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“profit element”

DisallowancesSection 69CSection 69C5,654 judgments

The decision most relied on for profit element is CIT v. President Industries (258 ITR 654), cited in 471 judgments on BharatTax.

Leading authorities on profit element

CIT v. President Industries
258 ITR 654 · 2002 · High Court
471
citing judgments

When books of account are rejected and unaccounted sales or receipts are discovered, the income addition is restricted to the net profit element embedded in these undisclosed transactions, not the entire sale proceeds or receipts, especially if corresponding purchases are not proven to be outside the books.

Sanjay Oilcake Industries v. CIT
316 ITR 274 · 2009 · High Court
460
citing judgments

In cases of alleged bogus or unverifiable purchases, rather than disallowing the entire purchase value, a reasonable profit element or a proportionate percentage of the purchases should be added back to the assessee's income.

CIT v. Siemens Aktiongesellschaft
310 ITR 320 · 2009 · High Court
259
citing judgments

Reimbursements of actual expenses without any profit element are not taxable income. Additionally, mere amendments to the Income-tax Act do not override the provisions of Double Taxation Avoidance Agreements (DTAAs).

CIT v. Vijay M. Mistry Construction Ltd.
355 ITR 498 · 2013 · High Court
252
citing judgments

In cases of alleged bogus or hawala purchases where the existence of transactions is not entirely denied, only the profit element embedded in such purchases, and not the entire purchase price, can be added to the assessee's income. The focus is on determining a reasonable profit percentage for such additions.

CIT v. Balchand Ajit Kumar
263 ITR 610 · 2003 · High Court
212
citing judgments

When making an addition for unaccounted receipts, on-money, or non-genuine purchases/sales, the addition should be restricted to the estimated profit element embedded in such transactions, rather than the entire gross amount, particularly when evidence of corresponding expenditure is incomplete. This estimation often involves applying a net profit rate.

CIT v. Gurubachhan Singh J. Juneja
302 ITR 63 · 2008 · High Court
147
citing judgments

When unaccounted receipts or suppressed sales are detected and books of account are rejected under Section 145(3), additions to income must be restricted to the profit element embedded in such transactions, not the entire transaction value. This profit element is to be estimated by considering the assessee's regular profit ratio as per books of account.

Vijay Trading Co. v. ITO
388 ITR 377 · 2016 · High Court
119
citing judgments

When purchases are found bogus, only the profit element embedded therein, and not the entire purchase value, can be added to the assessee's income.

NK Proteins Ltd. v. DCIT
292 CTR 354 · 2017 · Supreme Court
115
citing judgments

When purchases are unverifiable or alleged to be bogus, only the profit element embedded in such transactions is taxable, not the entire purchase amount; the onus lies on the assessee to prove the genuineness of the transactions.

Judgments citing profit element

Vatadi Krishnarao, Palakole vs. ITO, Ward - 1, Palakole

ITA 528/VIZ/2025[2017-18]Status: DisposedITAT Visakhapatnam09 Feb 2026AY 2017-18

Bench: Shri Ravish Sood, Hon’Ble

Section 147Section 148Section 148ASection 151ASection 250

आयकर अपीलीय अधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM (HYBRID HEARING) श्री रिीश

Pringalkumar Praveenbhai Shah, Ahmedabad vs. The ITO, Ward-6(1)(1), Ahmedabad

In the result, the appeal of the asessee is allowed

ITA 2365/AHD/2025[2020-21]Status: DisposedITAT Ahmedabad09 Feb 2026AY 2020-21

Bench: SHRI SANJAY GARG (Judicial Member), SMT. ANNAPURNA GUPTA (Accountant Member)

For Appellant: Shri Umedsingh Bhati & ShriFor Respondent: Shri Rignesh Das, CIT. DR
Section 250Section 250(6)Section 69C

Without prejudice, the learned Commissioner of Income Tax (Appeals) erred in confirming 100% disallowance of purchases, contrary to settled judicial principles that only profit element, if any, can be brought to tax.” 3. The solitary grievance raised by the assessee before us is against the confirmation

Deputy Commissioner of Income Tax Central Circle 29, New Delhi vs. M/S Ansh Industries Private Limited, East Delhi

Appeal is partly allowed

ITA 43/DEL/2026[2013-14]Status: DisposedITAT Delhi09 Feb 2026AY 2013-14

Bench: Shri Satbeer Singh Godaraassessment Year: 2013-14 Dcit, Vs. M/S. Ansh Industries Pvt. Central Circle-29, Ltd., New Delhi Flat No. 17, Akriti Apartments, Ip Extension, East Delhi, S.O. East Delhi, Delhi Pan: Aakca4381P (Appellant) (Respondent) Assessee By None Department By Sh. Manoj Kumar, Sr. Dr

Section 147Section 68

impugned transactions. Be that as it may, once it is prima facie established that this assessee is engaged in accommodation entry business, only a profit element @ 3% in the given facts is deemed to be just and proper with a rider 2 | P a g e that the same shall

DCIT, Circle -2(1)(1), Ahmedabad, Prahlad Nagar vs. Pancham Developers, Chandkheda

In the result, the appeal of the Revenue is partly allowed

ITA 1202/AHD/2025[2017-18]Status: DisposedITAT Ahmedabad06 Feb 2026AY 2017-18

Bench: Shri Tr Senthil Kumar & Shri Narendra Prasad Sinhaassessment Years: 2017-18

Section 136Section 143(3)

while holding that the purchases made from the four parties were bogus, had directed the AO to make addition for only the gross profit element embedded in the bogus purchases. 4. Now the Revenue is now in appeal before us. The following grounds have been taken in this appeal ... purchase made from the four parties. The ld. SR-DR contended that the direction of the Ld. CIT(A) to make addition for the profit element embedded in the bogus purchases had completely nullified the addition as the profit element of these purchase transactions was already accounted

Prathmesh Construction, Pune vs. DCIT Circle - 2 Pune, Pune

In the result, the appeal filed by the assessee is allowed

ITA 1814/PUN/2025[2021-22]Status: DisposedITAT Pune04 Feb 2026AY 2021-22

Bench: Shri R. K. Panda & Ms. Astha Chandraassessment Year : 2021-22

For Appellant: Shri Neelesh KhandelwalFor Respondent: Shri Vinod Pawar, Addl.CIT (virtual)
Section 132Section 132(4)Section 142(1)Section 143(2)

Counsel for the assessee relying on the following decisions submitted that the addition made by the Assessing Officer should be restricted to the gross profit element embedded in such sub-contract payments: i) PCT vs. Pravin U. Parmar (Jain) vide Income Tax Appeal No.1015 of 2018, order dated 09.01.2025 (Bombay ... therefore, no disallowance should have been made on account of those two sub-contractors. It is his alternate contention that at best the profit element embedded in such payments to the sub-contractors can be added and not the entire amount. 9 16. We find some force in the above

K V Tex Firm, Chennai vs. Asst. Commissioner of Income Tax, Chennai

In the result, all the three appeals of the assessee stand allowed

ITA 1860/CHNY/2025[2020-21]Status: DisposedITAT Chennai04 Feb 2026AY 2020-21

Bench: Shri George George K & Shri S.R. Raghunatha

For Appellant: Shri. D. Anand, AdvocateFor Respondent: Shri. Shiva Srinivas, CIT
Section 132Section 139(1)Section 143Section 147Section 44A

During the course of the assessment proceedings, the Assessee submitted that, even assuming the existence of any suppressed turnover, only the gross profit element embedded therein could be brought to tax as income. In support of the said contention, the Assessee filed a sworn affidavit and placed reliance on binding ... Industries [(2002) 258 ITR 654 (Guj)] and CIT v. Simit P. Sheth [(2013) 356 ITR 451 (Guj)], is to bring to tax only the profit element embedded in the unaccounted sales. The AO’s failure to recognize this basic accounting reality renders the addition of the entire turnover wholly unsustainable

Bhaumik Jewellers Private Limited, Ahmedabad vs. The ITO, Ward-1(1)(2), Ahmedabad

In the result, the appeal of the assessee stands allowed

ITA 1642/AHD/2024[2017-18]Status: DisposedITAT Ahmedabad03 Feb 2026AY 2017-18

Bench: Shri Sanjay Garg & Annapurna Guptaआयकर अपील सं /Ita No.1642/Ahd/2024 िनधा"रण वष" /Assessment Year : 2017-18 Bhaumik Jewellers Private The Ito बनाम/ Limited Ward-1(1)(2) V/S. 111, Gold Souk Complex Ahmedabad B/H. Sapphire Complex Cg Road Ahmedabad – 380 009 "थायी लेखा सं./Pan: Aagcb 2423 B (अपीलाथ)/ Appellant) (*+ यथ)/ Respondent) Assessee By : Shri Biren Shah, Ar Revenue By : Shri Sher Singh, Cit-Dr सुनवाई की तारीख/Date Of Hearing : 17/12/2025 घोषणा की तारीख /Date Of Pronouncement: 03/02/2026 आदेश/O R D E R Per Sanjay Garg: The Present Appeal Has Been Preferred By The Assessee Against The Order Of The Commissioner Of Income Tax (Appeals) National Faceless Appeal Centre (Nfac), Delhi [In Short “The Cit(A)”] Passed Under Section 250 Of The Income Tax Act, 1961 (In Short “The Act”), Dated 26/07/2024 Arising Out Of The Assessment Order Passed By The Assessing Officer (In Short “The Ao”) Under Section 143(3) Of The Act For The Assessment Year 2017-18. The Assessee In This Appeal Has Agitated The Confirmation Of The Addition Of Rs. 9,65,97,834/- Made By The Ao Under Section 68 Of The Act Bhaumik Jewellers Private Limited Vs. The Ito Asst. Year : 2017-18

For Appellant: Shri Biren Shah, ARFor Respondent: Shri Sher Singh, CIT-DR
Section 115BSection 133(6)Section 143(3)Section 145(3)Section 250Section 68

therefore, has contended that the entire receipts from the corresponding sales can not be treated as unaccounted income of the assessee, only the profit element embedded in such sales can be taxed, which the assessee has duly offered for taxation. 10. The Ld. DR, on the other hand, relied ... been offered to tax. Therefore, the entire receipts from the corresponding sales cannot be treated as unaccounted income of the assessee; only the profit element embedded in such sales can be taxed, which the assessee has duly offered for taxation. Taxing the gross receipts again u/s 68 would amount

Mukeshkumar Patel(Individual), Ahmedabad vs. The Income Tax Officer, Ward-5(3)(1), Ahmedabad

In the result, all the three appeals of the assessee are hereby allowed

ITA 1463/AHD/2024[2017-18]Status: DisposedITAT Ahmedabad03 Feb 2026AY 2017-18

Bench: Shri Sanjay Garg & Annapurna Guptaआयकर अपील सं/ िनधा"रण वष"/ Sl. Appeal(S) By :

For Appellant: Shri Parin Shah, ARFor Respondent: Ms. Ketaki Desai, Sr.DR
Section 132Section 147Section 148Section 44A

profit at the rate of 8% on the same was offered in the Return of Income so filed. It was submitted that only the profit element embedded in the transactions could be taxed and not the entire sale receipts. The AO, however, observed that since the return of income filed ... That the agricultural submersible pumps were sold to agriculturists and the sale proceeds were deposited in the said account. It was requested that only profit element could be added in respect of the aforesaid deposits on account of business transactions. It was further submitted that the Co-ordinatr Ahmedabad Bench

Mukeshkumar Patel(Individual), Ahmedabad vs. The Income Tax Officer, Ward-5(3)(1), Ahmedabad

In the result, all the three appeals of the assessee are hereby allowed

ITA 1462/AHD/2024[2016-17]Status: DisposedITAT Ahmedabad03 Feb 2026AY 2016-17

Bench: Shri Sanjay Garg & Annapurna Guptaआयकर अपील सं/ िनधा"रण वष"/ Sl. Appeal(S) By :

For Appellant: Shri Parin Shah, ARFor Respondent: Ms. Ketaki Desai, Sr.DR
Section 132Section 147Section 148Section 44A

profit at the rate of 8% on the same was offered in the Return of Income so filed. It was submitted that only the profit element embedded in the transactions could be taxed and not the entire sale receipts. The AO, however, observed that since the return of income filed ... That the agricultural submersible pumps were sold to agriculturists and the sale proceeds were deposited in the said account. It was requested that only profit element could be added in respect of the aforesaid deposits on account of business transactions. It was further submitted that the Co-ordinatr Ahmedabad Bench

Mukeshkumar Patel(Individual), Ahmedabad vs. The Income Tax Officer, Ward-5(3)(1), Ahmedabad

In the result, all the three appeals of the assessee are hereby allowed

ITA 1461/AHD/2024[2015-16]Status: DisposedITAT Ahmedabad03 Feb 2026AY 2015-16

Bench: Shri Sanjay Garg & Annapurna Guptaआयकर अपील सं/ िनधा"रण वष"/ Sl. Appeal(S) By :

For Appellant: Shri Parin Shah, ARFor Respondent: Ms. Ketaki Desai, Sr.DR
Section 132Section 147Section 148Section 44A

profit at the rate of 8% on the same was offered in the Return of Income so filed. It was submitted that only the profit element embedded in the transactions could be taxed and not the entire sale receipts. The AO, however, observed that since the return of income filed ... That the agricultural submersible pumps were sold to agriculturists and the sale proceeds were deposited in the said account. It was requested that only profit element could be added in respect of the aforesaid deposits on account of business transactions. It was further submitted that the Co-ordinatr Ahmedabad Bench

Devadas Anup, Bangalore vs. Income Tax Officer, Ward-6(2)(1), Bangalore

In the result, the appeal of the assessee is allowed

ITA 1933/BANG/2025[2018-19]Status: DisposedITAT Bangalore02 Feb 2026AY 2018-19

Bench: Shri Waseem Ahmed & Shri Keshav Dubeyassessment Year: 2018-19

For Appellant: Shri Guruswamy H, ITPFor Respondent: Shri Ganesh R Ghale, Advocate – Standing
Section 133(6)Section 139(1)Section 250

purchases of Rs.3,61,05,162/- and not on sales without appreciating the fact that the purchase of goods was an expenditure without any profit element. 5. The Ld. CIT(A) has erred in confirming the addition of Rs. 18,05,258 /- estimated on purchases but mentioned as Sales

ITO, Ward- 20(1), New Delhi vs. Precision Agencies Pvt. Ltd., New Delhi

Appeals are partly allowed

ITA 9274/DEL/2019[2001-02]Status: DisposedITAT Delhi02 Feb 2026AY 2001-02

Bench: Shri Satbeer Singh Godara & Shri Naveen Chandra

Section 131Section 143(3)Section 147Section 254Section 68

Nos.9038, 9039, 9040, 9274/Del/2019 & C.O. No.10/Del/2020 only a part of the well-orchestrated accommodation entry business wherein it could only be assessed qua the profit element embedded therein than the entire credits figure. 5. We invited the Revenue’s attention to the CIT(A)’s foregoing detailed discussion in para ... from the beneficiary companies (supra). We thus deem it appropriate in this factual backdrop that the assessee deserves to be assessed at the estimated profit element @ 5% qua its impugned accommodation entries rather than the entire credits in these peculiar facts. We order accordingly subject to a rider that

Precision Agencies Pvt. Ltd., New Delhi vs. ITO, Ward- 20(1), New Delhi

Appeals are partly allowed

ITA 9040/DEL/2019[2002-03]Status: DisposedITAT Delhi02 Feb 2026AY 2002-03

Bench: Shri Satbeer Singh Godara & Shri Naveen Chandra

Section 131Section 143(3)Section 147Section 254Section 68

Nos.9038, 9039, 9040, 9274/Del/2019 & C.O. No.10/Del/2020 only a part of the well-orchestrated accommodation entry business wherein it could only be assessed qua the profit element embedded therein than the entire credits figure. 5. We invited the Revenue’s attention to the CIT(A)’s foregoing detailed discussion in para ... from the beneficiary companies (supra). We thus deem it appropriate in this factual backdrop that the assessee deserves to be assessed at the estimated profit element @ 5% qua its impugned accommodation entries rather than the entire credits in these peculiar facts. We order accordingly subject to a rider that

Precision Agencies Pvt. Ltd., New Delhi vs. ITO, Ward- 20(1), New Delhi

Appeals are partly allowed

ITA 9039/DEL/2019[2001-02]Status: DisposedITAT Delhi02 Feb 2026AY 2001-02

Bench: Shri Satbeer Singh Godara & Shri Naveen Chandra

Section 131Section 143(3)Section 147Section 254Section 68

Nos.9038, 9039, 9040, 9274/Del/2019 & C.O. No.10/Del/2020 only a part of the well-orchestrated accommodation entry business wherein it could only be assessed qua the profit element embedded therein than the entire credits figure. 5. We invited the Revenue’s attention to the CIT(A)’s foregoing detailed discussion in para ... from the beneficiary companies (supra). We thus deem it appropriate in this factual backdrop that the assessee deserves to be assessed at the estimated profit element @ 5% qua its impugned accommodation entries rather than the entire credits in these peculiar facts. We order accordingly subject to a rider that

Precision Agencies Pvt. Ltd., New Delhi vs. ITO, Ward- 20(1), New Delhi

Appeals are partly allowed

ITA 9038/DEL/2019[2000-01]Status: DisposedITAT Delhi02 Feb 2026AY 2000-01

Bench: Shri Satbeer Singh Godara & Shri Naveen Chandra

Section 131Section 143(3)Section 147Section 254Section 68

Nos.9038, 9039, 9040, 9274/Del/2019 & C.O. No.10/Del/2020 only a part of the well-orchestrated accommodation entry business wherein it could only be assessed qua the profit element embedded therein than the entire credits figure. 5. We invited the Revenue’s attention to the CIT(A)’s foregoing detailed discussion in para ... from the beneficiary companies (supra). We thus deem it appropriate in this factual backdrop that the assessee deserves to be assessed at the estimated profit element @ 5% qua its impugned accommodation entries rather than the entire credits in these peculiar facts. We order accordingly subject to a rider that

Deputy Commissioner of Income Tax, Central Circle-1, Rajkot vs. Classic Network Pvt. Ltd., Rajkot

In the result, appeal filed by the assessee in ITA No

ITA 287/RJT/2024[2016-17]Status: DisposedITAT Rajkot30 Jan 2026AY 2016-17

Bench: Dr. Arjun Lal Saini & Dr. Dinesh Mohan Sinha

valid estimate of profits is made by ld.CIT(A), the Revenue should not have grievance, considering the settled position of law that only profit element embedded in the various payments and receipts should be added. We also noted that profit estimation made by the learned CIT(A) in above assessment

Deputy Commissioner of Income Tax, Central Circle-1, Rajkot vs. Classic Network Pvt. Ltd., Rjakot

In the result, appeal filed by the assessee in ITA No

ITA 286/RJT/2024[2014-15]Status: DisposedITAT Rajkot30 Jan 2026AY 2014-15

Bench: Dr. Arjun Lal Saini & Dr. Dinesh Mohan Sinha

valid estimate of profits is made by ld.CIT(A), the Revenue should not have grievance, considering the settled position of law that only profit element embedded in the various payments and receipts should be added. We also noted that profit estimation made by the learned CIT(A) in above assessment

Classic Network Private Limited, Rajkot vs. Deputy Commissioner of Income Tax, Central -1, Rajkot

In the result, appeal filed by the assessee in ITA No

ITA 178/RJT/2024[2017-18]Status: DisposedITAT Rajkot30 Jan 2026AY 2017-18

Bench: Dr. Arjun Lal Saini & Dr. Dinesh Mohan Sinha

valid estimate of profits is made by ld.CIT(A), the Revenue should not have grievance, considering the settled position of law that only profit element embedded in the various payments and receipts should be added. We also noted that profit estimation made by the learned CIT(A) in above assessment

Classic Network Private Limited, Rajkot vs. Deputy Commissioner of Income Tax, Central - 1, Rajkot

In the result, appeal filed by the assessee in ITA No

ITA 177/RJT/2024[2016-17]Status: DisposedITAT Rajkot30 Jan 2026AY 2016-17

Bench: Dr. Arjun Lal Saini & Dr. Dinesh Mohan Sinha

valid estimate of profits is made by ld.CIT(A), the Revenue should not have grievance, considering the settled position of law that only profit element embedded in the various payments and receipts should be added. We also noted that profit estimation made by the learned CIT(A) in above assessment

Classic Network Private Limited, Rajkot vs. The Deputy Commissioner of Income Tax, Central -1 Rajkot, Rajkot

In the result, appeal filed by the assessee in ITA No

ITA 176/RJT/2024[2014-15]Status: DisposedITAT Rajkot30 Jan 2026AY 2014-15

Bench: Dr. Arjun Lal Saini & Dr. Dinesh Mohan Sinha

valid estimate of profits is made by ld.CIT(A), the Revenue should not have grievance, considering the settled position of law that only profit element embedded in the various payments and receipts should be added. We also noted that profit estimation made by the learned CIT(A) in above assessment