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Facts
The assessee, Sapna Enterprise, filed its return of income and P&L account showing a turnover of Rs. 2,62,37,48991/- and a net profit of Rs. 661/-. The audit report indicated adverse observations regarding stock valuation, debtors, creditors, lack of sufficient invoices, and missing documents supporting physical transfer of goods. The Assessing Officer noted the assessee was merely engaged in billing entry activity.
Held
The Tribunal acknowledged the specific facts of the case, including a flood during the period which led to a loss of grains and books of accounts. Considering these circumstances, the Tribunal held that Rs. 10,00,000/- could be fairly treated as the net profit earned by the assessee.
Key Issues
Whether the net profit declared by the assessee on agricultural commodities trading was acceptable, considering adverse audit observations and lack of supporting evidence.
Sections Cited
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
(Assessment Year: 2017-18) Sapna Enterprise, Income Tax Officer, Vs. A-102, Samay Apartment Ward-3(3)(5), Near Azad Society, Ahmedabad. Ambawadi Ahmedabad-380015. [PAN :AAGFT2725 F] (Appellant) .. (Respondent) Appellant by : Shri Parin Shah, AR Respondent by: Shri Rajeev Garg, Sr. DR Date of Hearing 03.07.2025 Date of Pronouncement 09.07.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- Delay Condoned This appeal is filed by the Assessee against the appellate order dated 22.02.2024 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi, relating to the Assessment Year 2017-18.
On verification of audit report, it is noticed that the assessee has shown total turnover of Rs. 2,62,37,48991/-. The assessee has furnished return of income and P & L account only. The assessee has not submitted any books of accounts or any other details called for. The assessee did not furnish any evidence in support of his claim of expenses, purchases, etc. shown in P&L account to the return of income.
Sapna Enterprise Vs. ITO Asst. Year : 2017-18 - 2– On perusal of audit report, it is noticed that the assessee has shown net profit Rs.661/-only. The assessee has shown GP at 0.44% in preceding year FY 2015-16.
Further, in form 3CB to audit report, the auditors observations are found adverse and reproduced as under. 1. Valuation of closing stock is subject to management confirmation. 2. Debtors and creditors balance are subject to confirmation. 3. No details of PAN available for loan advanced and received.
4. Though proper books of accounts were maintained but we were not able to express the opinion of true and fair view to lack of invoices up to certain extent.
The documents supporting physical transfer of goods are also missing
The Assessing Officer held that the above remarks of the auditor also reveal that there is no physical delivery of goods and the assessee is merely engaged in billing entry providing activity. Further, during the assessment, no details are furnished even bank account statements are not furnished. Based on the profit and loss account, there is sales of Rs. 2,61,08,88,797/- and purchase of Rs 2,62,48,14,799/- and these purchases and sales are of the items namely Oil Seed Cake, Gaur seed, Jeera and meithai. The Assessing Officer held that the net profit as shown Rs.661/- on the total turnover of Rs. 2629694799/- is not Sapna Enterprise Vs. ITO Asst. Year : 2017-18 - 3– acceptable. After observing so, the Assessing Officer determined net profit @1% on total gross sales of Rs.2,61,08,88,797/- of oil seed cake, jeera etc. shown in the Profit and loss account which amounts to Rs.2,61,08,890/-.
5. Aggrieved by the order of the Ld. CIT(A), the Assessee filed appeal before the Tribunal.
Before us, the Ld. AR submitted that the profit on sale of agricultural commodities cannot be 1% and the traders trade on meager margins. The Ld. DR argued that even in agricultural commodity trading, 0.05% is accepted market averages. The ld. DR accepted for lump-sum of Rs.10,00,000/- which can be determined as net profit on estimate basis. Not laying down any legal proposition, in the specific facts of the instant case, since there was flood during the period which led to loss of grains as well as books of accounts, we hold that Rs.10,00,000/- can be fairly treated as net profit earned by the assessee.
In the result, the appeal of the assessee is partly allowed.
The order is pronounced in the open Court on 09.07.2025
Sd/- Sd/- (SUCHITRA KAMBLE) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT (True Copy) Ahmedabad; Dated 09.07.2025 MV Sapna Enterprise Vs. ITO Asst. Year : 2017-18 - 4– आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy