ITAT Adjusts Profit Rate, Lowers to 6% for Assessments, Considering Appellant's Historical Rates

The ITAT found the 12% profit rate excessive, directing the Assessing Officer to use a net profit rate of 6% for both assessment years. The appellant's historical profit rates were considered, leading to the partial allowance of the appeals and modification of the lower authorities' orders.

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Issues:
- Rejection of books of account under section 145(3) of the Income Tax Act
- Application of net profit rate of 12% leading to addition to the returned income

Analysis:
1. Rejection of Books of Account under Section 145(3):
- The appellant, a civil contractor, challenged the rejection of books of account under section 145(3) of the Income Tax Act for assessment years 2009-10 and 2010-11.
- The Assessing Officer found the books of account incomplete and unreliable, especially regarding material purchases and labor expenses.
- The rejection was based on the inability to verify material purchases due to the absence of a stock register.
- The Assessing Officer applied a net profit rate of 12% citing a judgment from the Hon'ble High Court in a similar case.

2. Application of Net Profit Rate of 12% and Addition to Income:
- The Assessing Officer applied a net profit rate of 12% in both assessment years, leading to additions to the returned income.
- The ld. CIT(Appeals) confirmed the rejection of books of account and the addition based on the profit rate.
- The appellant argued that the 12% profit rate was excessive, citing historical profit rates accepted in previous assessment years.
- The appellant presented evidence of lower profit rates accepted in earlier assessments, ranging from 1.08% to 6%.
- The ITAT considered the appellant's history and directed the Assessing Officer to apply a net profit rate of 6% instead of 12% for both assessment years.

3. Judicial Decision and Outcome:
- The ITAT found the 12% profit rate excessive and modified the orders of the authorities below.
- Relying on the appellant's historical profit rates, the ITAT directed the Assessing Officer to compute income using a net profit rate of 6% for both assessment years.
- As a result, both appeals by the assessee were partly allowed, and the orders were pronounced in the Open Court.

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