2023 (10) TMI 365 - AT - Income Tax

Tribunal adjusts net profit estimate, deletes addition; interest income accounted for in appeal decision.

M/s. Dulichand Kundanmal Versus ACIT, Circle-2 (2), Jalpaiguri

M/s. Dulichand Kundanmal Versus ACIT, Circle-2 (2), Jalpaiguri - TMI Issues involved:The appeal against the order dated 20.12.2022 passed by the ld. Commissioner of Income-tax Appeals, NFAC, Delhi raised multiple grounds, including the assessment order being bad in law, ex-parte decision by the Ld. CIT (A), failure to decide issues ground-wise, arbitrary net profit rate determination, and addition of interest income without proper reasoning.Assessment Order and Appeal:The assessee declared a net profit of Rs. 10,68,769/- against a turnover of Rs. 21,67,61,571/- for the assessment year 2014-15. The assessing officer framed an assessment order by making an addition of Rs. 1,73,40,926/- from the business, calculated at 8% of the total turnover. The appeal before the ld. CIT(A) was dismissed, leading to further appeal before the Tribunal.Core Issue - Net Profit Determination:The core issue in the appeal centered around the determination of net profit at 8% of the net turnover without rejecting the books of accounts. The assessee contended that the addition made by the AO was unsustainable as the books of account were not rejected, citing previous years' net profit rates of 0.22% to 0.19%. The Tribunal noted the regular audit of the accounts and decided to adjudicate the issue.Tribunal Decision - Net Profit Estimation:The Tribunal observed that the net profit rate declared for the year under consideration was 0.49%, higher than the preceding years. Considering the audited financial statements of the past two years, a net profit rate of 0.50% was estimated, resulting in a net profit of Rs. 10,83,808/-. Consequently, the remaining addition was deleted, partially allowing grounds no. 6 & 7.Interest Income Addition:The Tribunal noted that the disclosed interest income of Rs. 1,55,791/- was already considered in the net profit rate calculation. With the revised net profit rate of 0.50%, the interest income was accounted for, leading to the allowance of ground no. 8 in the assessee's appeal.Conclusion:The Tribunal partly allowed the appeal of the assessee, modifying the net profit estimation and addressing the addition of interest income. The remaining grounds of appeal were deemed general and consequential, not requiring adjudication.