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TMI Blog2022 (9) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... ess in the name and style of M/s. Sundaram Agrovet as a trader in chicks and ready birds. Assessee also has breeding centre for growing chicks and deals in poultry products. Assessee filed his return of income on 17.10.2014 reporting a total income of Rs.12,60,000/-. In the course of assessment proceedings, Ld. AO noted that during the year, turnover of the assessee had increased from Rs.9.43 Cr. in the preceding year to Rs.26.23 Cr. in the current year whereas his net profit has reduced from 0.21% to 0.18%, which according to him, was unrealistic and unimaginative as the business has increased almost three times whereas the net profit has reduced. Ld. AO also noted that assessee has debited huge expenses under the head "Staff salary & Bonus" amounting to Rs.2,35,78,857/- which in the preceding year was at Rs.10,42,331/-. Assessee was show caused to give explanation for the same. Ld. AO also noted that in respect of certain expenses, assessee has not done TDS for which also explanations were called for. 4.1 Assessee made his detailed submission and stated that hatched chicks from eggs were handed over to various farmers for breeding and who in turn delivered to the assessee the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly claims to have not been offered real opportunity to explain his case on the abnormal figure under Salary & Wages. The Assessing Officer's action amounts to acting behind the back of the assessee. This act is violation of natural justice. This high pitched assessment is not based on any material. The assessment has to be based on material and evidences, even best judgement assessment gives no licence to add on the whims of the AO. The Assessing Officer's action cannot be upheld. (v) The appellant during the appellate stage produced detailed submission and paper book substantiating his claim. The appellant claimed that Labour charges payment, Hatching Charges payment and Reimbursement of feeding expenses paid to local villagers were wrongly clubbed with the Head Staff Salary and Bonus." 6. From the perusal of above observations and findings noted by the Ld. CIT(A), we find that on the one hand, Ld. CIT(A) states that assessee has consistently showed more or less same percentage of gross and net profit and on the other hand, he has resorted to estimate the income of the assessee by taking gross profit rate of 10.5% as against 9.8% already shown by the assessee in his au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit ratio of 10.50% without any basis and also without bringing any comparative material on record. Ld. Counsel submitted that the comparative gross profit and net profit chart of the last two preceding assessment years as well as the re-casted gross profit and net profit were produced before the Ld. CIT(A) which evidently demonstrates that the book profits @ 9.8% in the current year are justified. The comparative gross profit and net profit chart for the last two preceding AYs referred by the Ld. Counsel are reproduced as under: Assessment Year 2012-13 2013-14 2014-15 Turnover 3,78,28,956/- 9,43,37,851/- 26,23,19,627/- Gross Profit 36,13,553/- 1,03,85,137/- 3,13,58,120/- Net Profit 4,19,097/- 1,95,084/- 4,70,000/- G.P (%) 9.55 11.00 11.95 N. P (%) 1.10 0.21 0.18 7.2. Assessee further produced the re-casted G.P and N.P chart for the three assessment years considering the above expenses which is as under: Assessment Year 2012-13 2013-14 2014-15 Turnover 3,78,28,956/- 9,43,37,851/- 26,23,19,627/- Gross Profit 36,13,553/- 1,03,85,137/- 2,56,77,120/- Net Profit 4,19,097/- 1,95,084/- 4,70,000/- G.P (%) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o note that Ld. AO has not rejected the books of account. It is the Ld. CIT(A) who rejected the books of account without pointing out specific defects therein. 10.1 While rejecting the books of account, conditions stipulated u/s. 145(3) had not been referred to by the Ld. CIT(A). The basis for disturbing the gross profit adopted by the ld. CIT(A) is in reference to the decision of Co-ordinate Bench of ITAT, Bangalore (supra) wherefrom he himself had noted that the G.P. ratio ranges between 9& and 12% in the business of hatchery and poultry. We note that Ld. CIT(A) without giving any finding that account books are unreliable, incorrect or incomplete, has rejected the audited books of account. We also note that the books of account of the assessee have not been rejected in compliance to the provisions of section 145(3) and assessment having not been framed u/s. 144 of the Act. Action of Ld. CIT(A), in such a situation, is erroneous in resorting to an estimation of income and the exercise undertaken by him of adopting the G. P. rate of 10.5% without any basis, is not sustainable. 10.2 For our finding, we find force from the decision of Hon'ble High Court of Karnataka in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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