Case Law Details
Poonam Developers Vs ACIT (ITAT Surat)
The Assessing Officer further mentioned in para no. 5.1 that there is no dispute with regard to the fact of receipt of ‘on-money’ from sale of units. This clearly shows that amount of Rs.2,57,76,000/- is business receipts, and since these are business receipts therefore these receipts are taxable as per the profit declared by the assessee in audited books of accounts. These facts have been admitted by one of the partner of the assessee firm, Mr. Rajesh Ahir, who has categorically admitted and accepted in his statement during the course of survey proceedings that two columns against each of the party A and B, out of which column B represents cash i.e ‘on-money’ and column A represent money received through cheques. The Assessing Officer mentioned these details on page no. 4,5 & 7 of the assessment order. Hence it is proved by the facts stated by the assessing officer in the assessment order that additions of total gross receipts have been made and not the profit amount. However, on appeal by assessee, ld CIT(A) restricted the addition to 20% of gross receipts, assuming profit element @ 20%.
We note that 20% net profit is very higher side as compared to net profit rate of assessee which ranges between 4% to 6%. The ld CIT(A) has to bring on record some material to justify the rate of profit estimated by him and the basis of such estimate. This has been so held by the Hon’ble Calcutta High Court in the case of Ranicherra Tea Co. Ltd., 207 ITR 979. The ld CIT(A) has conterminous power, he can do what the assessing officer can do. The assessing officer cannot make a pure guess as has been held in the case of Dhakeshwari Cotton Mills reported in 26 ITR page 775. Moreover, he has determined the gross profit when for the purpose of computation of total income it is not the gross profit but net Income which has to be added to the total income. The assessees own records are one of the factors which has to be considered and kept in mind while estimating the profit as has been held in the case of Delta Engineering Co. reported in 186 ITR 383. Similar view have been taken in the case of Action Electricals (Delhi) reported in 258 ITR 188. The AI1ahabad High Court in the case of Shyam Bidi Works (Appeal No. 64 of 2005 vide judgement dated 18th July 2014) has approved the action of the authorities wherein the rate of profit accepted in earlier years was adopted. Further it is the net profit and net income which has to be added and not the gross profit since indirect expenses are also incurred in the business.
Therefore, net profit is taxable income. Hence, considering the facts and circumstances of the case, we direct the assessing officer to compute the net profit @ 8% of the gross receipts. Since we have adjudicated the issue involved in assessee`s case, taking into account, the peculiar facts and circumstances, as narrated above, therefore, it is made clear that instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year.
FULL TEXT OF THE ORDER OF ITAT SURAT
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