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of <h1>Tribunal adjusts profit rate in appeal, emphasizes case uniqueness, and clarifies non-precedential nature.</h1> <h3>Geeta Gupta Versus Income Tax Officer, Range-2 (3), Varanasi</h3> Geeta Gupta Versus Income Tax Officer, Range-2 (3), Varanasi - TMI Issues:1. Rejection of books of accounts under section 145(3) of the Income Tax Act.2. Estimation of income by adopting net profit rate of 8% on sales.3. Applicability of section 44AD.4. Reasonableness of net profit rate applied by the Assessing Officer.5. Lack of comparable cases for net profit rate determination.Analysis:1. The Assessing Officer rejected the books of accounts of the assessee under section 145(3) due to non-compliance despite audited financials being uploaded. The rejection led to estimating income by applying an 8% net profit rate on sales, resulting in an addition of Rs. 5,04,414 to turnover.2. The assessee contended that the rejection was unwarranted as books were audited and uploaded, arguing for a lower net profit rate. The CIT(A) upheld the addition based on the 8% rate, supported by a remand report.3. The Tribunal noted that section 44AD wasn't applicable due to audited accounts and turnover exceeding limits. The Assessing Officer's reliance on 8% net profit was deemed arbitrary without comparable trade data.4. The Assessing Officer and the assessee failed to provide a suitable basis for net profit estimation post-rejection of accounts. Considering the lack of historical data, a net profit rate of 5.5% was deemed reasonable for the first year of business.5. The Tribunal allowed the appeal partially, directing the Assessing Officer to recalculate income at 5.5% net profit. The judgment emphasized the unique circumstances of the case, clarifying its non-precedential nature for future assessments.This detailed analysis addresses the rejection of accounts, net profit estimation, section 44AD applicability, reasonableness of rates, and the directive for income recalculation, ensuring a comprehensive understanding of the judgment.
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