SAMBHU NATH HALDER,SOUTH 24 PARGANAS vs. ITO, WARD-53(3), KOLKATA, KOLKATA

The only issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by AO by applying gross profit rate @ 26% on the undisclosed turnover and thereby assessing the gross profit at Rs.9,29,806/-.

I have heard rival submissions and gone through facts and circumstances of the case. Briefly stated facts are that the assessee derives income from trading of gold ornaments. A survey u/s. 133A of the Act was conducted on the business premises of the assessee on 16.03.2011 and books of accounts were impounded vide ID No. BJ-32 to BJ-42. The AO as well as CIT(A) noted on examination of impounded books of account, that the sale of the assessee comes to Rs.40,92,403/- as against the declared sales in the books of account at Rs.5,16,225/-. According to both the authorities below the undisclosed sales comes to Rs.35,76,178/-. This fact was accepted by the assessee and even before us ld. Counsel for the assessee admitted this fact. Once it is a fact that this undisclosed sale is there, which is found during the course of survey and admitted by the assessee, now the question before us what is the profit element in this. The AO applied gross profit @ 26% because the assessee in its regular course of business has declared gross profit @ 26%. The CIT(A) also confirmed the action of the AO. Aggrieved, now assessee is in second appeal before Tribunal.

Before us, Ld. Counsel for the assessee filed details of comparable cases in the same trade i.e. trading of gold and jewellery. He filed the comparative statement of Geetanjali Gems Ltd., Titan Industries Ltd. and Reliance Gems & Jewells Ltd. wherein gross profit declared is at 4.85% 2 Sambhu Nath Halder AY 2009-10 to 5.96%. According to Ld. Counsel in assessee’s own case also the gross profit rate varies from 3.3% to 9.7%. According to him, in this year also the gross profit rate is 9.7% and AO has erred in not calculating and admitting the gross profit rate by not reducing the interest income and making charges income from the profit of trading. Ld. Counsel for the assessee filed two years’ computation which is as under: “Calculation of Profit in Asstt. Year 2008-09 Turnover as per Profit & Loss A/c. Rs.4,51,895/- Profit as per Profit & Loss a/c Rs.1,00,645/- Less Interest Rs.47,665/- Less Making charges Rs.37,360/- Rs. 85,025/- Profit from sale Rs. 15,620/- + 3.3% of turnover of goods Calculation of profit in Asstt. Year 2009-10 Turnover as per Profit & Loss A/c. Rs.4,58,350/- Profit as per Profit & Loss a/c Rs.1,47,040/- Less Interest Rs.44,660/- Less Making charges Rs.57,875/- Rs.1,02,435/- Profit from sale Rs. 44,695/- + 9.7% of turnover of goods” On the other hand, the Ld. Sr. DR stated that the AO as well as CIT(A) has rightly applied the gross profit rate @ 26% to the undisclosed turnover found during the course of survey by revenue because the assessee himself in his regular business in this year has declared gross profit @ 26%.

I find from the facts narrated above that the gross profit varies in comparable cases at 5% to 6%, the assessee’s own gross profit rate is at 3.3% to 9.7%. On query from the bench, Ld. Sr. DR stated that a fair estimate can be made and according to him, the fair estimate will be at 10%. On the other hand, ld. Counsel for the assessee argued that fair estimate can be made by applying t to 6%. Taking into consideration of the arguments of both the sides, facts of the case and also considering comparable cases, I am of the view that a reasonable estimate of gross profit rate will be @ 8% and I direct the AO accordingly. Appeal of assessee is partly allowed.

In the result, the appeal of assessee is partly allowed.

Order is pronounced in the open court.