The Income Tax Appellate Tribunal ( ITAT ) in Delhi held that, in earlier assessment years as well as in subsequent assessment years, a particular net profit rate has been applied, which can be applied by the Revenue. Application of net profit rate of 12% by the authorities is excessive and unreasonable.
Brief facts of the case are that return declaring income was filed by the assessee. Assessee derives income from contract work. During the course of assessment proceedings, the A.O. asked the assessee to produce complete books of accounts along with details/documents as per questionnaire issued by him, and also asked to furnish evidence with regard to cash deposits in a savings bank account. The assessee failed to furnish the requisite details or produce books of accounts. The AO accordingly estimated the income of the assessee by applying net profit rate of 12%.
The assessee challenged all the additions before the Ld. CIT(A) and also filed an application for admission of additional evidence under Rule 46A of I.T. Rules. The assessee relied upon judgments in the case of Sudershan Kumar Shekhar vs., ACIT in ITA.No.101, Telelinks vs., CIT, Bathinda in ITA.No.269 of 2014, CIT vs., Amarjit Singh Bajwa [2013] 84 CCH 198 (P & H) and said that documents could not be submitted because his only son was suffering from Cancer. The flat rate of 7% may be applied to the contract work. Assessee also submitted history of the assessee to show that in preceding A.Y. 2010-2011 assessee has shown net profit of 2.93% and in assessment year under appeal, assessee has shown net profit of 3.014% and in subsequent A.Y. 2012-2013 assessee has shown net profit rate of 8.134%, therefore, application of G.P. rate of 12% is excessive in nature. It is further submitted that addition may be added to the gross turnover as same was part of total receipts, therefore, separate addition may not be maintained.
The ITAT bench comprising of Accountant Member O.P. Kant and Judicial Member Bhavnesh Saini held that the A.O. has recorded on several pages of the assessment order in non-compliance by the assessee and about the production of the books of account and other details. Some part details were submitted which were not sufficient to explain any of the issues. The A.O, therefore, in the absence of any explanation from the side of the assessee, made all the additions. The A.O. while estimating the income of the assessee, has applied the net profit rate of 12%. Application of net profit rate of 12% by the authorities is excessive and unreasonable. Therefore, considering the history of the assessee, held that “if an earlier assessment years as well as in subsequent assessment years, a particular net profit rate has been applied, it is a prudent rate of income, which can be applied by the Revenue”, And directed the A.O. to apply net profit rate of 8% against the total turnover and made addition accordingly. This ground of appeal of the assessee is allowed.
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