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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 Party

Item

Shiv Distributor
Shaksham Sales
Shivalik Enterprises
Shyam Gramodyog
Sansthan
Shyam Enterprises
Kesharwani Agency
Mahesh
Traders,
Kondaliyur (TN)

Tobacco
Agarbatti
Cigarette
Soap

293576
34296
744294
106668

293576
34296
744294
106668

293576
6820
744294
106668

Matches

25529
508682
633572

25529
508682
633572

25529
508682
633572

Purchase as per
Trading Account
Difference
Transfer to VAT
Account
Difference

Openin
g

Purchase

Total Payment

2319141
2206842
112299
112299
NIL

Balance
27476

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