What did the Tribunal hold?

The Tribunal reduced the estimated profit by 50% and directed the Assessing Officer to apply this reduced rate on the actual purchase amount, as explained by the assessee. The addition was to be recomputed accordingly.

The assessee's appeal concerns the assessment year 2010-11, challenging the CIT(A)'s decision to tax the profit element of unproved purchases at 10%. The Assessing Officer had initially made an addition based on peak credit balance.

What were the issues?

The key issues were the estimation of profit on unproved purchases and the correctness of the purchase value used for such estimation.

Vijendra S. Anjure vs ITO | ITAT Mumbai 2016

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI G.S.PANNU

For Appellant: Shri Kuldip Mehta

For Respondent: Ms. Beena

Hearing: 06/12/2016Pronounced: 09/12/2016

ORDER The captioned appeal filed by the assessee pertaining to assessment year 2010-11 is directed against an order passed by CIT(A)-25, Mumbai dated 16/01/2016, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 28/03/2013.

In this appeal, although the assessee has raised multiple Grounds of appeal, but the only point substantively argued at the time of hearing is against the action of the CIT(A) in holding that profit element in relation to unproved purchases of Rs.2,28,00,000/- be brought to tax @10% as against addition

(Assessment Year 2010-11) made by the Assessing Officer of Rs.37,80,155/- based on the peak credit balance.

At the time of hearing, Ld. Representative for the assessee pointed out that the CIT(A) had made estimate of profit @ 10%, which is over and above the declared profit, and the same was quite excessive considering that the assessee has declared net profit of 6.5%. The Ld. Representative for the assessee submitted that the appellant assessee is a proprietor of M/s.Shrinathji Enterprises, which is engaged in the business of trading and processing of bitumen and M/s. Shrinathji Roadlines, which is engaged in the business of transportation. It has also been pointed out that the relevant purchases, which are in dispute are on account of purchase of Light Diesel Oil(LOD) from M/s.Rumeet Enterprises. The Ld. Representative for the assessee pointed out that though the purchases have been taken at the figure of Rs.2,28,00,000/-, but the same includes tax element also, whereas the actual purchase is only of Rs.1,93,75,528/-, as can be seen from the assessment order as well as from the copy of the P&L Account of M/s. Shrinathji Enterprises, placed at pages 1 & 2 of the Paper Book. Reference has also been made to page -11 of the Paper Book, wherein is placed the details of purchases. It was therefore, contended that both the rate of profit element as well as purchases have been taken at excessive figures.

On the other hand, Ld. Departmental Representative has contended that the addition is based on an adhoc estimation of profit and that in view of the purchases having been found unproved, certain profit percentage over and above that declared by the assessee should be assessed as income on this count.

(Assessment Year 2010-11) 5. I have carefully considered the rival submissions. In my considered opinion, it would meet the ends of justice if the estimation of profit made by the CIT(A) is reduced by 50% and the Assessing Officer is further directed to apply the reduced rate on the purchases of Rs.1,93,75,528/-, as explained by the assessee. Accordingly, the Assessing Officer is directed to rework the addition on account of unproved purchases of M/s. Shrinathji Enterprises. At this stage, it is to be put on record that at the time of hearing nothing has been brought on record to suggest that the Revenue has preferred any appeal against the partial relief allowed by the CIT(A). Be that as it may, the Assessing Officer is directed to recompute the addition as above and allow the consequential relief to the assessee.

In the result, appeal of the assessee is partly allowed, as above. Order pronounced in the open court on 09/12/2016

VIJENDRA S. ANJURE,MUMBAI vs. ITO 22(2)(2), MUMBAI

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