THE PRINCIPAL COMMISSIONER OF INCOME TAX 1 vs M/S KANDLA STEEL PVT. LTD.
- Court
- Gujarat High Court
C/TAXAP/49/2023 JUDGMENT DATED: 21/10/2026
(GJHC240116732023)
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 49 of 2023
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRZAR S. DESAI
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Approved for Reporting Yes No
✓
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THE PRINCIPAL COMMISSIONER OF INCOME TAX 1
Versus
M/S KANDLA STEEL PVT. LTD.
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Appearance:
MAUNIL G YAJNIK(9346) for the Appellant(s) No. 1
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CORAM: HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRZAR S. DESAI
Date : 21/10/2026
JUDGMENT
(PER : HONOURABLE MR. JUSTICE NIRZAR S. DESAI)
1. Heard learned Senior Standing Counsel Mr. Maunil Yajnik
for the appellant.
2. This Tax Appeal is filed under Section 260A of the
Income Tax Act,1961 [for short ‘the Act’] by the appellant-
Revenue proposing following substantial questions of law
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arising out of the Judgment and Order dated 14.09.2022
passed by the Income Tax Appellate Tribunal, Rajkot Bench,
Rajkot [for short ‘the Tribunal’] in ITA No.266/RJT/2017 for
assessment Year 2012-13;
(i) "Whether the Hon'ble Tribunal was justified in
upholding the order of the Ld. CIT(A), contrary to
the finding of the A.O. in estimating net profit
@7% of the assessee company?"
(ii) "Whether the Hon'ble Tribunal was justified in
directing to take net profit @0.22% as again 7%
estimated by the AO despite rejection of the books
of account by under section 145(3) of the Act?"
3. The brief facts giving rise to the present Appeal are as
under:
3.1. In this case, the assessee company is engaged in the
business of trading in Iron and Steel. The AO has
rejected books of account of the assessee u/s. 145(3) of
the Act and also rejected the returned loss and estimated
the net profit @7% of the turnover/total sales of
Rs.7,04,61,98,991/- at Rs.49,32,33,930/-. Further the AO
has computed the depot-direct sales at Rs.3,68,78,471/-
after allowing the expenses and purchases from depot-
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direct sales. The AO also computed the income from
manpower supply services & job work at Rs.
1,65,78,035/- after allowing expenses. The AO has
computed total business income of Rs.54,66,90,436/- of
the assessee.
3.2 Being aggrieved by the order passed under Section
263 of the Act, the assessee filed an appeal before the
CIT(A). The CIT(A), vide order dated 03.05.2017, partly
allowed the assessee’s appeal. Against the said order of
the CIT(A), the Revenue preferred an appeal before the
ITAT (for short the “the Tribunal”). The Tribunal vide
order dated 14.09.2022, dismissed the appeal of the
Revenue. Being aggrieved by the aforesaid order, the
Revenue has preferred the present Tax Appeal.
4. We have heard learned Senior Standing Counsel Mr.
Maunil Yajnik appearing for the appellant and perused the
record. On perusal of record, we find that the Tribunal, while
allowing the assessee's appeal, observed as under;
“5. At the time of hearing, none appeared on
behalf of the assessee, but the Ld DR submitted that
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the issue is squarely covered by the earlier
assessment Year i.e. 2010-11 passed by the
Tribunal.
6. We have heard Ld DR and perused all the
relevant materials available on record. It is
pertinent to note that the issue related to estimating
net profit at Rs.1,87,42,378/[email protected] and
receipts of Rs.54,66,95,400/- was similar to the
earlier Assessment Year i.e. 2010-11 as quoted by
the CIT(A) in his order at para 5.14. The Tribunal
in Assessment Year 2010-11 has confirmed the order
of the CIT(A) and hence no distinguishing facts
were pointed out by the Ld DR in the present
Assessment year. Therefore, the appeal filed by the
Revenue does not survive.”
5. The aforesaid observations made by the Tribunal would
indicate that the advocate D.R. had only pointed out that the
issue was squarely covered. The only ground canvassed today
before us by learned Senior Standing Counsel Mr. Yajnik is
that an appeal preferred against the said order passed by the
Tribunal under Section 260A of the Act is pending before this
Court.
6. On the contrary, the Court finds that the aforesaid appeal
in respect of Assessment Year 2010-2011, being Tax Appeal
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No. 675 of 2022, has already been dismissed by the Co-
ordinate Bench of this Court vide its order dated 03.01.2023,
wherein the Co-ordinate Bench of this Court, in paragraph No.
10, observed as under;
“We find that both the CIT (Appeals) and the
Tribunal have concurrently held estimating the net
profit at 0.05 % of the assessee company. While so
doing, it had also confirmed the act of rejection of
books under Section 145 of the IT Act. At the same
time, there has been equitable balance struck by the
authorities when it found that the Assessing Officer
had not given any internal or external comparitive
figures of sector of the assessee’s business while
arriving at the GP/NP ratio of 7%. The business is
of trading of steel items. The manufacturing
activities had almost stopped. The NP ratio of 7%
being impractical and completely unacceptable and
as most of the trading concerns have been operating
at the GP ratio of 0.5% to 1%, when both the
authorities have deemed it appropriate to apply
0.5% ratio, no indulgence is necessary. These are all
essentially and predominantly the factual aspects
analysed based on the material adduced before
these authorities and that also by giving cogent and
sound reasons, in absence of any question of law,
much less any substantial questions of law for the
court to admit this matter, this appeal is
dismissed.”
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In view of above observations made by the Co-ordinate
7.
Bench of this Court, and as the present Tax Appeal arises
only on account of pendency of the aforesaid Tax Appeal, the
substantial questions of law formulated by the Revenue are
answered in favour of the assessee. The present Tax Appeal is
required to be dismissed and same is dismissed accordingly.
(BHARGAV D. KARIA, J)
(NIRZAR S. DESAI,J)
BHAVIN MEHTA
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