2023 (1) TMI 1170 - AT - Income Tax

Tribunal adjusts net profit estimation, reducing assessed income for assessee in appeal

Sudipta Dutta Versus Assistant Commissioner of Income Tax, Circle-29, Kolkata

The Tribunal partially allowed the assessee's appeal by adjusting the net profit estimation from 5% to 2.5% of turnover for the assessment year. Despite ... Estimation of net profit @ 5% of the turnover - non-filing of books of account - HELD THAT:- Looking to the fact of the case referring to the financial data of preceding two years appearing in the audited financial statements and the assessee being unable to bring any other details on record; and considering the factual matrix as well as past trend of profit earned by the assessee and the fact that ld. AO has not pointed out any specific defect in the details filed by the assessee, we, therefore, in order to bring to an end to this litigation estimate the net profit @ 2.5% as against the net profit rate of 5% confirmed by the ld. CIT(Appeals). Appeal of the assessee is partly allowed. Issues:Estimation of net profit at 5% by the Assessing Officer, Acceptance of the estimation by the assessee, Appeal against the estimation of net profit, Comparison with past profit rates, Relief sought by the assessee.Estimation of Net Profit at 5%:The case involved an appeal by the assessee against the estimation of net profit at 5% of the turnover by the Assessing Officer. The Assessing Officer based this estimation on the letter dated 09.03.2015, where the assessee agreed to the proposed 5% estimation due to financial constraints. The assessee had declared a loss of Rs.21,39,561/-, and the turnover was Rs.7,57,16,480/-. The Assessing Officer did not find any specific defects in the details provided by the assessee but issued a show-cause notice for estimating the net profit at 5% due to the unavailability of the books of account. The Tribunal noted that the Assessing Officer did not refer to comparable cases or the past profit history of the assessee.Acceptance of Estimation by the Assessee:The Tribunal considered the financial data from the audited balance-sheets of the preceding two years, where the net profit rates were 1.16% for A.Y. 2009-10 and 1.11% for A.Y. 2010-11. Despite the inability of the assessee to provide additional details and the absence of specific defects in the filed information, the Tribunal decided to estimate the net profit at 2.5% instead of the 5% confirmed by the CIT(Appeals). This adjustment resulted in a net profit of Rs.18,92,912/- for A.Y. 2011-12, providing relief to the assessee of Rs.18,92,912/-.Appeal Against the Estimation of Net Profit:The assessee appealed before the Tribunal after failing to succeed with the CIT(Appeals), who upheld the 5% net profit estimation. The Tribunal considered the past profit rates of the assessee, the absence of specific defects in the provided details, and the financial constraints mentioned by the assessee in accepting the 5% estimation. Ultimately, the Tribunal decided to partially allow the appeal by estimating the net profit at 2.5% instead of 5%, providing significant relief to the assessee.Comparison with Past Profit Rates:The Tribunal analyzed the past profit rates of the assessee from audited financial statements for A.Y. 2009-10 and 2010-11, where the net profit rates were significantly lower than the 5% estimation made by the Assessing Officer. This comparison, along with the lack of specific defects in the details provided by the assessee, influenced the Tribunal's decision to adjust the net profit estimation to 2.5%, resulting in a substantial reduction in the assessed income for A.Y. 2011-12.Relief Sought by the Assessee:The assessee sought relief from the estimation of net profit at 5% due to suffering significant losses in the relevant year. The Tribunal considered the financial data, past profit rates, and the absence of specific defects in the details provided by the assessee while granting relief by adjusting the net profit estimation to 2.5%. This adjustment provided substantial relief to the assessee and partially allowed the appeal against the initial estimation made by the Assessing Officer.This detailed analysis of the judgment highlights the key issues involved, the arguments presented by the parties, and the Tribunal's decision regarding the estimation of net profit for the relevant assessment year.