By K. B. Bhujle, Advocate
58. Principal CIT vs. Smart Value Products and Services Ltd
[2022] 448 ITR 145 (HP)
A.Y.: 2009-10
Date of order: 28th March, 2022
S. 11 of ITA, 1961
Estimate of income — Accounting — Rejection of accounts — Estimate should be fair — Local knowledge and circumstances of assessee should be taken into consideration — Modification of estimate of AO by Tribunal based on material on record — Justified — No question of law arose.In the return of income for the A.Y.2009-10, the assessee had declared gross turnover to the tune of Rs. 91,90,10,669 and net profit to the tune of Rs. 1,06,69,510. Thus, the net profit rate was 1.16 per cent. The AO rejected the accounts. The AO prepared the trading account and the gross profit of the assessee came out to be Rs. 36,39,54,887 against sales of Rs. 71,24,69,335 and, as a result, the gross profit rate came to 51.8 per cent. Consequently, an addition of Rs. 14.48 crores was made by the AO.
Since in the subsequent years, the Revenue Department accepted the net profit rate in the case of the assessee at 2.53 per cent and 2.99 per cent, therefore, the Commissioner (Appeals) applied the average of the net profit of assessed income of the subsequent two years for the purpose of determining the profit of the assessee. This was upheld by the Tribunal.
The Himachal Pradesh High Court dismissed the appeal filed by the Revenue and held as under:
“i) Section 145 o
