PCIT vs. HARPREET KAUR - Delhi H C- 24 July 2017
"Author comments and analysis and summarizing" important points :
An assesee was having two similar types of businesses but at two different places and upon the return filing along with financial statements filed by the assessee, it was found that the Profit ratio between two similar businesses at two different places are quite different and hence AO has recomputed the business profit basing on reference rate of the other location and demanded for additional tax on such additions.
Going through the processes of appeals, ITAT has noted the below important aspects -
1- The financial statements are audited hence there should not be a question of disputes of figures arrives from such statements unless AO has some findings duly supported,
2- AO was not able to provide/ find any reason which is reasonable to substantiate his action being not accepting different profit margins at similar business at two different locations,
It was further noted that by referring the proviso of sec 80IA (8) which states that -
“that where, in the opinion of the Assessing Officer, the
computation of the profits and gains of the eligible business in the
manner hereinbefore specified presents exceptional difficulties, the
Assessing Officer may compute such profits and gains on such
reasonable basis as he may deem fit.”
However learned court says that there is nothing as such AO has found which could support any actions based on proviso to sec 80IA(8) and hence merely to note that there was some difference in profit margin at two different places and could add additional tax demand is not JUSTIFIED.
Appeal was held in favor of assessee and additions made by AO has been rejected.
For full judgement please refer https://www.taxpundit.org/phocadownload/Taxpundit_Reporter/Taxpundit_Reporter_2017/August_2017/817Taxpundit3.pdf
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