Neutral Citation No: 2022/Dhc/003750 v. Principal Commissioner Of Income Tax

$~2 IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 332/2022& CM APPL. 40706/2022SH NARENDER KUMAR ANANDSH NARENDER KUMAR ANAND ..... AppellantThrough:Mr.S.Krishnan,Mr.AmandeepMehta & Mr. Devender Singh Pal,Advocates.Mehta & Mr. Devender Singh Pal,Advocates. versus PRINCIPAL COMMISSIONER OF INCOME TAX ..... Respondent Through:Mr.Zoheb Hossain, Sr.StandingCounsel with Mr. Vipul Agrawal &Mr.ParthSemwal,Jr.StandingCounsels.Counsel with Mr. Vipul Agrawal &Mr.ParthSemwal,Jr.StandingCounsels.%Date of Decision: 16[th]September, 2022 CORAM: HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORAJ U D G M E N T MANMEET PRITAM SINGH ARORA, J (ORAL): CM APPL. 40706/2022 Exemption allowed, subject to all just exceptions. Accordingly, present application stands disposed of.ITA 332/2022 1.The present Income Tax Appeal has been filed seeking a direction forsetting aside the order dated 1[st]October, 2021, passed by the Income TaxAppellate Tribunal (‘ITAT’) in ITA No. 7376/Del/2017 for the AssessmentYear (‘AY’) 2013-14. 2.The appellant is aggrieved by the order of the ITAT upholding thedecision of the Commissioner of Income Tax(Appeals) [‘CIT(A)’] and theAssessing Officer (‘AO’) rejecting the books of accounts of the Assessee and assessing the gross profit of the Assessee for the relevant assessmentyear at the rate of 2% of the gross sales. 3.The learned counsel for the appellant contends that the ITAT failed toappreciate that the AO had failed to take into account the component ofCentral Sales Tax (‘CST’) while determining the rate of the gross profit. Hestates that the payment of CST is duly reflected on the invoices and if thesaid CST is taken into account, the rate of gross profit at 2% is ex-facieerroneous. He states that the taxes form part of the cost of the goods soldand therefore, should have been considered while estimating the trademargin of the Assessee. He states that since, admittedly there was nocomparable case of a wholesale trader relied upon by the AO and the rate ofgross profit has been determined by the AO with reference to the trademargins of manufacturers, which has led to an erroneous determination. 4.He further states that the ITAT erred in upholding the AO’s orderrejecting the accounts of the Assessee when admittedly all purchases andsales transactions were carried out through banking channels. He states thatITAT is the final fact finding authority and the ITAT failed to appreciate theerror made by the AO in determination of the rate of gross profit which hasled to taxation of an amount which is manifold the returned income. 5.Mr. Vipul Agrawal, learned counsel for the Revenue is present onadvance notice. He states that, in this matter, there are concurrent findingsof fact by the appellate authorities, upholding the findings of the AO andtherefore, no interference is warranted in this appeal. He further states thatthe Assessee in this appeal is seeking re-appreciation of evidence which maynot be entertained by this Court. 5.Mr. Vipul Agrawal, learned counsel for the Revenue is present onadvance notice. He states that, in this matter, there are concurrent findingsof fact by the appellate authorities, upholding the findings of the AO andtherefore, no interference is warranted in this appeal. He further states thatthe Assessee in this appeal is seeking re-appreciation of evidence which maynot be entertained by this Court. 6.We have heard the learned counsel for the parties and perused thepaper book. The order records that the case was selected for scrutiny throughComputer Aided Scrutiny Selection (CASS) with reasons of low net profitfrom large gross receipts. On 7[th]September, 2013, the Assessee filed hisreturn declaring a total income of Rs. 6,27,480/- and in his balance sheetdisclosedpurchasesofRs.80,30,04,497/-,salesamountingtoRs.77,01,13,308/- and a gross profit of Rs. 9,88,679/- i.e., 0.13% of thepurchases. The AO noted that the total expenses were a meagre sum of Rs.3,57,159/-. The AO noted that the expenses claimed for making such hugesales and purchases were nominal. The AO during the course of theassessment proceedings issued notice to the sundry debtors of the Assessee.Notices were sent to twenty (20) sundry debtors and nineteen (19) of theparties did not respond and therefore, no confirmation was received by theAO from the sundry debtors. The only sundry debtor who did respond to theAO categorically denied any transaction with the Assessee and completelydisassociated itself from the transaction with the Assessee. In view of thesaid facts, the AO issued a notice to the Assessee to show cause why hisbooks of accounts should not be rejected as per the provisions of the Section145(3) of the Income Tax Act, 1961, (the ‘Act’). No reply was filed by theAssessee to the aforesaid notice. The AO, therefore, considered it proper toreject the books of accounts of the Assessee and proceeded to assess thegross profit for the relevant AY. The AO after perusing the invoices of salesand purchases filed before it by the Assessee, determined that the Assesseehad made gross profit in the range of 2.0% to 3.0% on various products. TheAO determined the gross profit of the Assessee at the lower rate of 2% ofthe gross sales. 7.The Assessee aggrieved by the assessment order passed by the AO,filed an appeal before the CIT(A), which after perusing the record,concurred with the findings of the AO and held that the sales of the Assesseecould not be verified in view of the non-confirmation from the sundrydebtors. The CIT(A) upheld the rate of gross profit determined by the AOand further observed that the Assessee himself had not furnished anycomparative information of the rate of gross profit earned by a comparablewholesaler. Aggrieved by the order of the CIT(A), an appeal was preferred by theAssessee before the ITAT. In the appeal filed before the ITAT as well, theITAT has concurred with the findings of the AO and the CIT(A) and upheldthe rate of gross profit at 2% on the gross sales declared by the Assessee.The ITAT rejected the submission of the Assessee for deduction of thestatutory taxes i.e., CST by holding that while estimating the gross profit, allexpenditure has been accounted for and this includes the expendituretowards taxes. 8.We do not find any perversity in the concurrent findings of theCIT(A) and ITAT. The ITAT is the final fact-finding authority, accordinglyno substantial questions of law arise for consideration in the present appealand accordingly, the same is dismissed. MANMEET PRITAM SINGH ARORA, J SEPTEMBER 16, 2022/msh MANMOHAN, J ITA 332/2022