Mohammad Ashraf War I.T.O. Ward-Baramulla [I.T.A. No. 07/Asr/2024]
The taxpayer is a registered dealer under the VAT Act. A copy of the relevant VAT return was filed for the record. The declared turnover by the taxpayer was Rs. 77.36 lakhs, which was significantly higher than the turnover determined by the Assessing Officer during the assessment. The Assessing Officer, without taking into account the previous year’s net profit and the nature of the business, calculated the net profit at a rate of 8 percent. The cash deposits made during the demonetization period were also considered as part of the turnover. The turnover is clearly stated in the VAT return. The determination of net profit at 8 percent is considered arbitrary in the eyes of the law. Referring to the cases of Commissioner of Income-tax-II v. Surinder Pal Anand [2010] 192 Taxman 264 (Punjab & Haryana) and Commissioner of Income-tax v. Rajinder Parshad Jain [2015] 61 taxmann.com 310 (Punjab & Haryana), the Assessing Officer was instructed to limit the net profit to 3 percent of the declared turnover by the taxpayer.
The Assessing Officer, without proper verification of facts, inaccurately determined the turnover of the taxpayer for the assessment year in question. There were no challenges raised regarding the authenticity of the documents submitted by the taxpayer. The turnover of the taxpayer for the assessment year in question, amounting to Rs. 77.36 lakhs, should be acknowledged. The net profit is capped at 3 percent of the turnover of Rs. 77.36 lakhs. The cash deposits in the bank account are considered part of the turnover and not from undisclosed sources.
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