“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

DCIT 13(1)(1), Mumbai vs. United Asphalters P.Ltd, Mumbai

ITA 1728/MUM/2016[2010-11]Status: DisposedITAT Mumbai07 Dec 2017AY 2010-11

Bench: Shri Joginder Singh & Shri Manoj Kumar Aggarwal

Section 69C

sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. This was the view of this court in the case of Sanjay Oilcake Industries

DCIT 5(2)(1), Mumbai vs. Karp Impex Ltd, Mumbai

ITA 6761/MUM/2016[2007-08]Status: DisposedITAT Mumbai06 Dec 2017AY 2007-08

Bench: Shri Rajendra, Am & Shri Sandeep Gosain, Jm आयकरअपीलसं./ I.T.A. No. 6761, 6760 & 6759/Mum/2016 (निर्धारणवर्ा / Assessment Year: 2007-08, 2009-10 & 2010-11)

For Appellant: Sh. M. V. Rajguru, DRFor Respondent: Sh. Sashank Dundu, AR

Section 143(3)

cent - Whether since purchases were not bogus but were made from parties other than those mentioned in books of account, only profit element embedded in such purchases could be added to assessee's income - Held, yes - Whether hence, order of Tribunal needed no interference - Held, yes [Pares ... Cake Industries (2009) 316 ITR 274 (Guj) (1C) and taking into consideration the facts of the present case, and to account for the profit element embedded in these purchase transactions to factorize profit earned by assessee against purchase of material in the grey market and undue benefit of VAT against

DCIT Cen Cir 3, Mumbai vs. Swan Energy Ltd, Mumbai

ITA 6662/MUM/2014[2011-12]Status: DisposedITAT Mumbai06 Dec 2017AY 2011-12

Bench: Shri Rajendra, Am & Shri Sandeep Gosain, Jm आयकरअपीलसं./ I.T.A. No. 6662 & 3870/Mum/2014 (निर्धारणवर्ा / Assessment Year: 2011-12 & 2010-11) Dcit Cen Cir 3 M/S Swan Energy Ltd. Room No. 905, Pratistha Formerly Known As Swan Mills Ltd, 2Nd Bhavan, Marines Lines, बिधम/ Mumbai-400020. Floor, Feltham House, Vs. Ballard Estate, J.N. Herdia Marg, Mumbai- 400001. स्थायीलेखासं./जीआइआरसं./ Pan/Gir No. Aabcs7890Q & आयकरअपीलसं./ I.T.A. No. 5778 & 2924/Mum/2014 (निर्धारणवर्ा / Assessment Year:2011-12 & 2010-11) M/S Swan Energy Ltd. Acit Rg 7(2) Formerly Known As Swan Room No. 626, M. K. बिधम/ Mills Ltd, 2Nd Floor, Feltham Road, Churchgate, Vs. House, Ballard Estate, J.N. Mumbai-400020. Herdia Marg, Mumbai- 400001. अपीलाथीकीओरसे/ Appellant By : Sh. J. P. Bairagazd प्रत्यथीकीओरसे/Respondentby : Ms. Abha Kala Chanda सुनवाईकीतारीख/ : 27/09/2017 Date Of Hearing घोषणाकीतारीख / : 06/12/2017 Date Of Pronouncement M/S Swan Energy Ltd..

For Appellant: Sh. J. P. BairagazdFor Respondent: Ms. Abha Kala Chanda

Section 14Section 143(3)Section 14A

Cake Industries (2009) 316 ITR 274 (Guj) (1C) and taking into consideration the facts of the present case, and to account for the profit element embedded in these purchase transactions to factorize profit earned by assessee against purchase of material in the grey market, we are of the considered view

Siddharth Structurals, Mumbai vs. ITO 29(3)(4), Mumbai

In the result, appeal of the assessee is allowed in part

ITA 1607/MUM/2017[2009-10]Status: DisposedITAT Mumbai05 Dec 2017AY 2009-10

Bench: Shri R.C.Sharma, Am M/S. Siddharth Structurals Vs. Ito 29(3)(4),Mumbai A/1801, 18Th Floor Park Royal Building M.M. Malaviya Road Mulund (W), Mumbai – 400 080 Pan/Gir No.Abkfs5656B Appellant) Respondent) ..

For Appellant: 1. In the facts and in the circumstances of the case and in law

Section 143(3)Section 147

shown in books are. Therefore, the entire purchase from these parties cannot be added as bogus and what needs to be taxed is the profit element embedded in such transactions. Estimations ranging from 12.5% to 25% have been upheld by the Hon'ble Gujarat High Court, depending the nature

Dilip B Shah, Mumbai vs. ITO 14(1)(1), Mumbai

In the result, this appeal filed by the assessee stands dismissed

ITA 5560/MUM/2016[2009-10]Status: DisposedITAT Mumbai04 Dec 2017AY 2009-10

Bench: Shri Shamim Yahya, Am & Shri Sandeep Gosain, Jm आयकर अपील सं./I.T.A. No.5560/Mum/2016 ("नधा"रण वष" / Assessment Year: 2009-10) Shri Dilip B. Shah Ito-14(1)(1), बनाम/ 2Nd Floor, Earnest House, 5/20 A, Gita Building, Gamdevi, Vs. Grant Road, Mumbai-400 002 Nariman Point, Mumbai-400 021 "थायी लेखा सं./जीआइआर सं./Pan/Gir No. Aapps 9105 F (अपीलाथ" /Appellant) (""यथ" / Respondent) : अपीलाथ" क" ओर से / Appellant By : Ms. Ruchi M. Rathod ""यथ" क" ओर से/Respondent By : Shri Ram Tiwari

For Appellant: Ms. Ruchi M. RathodFor Respondent: Shri Ram Tiwari

Section 148Section 69C

accepted by the AO, the very basis of purchases could not be questioned. Not the entire purchase price could be disallowed but only the profit element embedded in such purchases could be added to the income of the assessee. The estimation varies with the nature of business and no uniform

Reliance Realty, Ulhasnagar vs. Jt CIT RG 2, Kalyan

In the result, appeal of the assessee is partly allowed, as above

ITA 1122/MUM/2017[2011-12]Status: DisposedITAT Mumbai30 Nov 2017AY 2011-12

Bench: Shri G.S. Pannu: A.Y : 2011-12

For Appellant: Ms. Neha ParanjpeFor Respondent: Ms. N. Hemalatha

Section 133(6)Section 143(3)

canvassed that the purchases be treated as genuine and the addition be deleted. In the alternate, it is canvassed that only the profit element relatable to the impugned purchases be assessed to tax, say @ 5%, and not the entire amount of purchases. 4. The ld. DR appearing for the Revenue ... ratio of the judgment of the Hon'ble Gujarat High Court in the case of Simit P. Sheth, 356 ITR 451 (Gujarat), only the profit element attributable to such doubtful purchases can be assessed to tax. In this context, I find that the only saving which can be effected

ITO 19(1)(2), Mumbai vs. Bhavana Steel, Mumbai

In the result, appeal filed by the revenue for assessment year 2011-

ITA 7086/MUM/2016[2011-12]Status: DisposedITAT Mumbai30 Nov 2017AY 2011-12

Bench: Shri R.C. Sharma (Am) & Shri Ram Lal Negi (Jm) Assessment Year: 2011-12 The Ito – 19(1)(2), M/S Bhavana Steel, Room No. 204, Sabusidique Building, Matru Mandir, 1St Khetwadi Lane, Mumbai - 400007 Vs. Mumbai – 400004 Pan: Aaefb9418R (Appellant) (Respondent) Revenue By : Shri M.C. Omi Ningshen (Dr) Assessee By : Shri Sashank Dundu (Ar) Date Of Hearing: 09/11/2017 Date Of Pronouncement: 30/11/2017

For Appellant: Shri Sashank Dundu (AR)For Respondent: Shri M.C. Omi Ningshen (DR)

Section 143Section 143(1)Section 147Section 148

purchases amounting to Rs. 6,27,16,659/- as bogus and made addition of 12.5% of the said amount, taking into consideration the profit element involved in the transaction in question. 3. Aggrieved by the assessment order, the assessee challenged the same before the First Appellate Authority ... lower percentage in their case, which is convincing and also based on the same logic adopted by the case law cited for estimating the profit element embedded on non-genuine purchases, the AO is directed to restrict the estimation of the profit @ 6.5% on the total non genuine purchases

The Timken Company, Kolkata vs. The DDIT, International Taxation - 3(1), Kolkata

In the result appeals for AY 2004-05 to 2007-08 are allowed

ITA 1268/KOL/2014[2005-06]Status: DisposedITAT Kolkata29 Nov 2017AY 2005-06

Bench: Hon’Ble Sri N.V.Vasudevan, Jm & Shri M.Balaganesh Am]

For Appellant: Shri Ravi Sharma, ARFor Respondent: Shri N.B.Som, Addl. CIT, Sr.DR

compensation payable by TIL to the Assessee for the services would cover only the cost actually incurred by the Assessee and that no profit element or mark-up on the cost would be added to it. Article 1.1 of the said Agreement describes the nature of services and it reads ... DTAA) 2. The receipts representing profits and gains of business are also not taxable in India under the domestic law, since there is no profit element involved in such receipts and there would be NIL taxable income after deduction of expenses of matching amount following the principles laid down

The Timken Company, Kolkata vs. A.D.I.T (International Taxation) - II, Kolkata

In the result appeals for AY 2004-05 to 2007-08 are allowed

ITA 2139/KOL/2013[2004-05]Status: DisposedITAT Kolkata29 Nov 2017AY 2004-05

Bench: Hon’Ble Sri N.V.Vasudevan, Jm & Shri M.Balaganesh Am]

For Appellant: Shri Ravi Sharma, ARFor Respondent: Shri N.B.Som, Addl. CIT, Sr.DR

ADIT(It)-3(1), Kolkata vs. The Timken Company, Kolkata

In the result appeals for AY 2004-05 to 2007-08 are allowed

ITA 387/KOL/2010[2002-03]Status: DisposedITAT Kolkata29 Nov 2017AY 2002-03

Bench: Hon’Ble Sri N.V.Vasudevan, Jm & Shri M.Balaganesh Am]

For Appellant: Shri Ravi Sharma, ARFor Respondent: Shri N.B.Som, Addl. CIT, Sr.DR

Malay Sanghavi, Mumbai vs. ITO 8(3)(2), Mumbai

The appeal of the revenue is dismissed in terms of our aforesaid observations

ITA 151/MUM/2017[2009-10]Status: DisposedITAT Mumbai29 Nov 2017AY 2009-10

Bench: Shri G.S.Pannu, Am & Shri Ravish Sood, Jm Ita No. 5682/Mum/2013 (निर्धारण वषा / Assessment Years: 2009-10 & 2010-11) Shri Malay N. Sanghvi, I.T.O-8(3)(2) बिधम/ M-1, Kalpita Enclave Co-Op. Aayakar Bhavan, Housing Society, Sahar Road, Churchgage, Vs. Andheri (East) Mumbai- 20 Mumbai-400 069 स्थायी लेखा सं./जीआइआर सं./ Pan No. Aaahe1478G (अऩीराथी /Appellant) (प्रत्मथी / Respondent) :

For Appellant: Shri Kirti J. Sheth, D.RFor Respondent: Shri Suman Kumar, Sr. A.R

Section 143(2)Section 143(3)Section 271(1)(c)Section 80I

taken by the CIT(A) that the addition in the hands of the assessee was liable to be made only in respect of the profit element pertaining to the purchases made by him from the open/grey market. We however are unable to persuade ourselves to be in agreement with ... basis of quantification of the profit element by the CIT(A) @ 24.26% of the purchases claimed by the assessee to have been made from the aforesaid parties. We are of the considered view that when it comes to quantification of the profit element involved in making of bogus purchase

ITO 19(2)(4), Mumbai vs. Naitik Gems, Mumbai

In the result, appeal of the Revenue is dismissed

ITA 6718/MUM/2016[2007-08]Status: DisposedITAT Mumbai29 Nov 2017AY 2007-08

Bench: Shri P.K. Bansal, Vice- & Shri Pawan Singhito -19(2)(4), M/S Naitik Gems Room No. 217, Matru Mandir, 1304, Prasad Chambers, Vs. Mumbai-400007. Opera House, Mumbai-400004. Pan: Aaafn5200F (Appellant) (Respondent)

For Appellant: Shri V. Justin (Sr. DR)For Respondent: Shri Ashok J. Patil (AR)

Section 143(1)Section 143(3)Section 147Section 148Section 253Section 254(1)

Whether, Ld. CIT(A) was correct in sustaining only 4% of the total purchase amountof Rs. 84,00,000/- from M/s Little Diam as profit element embedded in such purchases. 3. The appellant prays that the order of the Leaned CIT(A) on the above grounds be set aside ... goods, the entire amount covered under such 7 ITA No. 6718/M/2016- M/s Naitik Gems purchase would not be subjected to tax and only the profit element embedded therein was to be taxed. While coming to the above conclusion, the Hon'ble High Court also relied on the decision

DCIT - 9(1)(1), Mumbai vs. Airpac Filters & Systems Pvt. Ltd., Mumbai

In the result, cross appeals filed by the revenue and the assessee for assessment years 2009-10 and appeal filed by the assessee for the assessment year 2010-11 are dismissed

ITA 6049/MUM/2016[2009-10]Status: DisposedITAT Mumbai29 Nov 2017AY 2009-10

Bench: Shri R.C. Sharma (Am) & Shri Ram Lal Negi (Jm) Assessment Year: 2009-10 The Dcit – 9(1)(1), M/S Airpac Filters & Systems - Room No. 260A, 2Nd Floor, Pvt. Ltd., Aayakar Bhavan, M.K. Road, 21, Papa Industrial Estate, Mumbai - 400020 Vs. 40, Suren Road, Andheri (East), Mumbai - 400093

For Appellant: Shri Jitendra Singh (AR)For Respondent: Shri V. Justin (DR)

Section 143(2)Section 143(3)Section 147Section 148Section 271

Seth 356 ITR 451(Guj) upheld the decision of the Tribunal and sustained the addition 12.5% of the total bogus purchases holding that only profit element embedded in such purchases can be added to income of the assessee. In view Assessment Years: 2009-10 & 2010-11 of the cases discussed ... genuineness of the transactions the Ld. CIT(A) has made addition of 12.5% of the total purchases in question keeping in view the profit element involved in the purchases. Hence, in our considered view, the order passed by the Ld. CIT(A) is based on the principles of law down

Samkit Diamonds Exporters, Mumbai vs. ACIT 19(3), Mumbai

In the result both the appeals of the assessee as well of the revenue are allowed for statistical purposes

ITA 4133/MUM/2016[2012-13]Status: DisposedITAT Mumbai29 Nov 2017AY 2012-13

Bench: Shri Saktijit Dey & Shri Ramit Kocharआयकर अपीऱ सं./I.T.A. No.4133/Mum/2016 (नििाारण वर्ा / Assessment Year: 2012-13) बिाम/ Samkit Diamonds Exporters Acit 19(3) 111 Prasad Chambers, Tata Mumbai Road No.2, Opera House, V. Mumbai 400004 स्थायी ऱेखा सं./ Pan : Aakfs5302F (अपीऱाथी /Appellant) (प्रत्यथी / Respondent) ..

For Appellant: Shri. Sanjay K ParikhFor Respondent: Shri. V. Vidyadhar,Sr DR

Section 143(3)

assessee did produce cloth and sell finished goods, the entire amount covered under such purchase would not be subjected to tax and only the profit element embedded therein was to be taxed. While coming to the above conclusion, the Hon'ble High Court also relied on the decision ... Court held that since the purchases were not bogus, but were made from parties other than those mentioned in books of accounts, only the profit element embedded in such purchases could be added to the assessees income and as such no question of law arose in such estimation. The tribunal

Asst Cir 32(3), Mumbai vs. Shree Swastik Developers, Mumbai

In the result, the cross objection raised by the assessee is partly allowed

ITA 1102/MUM/2016[2011-12]Status: DisposedITAT Mumbai29 Nov 2017AY 2011-12

Bench: Shri D.T. Garasia () & Shri N.K. Pradhan () Assessment Year: 2011-12

For Appellant: Ms. Keyuri Desai, ARFor Respondent: Mr. Saurabh Kumar Rai. DR

Section 133(6)Section 143(3)Section 37(1)Section 40bSection 41(1)Section 69C

taken cognizance by the AO, (ii) as held in the decision in Saraswathi Oil Traders vs. CIT 254 ITR 259 (SC), it is the profit element on the total component in dispute which needs to be added to the income of the assessee. As the assessee had shown gross profit

ITO 5(2)(1), Mumbai vs. N.K. Ferromate(India) P. Ltd, Mumbai

The appeal of the Revenue is dismissed

ITA 6736/MUM/2016[2009-10]Status: DisposedITAT Mumbai28 Nov 2017AY 2009-10

Bench: Shri Joginder Singh & Shri G. Manjunathaassessment Year: 2009-10 Income Tax Officer-5(2)(1), M/S N.K. Ferromate (India) R. No.567, P. Ltd. बनाम/ Aayakar Bhavan, 32/40, Krishna Baug, Vs. M.K. Road, Shop No.6, 2Nd Parshiwada, Mumbai-400020 V.P. Road, Mumbai-400004 (राज"व /Revenue) ("नधा"रती /Assessee) P.A. No.Aaccn4388N Assessment Year: 2009-10 M/S N.K. Ferromate (India) Income Tax Officer-5(2)(1), P. Ltd. R. No.567, बनाम/ 32/40, Krishna Baug, Aayakar Bhavan, Vs. Shop No.6, 2Nd Parshiwada, M.K. Road, V.P. Road, Mumbai-400020 Mumbai-400004 ("नधा"रती /Assessee) (राज"व /Revenue) P.A. No.Aaccn4388N M/S N.K. Ferromate (India) Ltd.

ITO 32(1)(4), Mumbai vs. Darshan Gautam Salot, Mumbai

The appeal of the Revenue is allowed for

ITA 3765/MUM/2016[2009-10]Status: DisposedITAT Mumbai28 Nov 2017AY 2009-10

Bench: Shri Joginder Singh & Shri G. Manjunathaassessment Year: 2009-10 Income Tax Officer-32(1)(4), Shri Darshan Gautam Salot, R. No.202, C-11, 2Nd Floor, A-3.4, Soni Tower, बनाम/ Pratyaksha Kar Bhavan, Ram Nagar, Borivali (East), Vs. Bandra Kurla Complex, Mumbai-400092 Bandra (East), Mumbai-400051 (राज"व /Revenue) ("नधा"रती /Assessee) P.A. No.Bmops4552G

Section 133(6)Section 69C

ITO 9(1)(2), Mumbai vs. Amann Infra Developemnts Ltd, Mumbai

In the result, appeal of the Revenue is dismissed

ITA 929/MUM/2017[2011-12]Status: DisposedITAT Mumbai27 Nov 2017AY 2011-12

Bench: Shri R.C.Sharma, Hon’Ble & Shri Amarjit Singh, Hon’Bleito 9(1)(2), Room No. 260A, Vs. M/S. Amann Infra 2Nd Floor, Developments Limited 1St Floor, Juhu Azad Nagar Aayakar Bhavan, M.K. Road, Chs, C.D. Barfiwala Road, Mumbai – 400 020 Opp. New India Quarters, Andheri (West), Mumbai – 400 053 Pan/Gir No: Aagca 9826 R Appellant .. Respondent

Section 143(1)Section 143(3)Section 147

suppressed profit to the extent of 12.5% of the purchases 3 M/s. Amann Infra Developments Limited made from the bogus entities, as the suppressed profit element embedded in such purchases. This estimation is in addition to the GP shown by the appellant. Accordingly, this ground of appeal is partly allowed

Satish R. Rathod, Mumbai vs. ITO 15(3)(1), Mumbai

In the result, both the appeals are hereby ordered to be dismissed

ITA 567/MUM/2016[2010-11]Status: DisposedITAT Mumbai27 Nov 2017AY 2010-11

Bench: Shri P. K. Bansal, Vp & Shri Amarjit Singh, Jm

For Appellant: Shri Suresh AnchaliyaFor Respondent: Shri Purushottam Kumar (SR

Section 133(6)Section 142(1)Section 143(1)Section 69C

sell the fin/shed goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. This was the view of this Court in the case of Sanjay 01/cake Jndu5tries ... Court held that since the purchases were not bogus, but were made from parties other than those mentioned In books of accounts, only the profit element embedded in such purchases could be added to the assesses income and as such no question of law arose in such estimation. While arriving

ITO 29(1)(5), Mumbai vs. Jayprkash D. Barbhaya, Mumbai

In the result, the departmental appeal is dismissed

ITA 3606/MUM/2016[2009-10]Status: DisposedITAT Mumbai24 Nov 2017AY 2009-10

Bench: Shri D.T. Garasia & Shri Rajesh Kumarassessment Year: 2009-10 Assessment Year: 2010-11

For Appellant: Shri Bhadresh Joshi, A.RFor Respondent: Shri T.A. Khan, D.R

Section 133(6)

shown in books are. Therefore, the entire purchase from these parties cannot be added as bogus and what needs to be taxed is the profit element embedded in such transactions. Estimations, ranging from 12.5% to 25% have been upheld by the Hon'ble Gujarat High Court, depending upon the nature