ITO Vs Rashid Laloo (ITAT Agra)
Separate NP Rates for Different Businesses Mandatory; 0.22% on Animal Trading and 8.7% on Scrap Upheld – ITAT Agra
The Agra Bench of the ITAT dismissed the Revenue’s appeal and upheld the order of the CIT(A) applying different net profit (NP) rates for two distinct businesses carried on by the assessee for AY 2014-15.
The assessee was engaged in livestock (buffalo) trading and iron scrap business. In reassessment proceedings, the Assessing Officer rejected the books and applied a uniform NP rate of 8% on the entire turnover of ₹33.39 crore, resulting in a huge estimated income of ₹2.68 crore, mainly on the ground of suppressed turnover and non-audit.
On appeal, the CIT(A) bifurcated the turnover and applied:
- 0.22% NP on animal sales turnover of ₹33.02 crore, and
- 8.7% NP on scrap sales turnover of ₹36.54 lakh,
relying on past results, comparable cases and earlier ITAT Agra decisions.
The Tribunal upheld this approach, noting that:
- Animal trading business normally yields very low margins (0.15%–0.23%), as seen from the assessee’s own past and subsequent years and comparable cases (chart on page 6),
- Scrap trading typically earns high margins around 8%–9%,
- The AO had pointed out no specific defects in the books, and
- Applying the same NP rate to two entirely different businesses was arbitrary and without any intelligible basis.
Holding that estimation must be based on comparable cases and assessee’s own history, the ITAT found no infirmity in the CIT(A)’s order and dismissed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT AGRA
