Tribunal affirms 1% net profit estimation, dismisses Revenue's appeal, and disposes of assessee's cross-objection.

The Tribunal upheld the CIT(A)'s decision, affirming the estimation of net profit at 1% of the gross turnover as reasonable. The Tribunal dismissed the Revenue's appeal, finding no issues with the CIT(A)'s findings. The cross-objection by the assessee, which did not challenge the CIT(A)'s order, was disposed of accordingly.

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Issues Involved:
1. Legitimacy of ex-parte assessment under Section 144 of the Income Tax Act.
2. Rejection of the assessee's book results.
3. Appropriate rate for estimating net profit.
4. Allowability of bad debts written off.

Issue-wise Detailed Analysis:

1. Legitimacy of Ex-parte Assessment under Section 144 of the Income Tax Act:
The assessment was framed ex-parte under Section 144 of the Income Tax Act as the assessee failed to respond to various notices issued during the assessment proceedings. The Assessing Officer (AO) noted that the assessee did not comply with the show cause notice issued under Section 144, leading to the finalization of the assessment without the assessee's cooperation. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's action in framing the ex-parte assessment, noting the repeated non-compliance by the assessee.

2. Rejection of the Assessee's Book Results:
The AO rejected the book results of the assessee, which declared a loss of Rs. 6,18,78,990/-, due to the absence of supporting evidences, ledger accounts, and primary books. The AO estimated the total income at 25% of the gross receipt, resulting in an assessed income of Rs. 2,60,22,854/-. The CIT(A) confirmed the rejection of the book results, agreeing that the books of account were incorrect and incomplete, thus deserving rejection under Section 145(3).

3. Appropriate Rate for Estimating Net Profit:
The AO applied a net profit rate of 25% to the gross turnover, based on the decision of the Hon'ble Gujarat High Court in the case of M/s. Vijay Proteins Ltd. The CIT(A), however, found this rate to be unreasonable and reduced it to 1%, directing the net profit to be estimated at Rs. 10,40,914/-. The CIT(A) distinguished the case of M/s. Vijay Proteins Ltd., noting that it involved bogus purchases, whereas the present case did not. The CIT(A) considered the past history of the assessee, which showed an average net profit of 0.03% over the last two years, and the nature of the business, where net profit typically varies from 1% to 3%.

4. Allowability of Bad Debts Written Off:
The assessee claimed bad debts written off amounting to Rs. 1,85,52,149/-, which further reduced the net profit. The AO accepted the allowability of bad debts to the extent of Rs. 1,19,95,434/-, subject to the condition that the income was offered in previous years. The CIT(A) found that the conditions of Section 36(1)(vii) and 36(2) were satisfied, making these bad debts allowable as deductions.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, agreeing that the estimation of net profit at 1% of the gross turnover was reasonable and justified. The Tribunal found no infirmity in the CIT(A)'s findings and dismissed the Revenue's appeal. The cross-objection by the assessee, being merely supportive and not challenging the CIT(A)'s order, was disposed of accordingly. The order was pronounced in the open court on 23-02-2022.

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