Pr. Commissioner Of Income Tax-31 Mumbai v. Chandan Jangid

DDR IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONINCOME TAX APPEAL NO.1359 OF 2017 Pr. Commissioner of Income Tax-31 Mumbai ..Appellant vs. Chandan Jangid Prop. Welldone Concept ..Respondent …........ Mr. Sham V. Walve a/w. Mr. Pritish Chatterjee for appellant. …........ CORAM : NITIN JAMDAR &M.S.KARNIK, JJ. DATE : 6 JANUARY 2020 P.C.:- Heard learned counsel for the Appellant. 2.The present Appeal relates to Assessment Year 2010-11. 3.By this appeal filed under Section 260A of the Income TaxAct, 1961, the Appellant challenges the order dated 28/10/2016passed by Income Tax Appellate Tribunal (‘Tribunal’ for short). 4.The Appellant has framed the following questions of law as asubstantial questions of law :- “A.Whether on the facts and circumstances of the caseand in law, the Hon’ble Income Tax Appellate Tribunal(ITAT) has erred in restoring the matter to the file of the Assessing Officer (AO) to examine the correct net profitratio of the assessee as assessed in the past and in thesubsequent years, ignoring the fact that in the event of boguspurchases being found, the past history of the assessee has norelevance ? B.Whether on the facts and circumstances of the caseand in law, the Hon’ble Income Tax Appellate Tribunal(ITAT) has erred in restoring the matter to the file of theAssessing Officer (AO), in view of the decision of theSupreme Court in the case of N.K. Proteins Ltd., whereinthe Apex Court has confirmed the High Court’s decisionupholding the 100% addition made by the AO on accountof bogus purchases ? ” 5.The Respondent – Assessee is engaged in the business ofInterior Designing & Contractor. He had shown his sales/receiptsat Rs.10,16,97,391/-, work-in-progress at Rs.1,74,86,972/-,purchases aggregating to Rs.9.17,19,684/-. The net profit ratio wasdeclared at 11.48%. Accordingly, total income of Rs.1,18,36,390/-was shown in the return of income for the Assessment Year 2010-11. As the Respondent – Assessee had shown his total income atRs.1,18,36,390/-, the Assessing Officer issued notice to theRespondent – Assessee in respect of the details of the parties fromwhom the Respondent – Assessee had made purchases andreceived advances. After details were so furnished, the AssessingOfficer issued notice to the parties and after conducting theinquiry and perusal of material on record, the Assessing Officer rejected the assessee’s book results and estimated the net profitratio at 20% and added further income of Rs.86,64,618. 6.In the Appeal, remand report was submitted by theAssessing Officer to the Commissioner of Income Tax (Appeals).After order passed by the Commissioner of Income Tax (Appeals),the Appeal of the Respondent – Assessee was considered by theTribunal. The Tribunal observed as under :- rejected the assessee’s book results and estimated the net profitratio at 20% and added further income of Rs.86,64,618. 6.In the Appeal, remand report was submitted by theAssessing Officer to the Commissioner of Income Tax (Appeals).After order passed by the Commissioner of Income Tax (Appeals),the Appeal of the Respondent – Assessee was considered by theTribunal. The Tribunal observed as under :- “This is evident from the remand report of the AssessingOfficer as well as the counter submissions made by theassessee before the CIT(A). However, the CIT(A) hasrejected all those submissions and evidences and proceededto call for the stock register, delivery challans of goods,work orders, etc. After calling for the records, he observedthat firstly, work orders are not fully verifiable ; secondly,stock register and delivery challans were either notproduced or assessee could not correlate the purchases withthe sales ; lastly, the material purchased are not backed bydelivery challans on the sites. On these reasons, he affirmedrejection of books of accounts. However, he reiterated theAssessing Officer’s estimation of 20%, again withoutbringing any material on record to support why such a highnet profit rate should be applied. If it has been found thatassessee’s books of accounts are not properly maintained orthe correctness or completeness of the accounts have notbeen found to be satisfactory, then it is incumbent upon theAssessing Officer to make the best judgment assessmentunder section 144 after taking into account the relevantmaterial gathered by him during the course of theassessment proceedings. The best judgment assessment u/s.144 does not entail that the assessment has to be made on a high pitch income by resorting to wild estimate withoutlooking into the records of the assessee or brining anymaterial or comparable case to justify such a highestimation of profit. In the matter of estimating the profitrate for the purpose of best judgment assessment, theassessee’s past or subsequent history is to be looked into orsome comparable case engaged in similar line of business orhaving similar attributes has to be identified and broughton record and after carrying out some comparable analysis areasonable net profit rate/GP rate can be applied. Here inthis case, no basis has been given for estimating the netprofit rate of 20% albeit from the assesseee’s own records, itis seen that the net profit rate from the Assessment Year2008-09 to 2012-13 have been ranging between 9.30% to11.40%. The details of turnover as well as net profit ratehave been given before us in the following manner :- Hence, the assessee’s net profit ratio has been rangingapproximately at 11.5% then Department has to be given aproper justification as to why net profit rate of 20% shouldbe applied.” The Tribunal found that the Assessing Officer, while estimatingthe net profit at 20% had proceeded on the basis of stock register,delivery challans of goods, work orders, and there was noapplication of mind for deriving at the figure of 20%. The 43. itxa 1359-17.doc Tribunal, therefore, found it fit to remand the proceeding to theAssessing Officer. We have not been shown as to how the findingregarding non application of mind by the Assessing Officer isincorrect. The Tribunal has rightly emphasised on the need toscrutinise the relevant aspects while working out the estimation,and not to arrive at the same in a haphazard manner. 7.The Tribunal, while disposing of the appeal has not givenconclusive findings but has made certain observations to emphasisthe need for remand. The Tribunal has made these observationsonly to emphasis that there are various aspects for the AssessingOfficer could have taken into consideration. 8.In these circumstances, the questions of law as framed donot give any rise to any substantial question of law. 9.The Appeal is accordingly dismissed. (M.S.KARNIK, J.) (NITIN JAMDAR, J.) Digitallysigned byDikshaDikshaRaneRaneDate:2020.01.1517:00:44+0530