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Facts
The assessee's appeal arose from an order by the CIT(A) which sustained an adhoc estimated net profit of 8% of the total turnover. The assessee had declared a lower income, and argued that the AO's estimation of net profit at 9.09% and the CIT(A)'s estimation at 8% were excessive and not based on material.
Held
The Tribunal found that neither the assessee's claim nor the department's estimation was fully acceptable. The assessee had not sufficiently proven their claim, and the department lacked comparable data. Therefore, the Tribunal directed a revised estimation of net profit at 4% of the turnover.
Key Issues
Whether the estimation of net profit by the AO and sustained by the CIT(A) is justified and if not, what would be the appropriate estimation.
Sections Cited
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Income Tax Appellate Tribunal, DELHI BENCH “SMC’’ : NEW DELHI
Asstt. Year : 2013-14 FAIZ MOHAMMAD, vs. ITO, Ward 1(2), 1015/1/D, SOUTH KHALAPAR, MUZAFFAR NAGAR CIMETRE ROAD, NEW ABADI CITY, MUZZAFARNAGAR (PAN: BCOPM9236P) (Appellant) (Respondent) Appellant by : Shri Ankit Gupta, Adv. (Through VC) Respondent by : Ms. Harpreet Kaur Hansra, Sr. DR. Date of Hearing 09.09.2025 Date of Pronouncement 30.09.2025 ORDER This appeal by the assessee is emanating from the order of the Ld. CIT(A), Muzaffarnagar, Delhi in Appeal No. 111/16-17/MZR dated 13.11.2017.
Heard both the parties and perused the records.
At the time of hearing, Ld. AR has submitted that AO has erred in computing the total income at Rs. 20,89,160/- by estimating the Net Profit @9.09% of the total turnover as against the declared income of Rs. 1,99,540/-. It was further submitted that Ld.CIT(A) has erred in sustaining the adhoc estimated the net profit @8% of 2 total turnover, which is unjust and very excessive and not based on any material on record. It was further submitted that CIT(A) rejected the books of accounts of the assessee without appreciating that the AO has not rejected the books of accounts.
Ld. DR vehemently argues during the course of hearing that Ld. CIT(A) after considering all the material facts and circumstances sustained the estimation of net profit @ 8% by upholding the addition of Rs. 18,32,000/- which deserve to be upheld.
I have given my thoughtful consideration to the assessee’s contention made in the grounds of appeal and Revenue’s foregoing vehement contentions. I am of the considered view that neither party’s submissions herein deserve to be accepted in entirety as the assessee on the one hand has not been pleaded and prove his claim of net profit nor the department could draw any comparable in the very line of business for estimating the net profit @8%. I therefore deem it appropriate in the larger interest of justice to assess the assessee’s foregoing turnover to a lump sum estimated net profit @4% in lieu of @8% with a rider that the same shall not be