reducing the gross profit from 3% (gross profit, addition made by AO) to 1% of gross profit. Therefore, in nutshell the issue before us is that learned assessing officer made addition @ 3% of gross profit, on appeal, ld CIT(A) has reduced to 1%, therefore, the Revenue is in appeal before us and prayed the Bench that addition made by the assessing officer @ 3% of gross profit, should be sustained. The different assessees are in appeal before us and prayed the Bench that addition sustained by ld CIT(appeals) @ 1% of gross profit should be reduced further to the extent of gross profit declared in books of accounts of assessees. Gross profit declared by different assessees in their books of accounts vary between the range of 0.01% to 0.07%. 3. From the above, it is vivid that since, the issues inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Shri Amritlal Tiwari an employee of the assessee-company has furnished the details. The Assessing Officer observed that assessee-company is engaged in the business of trading of textile goods and investment. Perusal of the audited accounts, it was noticed by the AO that during the year, the assessee has declared gross profit at ₹ 2,87,164/- on the total turnover of ₹ 2,39,05,01,881/- which comes to 0.012% as against at ₹ 1,79,779/- on the total turnover of ₹ 3,20,67,120/- which comes to 0.561% shown in the immediately preceding year. Since the assessee repeatedly failed to produce the books of account as well as to furnish the details called for. Since no details in respect of payments made towards purchases and payments received towards sales were filed by assessee, therefore vide letter dated 20.02.2015 of AO, the assessee was asked to show cause as to why audited book result should not be rejected as per the provisions of section 145(3) of the Act and as to why the gross profit @ 3% on total sales of ₹ 2,39,05,01,881/- which comes to the amount at ₹ 7,17,15,056/- should not be estimated and difference amount of gross profit be added back to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook result is also not true and correct. It is not difficult to imagine or visualize the reasons for which the assessee has deliberately refrained from producing of books of account till the very last stage of the assessment proceedings. The reason being that the books of account were not good enough to pass the test of verification of the Assessing Officer. It needs to be appreciated that verification of the books of account is a primary and fundamental tool for finalizing the assessment. If the assessee chooses to deny the Assessing Officer the opportunity to do so by willful non-production of the books of accounts, there is no way the books results could be accepted. Hence the Assessing Officer was left with no other alternate but to reject the books of account u/s 145(3) of the Act and the assessment is proceeded with to the best judgment of the undersigned as provided u/s 144 of the Act. Therefore, the gross profit of the assessee was estimated by assessing officer @ 3% against the gross profit shown by the assessee at 0.012%. The gross profit shown by the assessee is ₹ 2,87,164/- whereas the estimated gross profit works out to ₹ 7,17,15,056/- and the difference am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts before the assessing officer, the possible reason could be that these books of accounts may be defective and contain errors, which the assessee wants to hide by not submitting these books of accounts before the assessing officer for his verification? We note that in scrutiny assessment under section 143(3) of the Act, the Assessing Officer has to examine books of accounts. We note that assessee also did not submit purchase invoices, sales invoices, expenses bills and vouchers before the Assessing Officer, therefore, assessing officer has rightly rejected the books of accounts of the assessee. The estimation of gross profit was made by the Assessing Officer and completed the assessment by adopting 3% gross profit on the total turnover during the year. We note that assessee submitted during the appellate stage that the facts of the assessee`s case are similar to the cases of M/s Hari Om Agro Product Pvt. Ltd., where the CIT(A) has upheld the estimation of gross profit at 0.5% against 3% estimated by the Assessing Officer. Similarly in the case of M/s Jalaram Cultivation Pvt Ltd., the CIT(A) has estimated the gross profit at 1% against the gross profit of 3% estimated by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not disputed about the veracity of the transactions. Therefore, ld CIT(A) was of the view that 1% to 2% on profits may be estimated depending upon the market situation in such cases. The ld CIT(A) also noted that all transactions in assessee`s case are with the associated concerns and no physical transfer of goods took place. In addition, expenses recorded are abnormally on the lower side and the turnover shown is large. Under these circumstances the profit cannot be estimated at a normal market rate. In fact, it calls for appropriate rate. The ld CIT (A) held that it is not relevant at this juncture as to what prompted the assessee to resort to book adjustment mechanism to show high purchase and sales but the essence is the recorded transactions must suffer the rigors of tax liability. After considering all the facts and circumstances of the case, the ld CIT(A) held that a fair and justifiable gross profit rate should be adopted and which should be 1% of the total turnover which will meet the ends of justice. Therefore, ld CIT(A) sustained the addition at the rate of 1%of the total turnover. 16. It is well settled that in a best judgment assessment there is always a certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same time act in a manner that might indicate scales are weighed against the assessee. We are wholly unable to subscribe to the view that unless those authorities exercise the power in a manner most beneficial to the revenue and subsequently most adverse to the assessee they should be deemed not have exercised it in a proper and judicial manner. We note that there is gross failure on the part of the assessee, as the assessee has deliberately refrained from producing the books of account till the very last stage of the assessment proceedings. The reason being that the books of account were not good enough to pass the test of verification of the Assessing Officer. It needs to be appreciated that verification of the books of account is a primary and fundamental tool for finalizing the assessment under section 143(3) of the Act. Therefore, in the light of the judgment of the Hon`ble Apex Court in the case of CIT Vs. Simon Carves Ltd (supra), and taking into account the assessee`s facts, as narrated above, we are of the view that estimation made by ld CIT(A) is based on sound reasoning. That being so, we decline to interfere with the order of Id. CIT(A) in sustaining the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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