Faiz Mohammad Vs ITO (ITAT Delhi)
Books Not Rejected- No Comparables- Adhoc Estimation Partly Deleted- ITAT Delhi Moderates NP Estimation: Rate Reduced to 4% in Trader’s Case
Assessee, engaged in trading business, had filed return declaring income of ₹1.99 lakh. AO, not accepting the returned results, estimated income by applying a net profit rate of 9.09% on the declared turnover & assessed total income at ₹20.89 lakh. CIT(A) gave partial relief by reducing the rate to 8% & confirmed the addition to the extent of ₹18.32 lakh. Assessee carried the matter further before Tribunal.
Before Tribunal, it was argued that AO had not rejected the books of account nor pointed out specific defects in the same. Without rejection of books, ad hoc application of a high net profit rate was arbitrary. It was further contended that no comparable cases had been brought on record by Department to justify application of 8% net profit rate.
Tribunal observed that neither Assessee could establish that the income declared was reasonable nor the Revenue could bring any proper comparable cases or cogent material to support the application of 8% rate. In such circumstances, estimation of profits had to be made on a fair & reasonable basis. Considering the overall facts, Tribunal held that application of 4% NP rate would meet the ends of justice.
