9911796707
TMI Blog2023 (2) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... ining scale are declared on reduced turnover over the past and subsequent years which have been accepted by the Revenue and thus lend credence to the assessee's submission that its profitability has been effected due to reduced turnover without commensurate reduction in fixed costs. No justifiable basis has been stated by the ld. CIT(A) while estimating the net profit rate at the rate of 15% which is again arbitrary and no linkage with any material or past history of the assessee. No justifiable basis to disturb the declared results by the assessee even where the books of accounts have been rejected and the addition so made by estimating the net profit rate at the rate of 40% and sustenance thereof by the ld. CIT(A) at 15% is hereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has erred in confirming the action of Ld. AO wherein he had not allowed the deduction of depreciation, interest and other statutory/mandatory deductions from assessed estimated. 5. That on the law, facts and circumstances of the case, the Worthy CIT(A) was unjustified in confirming the action of the Ld. AO wherein he had completed the assessment in haste and without affording reasonable opportunity of being heard. 6. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same. 2. During the course of hearing the Ld. AR submitted that the assessee filed its return of income declaring loss of Rs. 37,61,584/- and alleging that books of account have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss in the year under consideration is substantial reduction in turnover but not the commensurate reduction in fixed expenses. The assessee is an immigration consultant which is a service industry. Within 2 years, i.e. from A.Y. 2011-12 to 2013-14, assessee's turnover reduced from Rs. 228.88 lacs to Rs. 28.27 lacs. The Ld. AO failed to appreciate these facts. It is an undisputed fact that declared turnover of the assessee has been accepted by Ld. AO as profitability rate of 40% has been applied by Ld. AO on this declared turnover only. When there is no dispute in turnover figure and assessee's expense are majorly fixed in nature, the estimation of profitability rate of 40% was extremely harsh and the addition deserves to be deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same deserves to be discarded. It was submitted that where assessee's own subsequent year's assessment order passed u/s. 143(3) exists, it deserves to be given preference over external comparable. Therefore, application of profitability rate of 40% by Ld. AO is extremely high and appropriate relief be granted to the assessee. 7. Per contra, the Ld. DR taken us through the findings of the Ld. AO which are contained at para 7 which read as under : 7. The assessee was asked to explain as to why not NP rate of 40% be applied in his case on rejection of books of accounts. The assessee has given a vague and unacceptable reply which is reproduced above. A similar entity by the name of M/s. International Education Guidance and Car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation in NP rate is from 4.10% to (-) 133.06% and the appellant has failed to produce books of accounts and bills and vouchers under the garb of occurrence of fire on the premises. AO was right in rejecting books of accounts. He has applied NP @ 40% on the basis of comparable. The appellant has failed to rebut the comparable either during assessment proceedings or during appellate proceedings except taking plea of turnover. Further, assessment of subsequent assessment year 2015-16 where appellant has declared Returned Income of Rs. 5,36,950/- cannot have bearing on the present case. Principle of res judicata is not applicable to the income tax proceedings. Every year is a separate year. Moreover, Ld. AR has not submitted further details re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant case, we find that the AO has not considered the past history of the assessee and has compared the results with an external comparable holding it to be in similar line of business as of the assessee. In our view, merely holding the comparable company in similar line of business is only the first step in undertaking a benchmarking analysis. The analysis also needs to consider various other factors and take into consideration functions, risks, and assets employed which apparently has not been undertaken in the instant case and the assessee has also not been confronted with the same. In view of the same, we find that comparing the results of the assessee with an external comparable is not justifiable in the instant case. As against ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
