BEFORE THE COMMISSIONER OF INCOME TAX (APPEAL)VARANASI

Re : Appeal No. of 2011-12 relating to A.Y. 2009-10

Ramesh ChandAppellant Prop. Akshat Silks Nayi Bazaar, Bhadohi

Vs.

Dy. Commissioner of IncoTax..Respondent Circle 3, Varanasi

Written Submission

In this connection, the appellant begs to state as under :-

1. That the assessee has small shop at Nai Baazar, Bhadohi and carry on the trading of tobacco, agarbatti, cigarette, soap, matches. The detail of purchases party wise and item wise from Shiv Distributor, Shivalika Enterprises, Shyam Gram Udyog, Keswani Agencies and Mahesh Traders are as under :

Name of the PartyItemOpening PurchaseTotalPayment Balance

Shiv DistributorTobacco293576293576293576

Shaksham SalesAgarbatti3429634296682027476

Shivalik EnterprisesCigarette744294744294744294

Shyam Gramodyog Sansthan Soap106668106668106668

Shyam Enterprises255292552925529

Kesharwani AgencyMatches508682508682508682

Mahesh Traders, Kondaliyur (TN)633572633572633572

2319141

Purchase as per Trading Account2206842

Difference112299

Transfer to VAT Account112299

DifferenceNIL

2. That kindly refer the observation of Assessing Officer in Para 4 of the Assessment Order 4. No regular books of accounts has been maintained nor assessee could reconcile the impounded during the course of survey in the assessment proceedings. Assessee has shown sales of Rs. 2206842/-. But net profit shown by the assessee is very low amounting to Rs. 63,330/-. Agricultural income of Rs. 24,000/- has also been shown by the assessee. Since assessee failed to reconcile the impounded material so in the interest of justice sales of the assessee are being estimated at Rs. 24,00,000/- in place of Rs. 22,97,267/- with corresponding increase in purchases. As per details furnished by the assessee net profit shown by the assessee is 2.75% which is very low. It is known to every body that in retail trade margin of profit is very high particularly in tobacco and agarwatti etc. and the same can be lower than 10%. So profit of the assessee is being estimated at Rs. 2,40,000/- from retail business. Further no evidence in support of agricultural income i.e., holding of land. Khasra and khatauni has not been filed during the course of assessment proceedings to substantiate agricultural income. So agricultural income of the assessee is also being treated to be income from the business. So assessed income of the assessee will be of Rs. 2,64,000/-

3. That on perusal of the aforesaid observation, it is very clear that any mistake in the book of accounts impounded by the Department has not been pointed out. The first sentence of the para 4 of the Assessment Order quoted hereinabove is only a passing remark and on the basis of passing remark the provision of Section 145(3) cannot be applied. The Assessing Officer has also not invoked this provision. Since, the provision of Section 145(3) has not been invoked, there is no reason to apply the GP Rate on enhanced sale and to estimate the income at Rs. 2,40,000/- and therefore, the returned income by the assessee at Rs. 63,330/- is to be accepted.

4. That the observation in Para 4 of the aforesaid order for the application of GP Rate at the rate of 10% is against the provision of Section 44AF of the Income Tax Act.

Hope the information submitted will do the needful.

For Appellant

(Subhash Chand)

Advocate