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TMI Blog2022 (3) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... h respect to the same was offered by the assessee in previous year which the A.O. noted that the fact on record. Therefore considering the exceptional item of bad debts written off and the submissions of the assessee, he held a net profit rate of 1% of gross sales to be reasonable and justified. D.R. has been unable to controvert any of the facts found by the ld. CIT(A) as above vis- -vis the net profits returned by the assessee in its line of business as also the claim of bad debts written off. Moreover he was unable to justify 25% net profit rate, in the backdrop of the aforesaid facts. We find the estimation of net profit by the Ld. CIT(A) @ 1% of the gross turnover to be justified and reasonable and see no reason to interfere in the same. We therefore uphold the order of the Ld. CIT(A) estimating the income of the assessee by applying the net profit rate of 1% to be gross turnover of the assessee. - Decided against revenue. - ITA No. 2039/Ahd/2018 & C.O. No. 38/Ahd/2020 (Assessment Year 2015-16) - - - Dated:- 23-2-2022 - Ms. Annapurna Gupta, Accountant Member And Ms. Madhumita Roy, Judicial Member Appellant by: Shri Rameshkumar L. Sadhu, Sr. D.R. Respondent by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of supporting evidences as well as ledger account and primary books, the book result cannot be considered as true and fair picture of state of affairs of business of the assessee contrary to the provision of section 145(1) of the Act. The book result is rejected and the total income of the assessee is determined in the succeeding paras in the manner provided u/s 144 of the Act. Therefore, by borrowing the ratio and philosophy of judgment of Hon'ble Gujarat High Court in the case of M/s Vijay Proteins Ltd.[2015] 58 taxmann.com 44 (Gujarat), the income of the assessee is considered @ 25% of gross receipt for the purpose of this assessment. In short, income from business is computed at ₹ 2,60,22,854/- ( 25% of Gross receipts of ₹ 10,40,91,416/-). 4. The assessee carried the matter in appeal before the Ld. CIT(A) who upheld the action of the AO in framing exparte assessment u/s. 144 of the Act and also the rejection of the book results. But at the same time, he held 1% of the gross turnover to be reasonable and justifiable net profit rate in the facts and circumstances of case and accordingly directed the net profit to be estimated at ₹ 10,40,914/- as agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of the details furnished at the time of assessment proceedings as well as appellate proceedings, I find that appellant has furnished mainly copy of account of various parties and expenses with some sample evidences. The business of the appellant is claimed to be whole sale trading in packaging material such as paper, paper board, woods etc. On perusal of the details of opening and closing inventory as well as purchases and remand report of the AO on this account, it is noticed that the appellant has claimed cost of goods sold at ₹ 14,33,89,891/- as against sales of ₹ 10,36,91,641/-. This has resulted into loss of ₹ 3,96,98,250/-. In order to justify this loss, the Ld. AR has referred to the point No.26 of Notes to Account wherein it has been mentioned that the loss of inventory was resulted on account of damage due to water logging of the paper, paper products and woods sold to paper manufacturing industry. However, no evidence of damaged inventory has been furnished such as claim made to the insurance company etc. No quantitative tally and inventory of items damaged in the water logging has also been furnished. Under these circumstances, loss of inventory to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove are duly verifiable from the Tax Audit Report placed on record and the AO has not brought anything on record to dispute the above factual position in his remand report also. In the rejoinder to remand report, after referring to the 3 years gross profit and net profit rate, the Ld. AR has also submitted that in the wholesale trading business of white paper and craft paper used for packaging, the net profit varies from 1% to 3% and gross profit varies from 5% to 7%. In this background, the Ld. AR has also requested for estimation of net profit at 1% of the gross receipts. Before estimation of net profit, it is worthwhile to mention that during the year under consideration, the appellant has claimed bad debts written off to the tune of Rs.l,85,52,149/- in the P L Account which had further reduced the net profit. As is evident from the record, the appellant has returned income (-) ₹ 6,09,42,907/-. In respect of the bad debts claimed, the AO has stated in his remand report that the bad debts written off to the extent of ₹ 1,19,95,434/- may be allowed subject to the condition that the income to that extent has been offered by the appellant in any of the previous years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to the facts of the present case. Even otherwise, we find that the Ld. CIT(A) has at length considered the facts of the case and arrived at a reasonable estimate, considering the past history of the assessee and the fact of huge bad debts having been written off in the impugned year. The Ld. CIT(A) has noted that the assessee has at an average returned profit of 0.03% in the preceding two years which is verifiable from the Tax Audit Report placed on record and which was not disputed by the A.O. in remand proceedings. The Ld. CIT(A) has also taken note of the submissions of the counsel of the assessee before him that in the line of business in which the assessee indulged in the wholesale trading business of white paper and craft paper used for packaging, the net profit varies from 1% to 3%. The Ld. CIT(A) also took note of the fact that in the impugned year, the assessee had claimed bad debts written off to the tune of ₹ 1,85,52,149/- which further reduced its net profit. He noted that the A.O. had accepted the allowability of this claim to the extent of ₹ 1,19,95,434/- subject to the condition that the income with respect to the same was offered by the assessee in p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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