2014 (9) TMI 57 - HC - Income Tax

Tribunal Reduces Net Profit Rate for Assessee, Upholds Decision in Tax Dispute

The Tribunal justified reducing the net profit rate to 5% for the assessee based on past history and nature of work, despite the A.O. estimating it at ... Net profits estimated @ 5% against 10% - Account books not furnished – Held that:- The Tribunal observed that the assessee has received the construction work from the government department and assessee has not done any private work during the assessment years under consideration - AO has made the addition on estimate basis – it was uphold by the CIT(A), but the Tribunal has again examined the books of account and estimated N.P. @ 5% on estimation basis - Relying upon The Commissioner Trade Tax, Lucknow Vs. M/s Herbochem Industries, Barabanki [2009 (8) TMI 1119 - ALLAHABAD HIGH COURT] - Thus, no substantial question of law arises for consideration – Decided against Revenue. Issues:1. Whether the Tribunal was justified in directing the A.O. to apply a net profit rate of 5% instead of 10% without the assessee producing account booksRs.2. Whether the Tribunal overlooked its own decision in a similar case while confirming the 10% net profit rateRs.3. Whether the Tribunal failed to consider evidence brought by the A.O. for enhancing gross receipts and net profit rateRs.Analysis:Issue 1: The A.O. rejected the account books under Section-145(3) and estimated the net profit rate at 10%, which was upheld by the first appellate authority. However, the Tribunal reduced the rate to 5% based on the assessee's past history and nature of work received from the government, not private sources.Issue 2: The Tribunal's decision to reduce the net profit rate to 5% was challenged by the department, citing a previous case where a 10% rate was confirmed. The Tribunal justified its decision based on the specific circumstances of the current case and the nature of the assessee's work.Issue 3: The A.O. made additions on an estimated basis, upheld by the C.I.T.(A), but the Tribunal re-evaluated and reduced the additions based on estimation. The Tribunal's decision was supported by legal precedents emphasizing that estimation is a question of fact.The judgment concluded that no substantial question of law arose from the Tribunal's order, and therefore, the decision was upheld in favor of the assessee. Additionally, penalty levied under Section-271(1)(c) was cancelled by the Tribunal due to the deletion of additions in the quantum appeals, leading to the dismissal of all appeals filed by the department.