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Facts
The assessee, an ex-serviceman running a Mother Dairy milk and milk products agency, declared an income of Rs. 2,58,740, including pension, on a turnover of Rs. 1.30 crore. The Assessing Officer applied an 8% net profit rate, whereas the assessee claimed a profit rate of 1.5% to 2%. The assessee was not maintaining regular books of accounts.
Held
The Tribunal held that an 8% net profit rate was not justified for a milk agency business earning commission. It estimated the net profit rate at 2.25% from the sale of milk, dairy products, and pulses, considering it fair to both parties.
Key Issues
Whether the Assessing Officer was justified in applying an 8% net profit rate on the turnover of a milk agency business, and what would be the fair estimation of net profit rate in absence of regular books of accounts.
Sections Cited
147, 144B, 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES “SMC”, JAIPUR
Before: DR.MANISH BORAD
Date of hearing : 30.06.2025 Date of pronouncement : 29.07.2025 आदेश / ORDER This appeal at the instance of the assessee is directed against the order of ld. CIT(A)/ NFAC dated 13.02.2025 arising out of the order for A.Y 2018-19 framed u/s 147 r.w.s 144B of the Act dated 20.03.2023 framed by Assessment Unit, Income Tax Department.
The assessee has raised following grounds of appeal :
“1. That under the facts and circumstances of the case ld. CIT (Appeals), NFAC has erred in law and facts in confirming the order passed by the learned assessing officer which is liable to be quashed. Kindly quash the same. 2. That under the facts and circumstances of the case the Id. CIT (Appeals), NFAC has erred in law and facts in not considering actual profit percentage as prevailing in this particular business. Kindly direct to consider the same and delete the addition.
2 Surendra Singh
That under the facts and circumstances of the case the Ld. CIT (Appeals), NFAC has erred in law and facts in confirming the addition of Rs. 9,60,000/- based on assumptions and presumption surmises and conjectures. Kindly delete the same.
That the appellant craves the permission to add to or amend to any of the above grounds of appeal or to withdraw any of them.”
3. At the outset, ld. Counsel for the assessee placing reliance on the decisions of Co-ordinate Bench, Agra in the case of Shri Tasavver Husain vs. ITO Ward-4(2), Farrukhabad in dated 12.06.2024 submitted that the income of the assessee is from carrying on milk agency business of Mother Dairy and net profit rate from sale of milk and dairy products is approx 1.5% to 2% but Ld. Assessing Officer grossly erred in applying Net Profit rate of 8%. He also submitted that even though the assessee is not dealing into fruits and vegetables but still ld. AO has considered it be part of total turnover and applied the higher net profit rate.
4. On the other hand, ld. Departmental representative supported the order of ld. CIT(A).
I have heard the rival contentions and perused the record placed before me. I observe that the assessee is running agency of Mother dairy in terms of the certificate given by Mother Dairy Fruits and Vegetables Pvt. Ltd. The assessee who is an ex-serviceman has been granted the booth for sale of milk and milk products. In the return of income, assessee has disclosed income of Rs. 2,58,740/- which comprises of pension of Rs. 2,08,739/- and balance income from dairy business on the turnover of Rs. 1.30 CR. Admittedly, the assessee is not maintaining regular books of accounts.
3 Surendra Singh
Before me, the only issue relates to estimation of net profit from dairy business. The ld. AO has considered that the assessee is dealing in milk, dairy products, daal, fruits and vegetables for which the profit/commission margin is 0.50%, 5%, 3% and 9% respectively. With the support of certificate from Mother Dairy, ld. Counsel for the assessee has submitted that the assessee is not dealing in fruits and vegetables. In so far as remaining items are concerned the ratio of sales is 70:25:5 of the total sales of milk, milk product and pulses. Taking basis of this ratio of weighted contributions on total turnover of Rs. 1.30 cr, the net profit/commission comes to Rs. 2,43,100/- (approx). In the case of Shri Tasavver Husain vs. ITO Ward-4(2), Farrukhabad (supra), relied by learned Counsel for the assessee in that case, the assessee maintained the books of accounts and also filed the audit report and 1.30% net profit margin has been accepted. However, in the instant case, the assessee is not maintaining any books of accounts. In such cases section 44AD of the Act is generally applicable and 8% net profit is calculated but in the given case which is milk agency business and the assessee is only earning profit in the form of commission from the Mother Dairy Fruits and Vegetables Ltd. and that too at pre- determined rate referred above therefore, it is not justified to calculate the net profit of the assessee @ 8%.
7. However, considering the facts and circumstances of the case and also being fair being fair to both the parties, I hereby estimate the net profit rate of 2.25% from sale of milk, dairy milk products and pulses of Mother Dairy and net profits for this year on total sale of Rs. 1.30 cr (approx.) admitted by the assessee comes to Rs. 2,92,500/- and after reducing income 4 Surendra Singh from the business income declared in the income tax return, the excess amount is sustained as an addition in the hands of the assessee. Ld. Assessing Officer shall give the effect as per my direction given above. Impugned order is set aside and Grounds of appeal raised by the assessee are partly allowed.
In the result, appeal filed by the assessee is partly allowed.