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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

Metal Power Analytical (I) P.Ltd, Mumbai vs. DCIT 8(2), Mumbai

In the result, the appeal is partly allowed

ITA 3520/MUM/2015[2010-11]Status: DisposedITAT Mumbai19 May 2017AY 2010-11

Bench: Shri Joginder Singh () & Shri N.K. Pradhan () Assessment Year: 2010-11

For Appellant: Dr. K. Shivaram, Senior AdvocateFor Respondent: Shri Purushottam Kumar, DR
Section 143(3)Section 234BSection 251(2)Section 69C

High Court held that since purchases were not bogus but were made from parties other than those mentioned in the books of account, only profit element embedded in such 9 purchases could be added to assessee’s income. The decision in the case of CIT vs. Vijay M. Mistry Construction ... followed by the Hon'ble High Court. 8.3 In the instant appeal, the facts being similar, we have to ascertain the profit element embedded in such purchases which can be added to the income of the assessee. We find it just and fair to estimate 12.5% of the purchase cost

ACIT, Hubli vs. Shri. Mallanagouda S. Sankagoudashani, Hubli

In the result the appeal of the assessee is partly allowed and revenue is dismissed

ITA 295/BANG/2014[2011-12]Status: DisposedITAT Bangalore19 May 2017AY 2011-12

Bench: Shri Vijay Pal Rao & Shri S. Jayaramanassessment Year: 2011-12 Shri Mallanagouda S. Sankagoudashani, No.222, 2Nd Floor, The Deputy Commissioner Of Bhavani Arcade, Income Tax, Vs. Near Basav Vana, N.C.M., Circle 1(1), Hubli – 580 029. Hubli. Pan: Aeups 7783Q Appellant Respondent Assessment Year: 2011-12 Shri Mallanagouda S. Sankagoudashani, The Assistant Commissioner Of No.222, 2Nd Floor, Income Tax, Bhavani Arcade, Vs. Circle 1(1), Near Basav Vana, N.C.M., Hubli. Hubli – 580 029. Pan: Aeups 7783Q Appellant Respondent

For Appellant: Shri G. Kamaladhar, Standing CounselFor Respondent: Shri Ashok Kulkarni, Advocate

action of the AO before the CIT(A) and submitted that the addition made on the entire amount is not justified as only profit element in the said sale could be taxed and not the whole of the receipts. The CIT(A) did not accept the contention of the assessee ... year 2006-08 has directed the AO to adopt the GP rate at 5.5%. Thus, the ld. AR has contented that only the income / profit element in the said receipt can be taxed. On the other hand, the ld. DR has relied upon the orders of the authorities below

Sri. Mallangouds Sankagoudashani, Hubli vs. DCIT, Hubli

In the result the appeal of the assessee is partly allowed and revenue is dismissed

ITA 259/BANG/2014[2011-12]Status: DisposedITAT Bangalore19 May 2017AY 2011-12

Bench: Shri Vijay Pal Rao & Shri S. Jayaramanassessment Year: 2011-12 Shri Mallanagouda S. Sankagoudashani, No.222, 2Nd Floor, The Deputy Commissioner Of Bhavani Arcade, Income Tax, Vs. Near Basav Vana, N.C.M., Circle 1(1), Hubli – 580 029. Hubli. Pan: Aeups 7783Q Appellant Respondent Assessment Year: 2011-12 Shri Mallanagouda S. Sankagoudashani, The Assistant Commissioner Of No.222, 2Nd Floor, Income Tax, Bhavani Arcade, Vs. Circle 1(1), Near Basav Vana, N.C.M., Hubli. Hubli – 580 029. Pan: Aeups 7783Q Appellant Respondent

For Appellant: Shri G. Kamaladhar, Standing CounselFor Respondent: Shri Ashok Kulkarni, Advocate

action of the AO before the CIT(A) and submitted that the addition made on the entire amount is not justified as only profit element in the said sale could be taxed and not the whole of the receipts. The CIT(A) did not accept the contention of the assessee ... year 2006-08 has directed the AO to adopt the GP rate at 5.5%. Thus, the ld. AR has contented that only the income / profit element in the said receipt can be taxed. On the other hand, the ld. DR has relied upon the orders of the authorities below

Manish Kanji Patel, Mumbai vs. ITO 4(1)(4), Mumbai

In the result Departmental appeal ground No

ITA 7627/MUM/2014[2009-10]Status: DisposedITAT Mumbai18 May 2017AY 2009-10

Bench: Shri D.T. Garasia, Jm & Ashwani Taneja, Am

For Appellant: Shri MC Omi Ningshen (DR)
Section 133(6)Section 40ASection 40A(3)

assessee has purchase the paper from the local market and he has made Manish Kanji Patel 7 sales of the paper. Therefore, only profit element should be added he relied on various judgements which reads as under: Sr. No. Copy of Judgments Balaji Textile Industries P Ltd v Third Income ... Simit P. Sheth 356 ITR 451 (Guj.) wherein the Hon’ble Gujarat High Court held that entire purchase price cannot be added only profit element embedded in the such purchase can be added to the total income of the assessee. The Hon’ble High Court has held that: - “The assessee

ITO 4(1)(4), Mumbai vs. Manish Kanji Patel, Mumbai

In the result Departmental appeal ground No

ITA 7300/MUM/2014[2010-11]Status: DisposedITAT Mumbai18 May 2017AY 2010-11

Bench: Shri D.T. Garasia, Jm & Ashwani Taneja, Am

For Appellant: Shri MC Omi Ningshen (DR)
Section 133(6)Section 40ASection 40A(3)

assessee has purchase the paper from the local market and he has made Manish Kanji Patel 7 sales of the paper. Therefore, only profit element should be added he relied on various judgements which reads as under: Sr. No. Copy of Judgments Balaji Textile Industries P Ltd v Third Income ... Simit P. Sheth 356 ITR 451 (Guj.) wherein the Hon’ble Gujarat High Court held that entire purchase price cannot be added only profit element embedded in the such purchase can be added to the total income of the assessee. The Hon’ble High Court has held that: - “The assessee

ITO 4(1)(4), Mumbai vs. Manish Kanji Patel, Mumbai

In the result Departmental appeal ground No

ITA 7299/MUM/2014[2008-09]Status: DisposedITAT Mumbai18 May 2017AY 2008-09

Bench: Shri D.T. Garasia, Jm & Ashwani Taneja, Am

For Appellant: Shri MC Omi Ningshen (DR)
Section 133(6)Section 40ASection 40A(3)

assessee has purchase the paper from the local market and he has made Manish Kanji Patel 7 sales of the paper. Therefore, only profit element should be added he relied on various judgements which reads as under: Sr. No. Copy of Judgments Balaji Textile Industries P Ltd v Third Income ... Simit P. Sheth 356 ITR 451 (Guj.) wherein the Hon’ble Gujarat High Court held that entire purchase price cannot be added only profit element embedded in the such purchase can be added to the total income of the assessee. The Hon’ble High Court has held that: - “The assessee

Sion Steel, Mumbai vs. ITO WD 26(3)(2), Mumbai

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

ITA 7598/MUM/2016[2009-10]Status: DisposedITAT Mumbai17 May 2017AY 2009-10

Bench: Shri G.S.Pannum/S. Sion Steels, A-159, Naik Nagar, Near Maharashtra- Weigh Bridge, Lbs Marg, Sion (W), Mumbai 400 022. Pan:Aabfs 7718L ...... Appellant Vs. The Income Tax Officer, Ward 26(3)(2), Pratyakshyakar Bhavan, Bandra Kurla Complex, Bandra(E), Mumbai -400 051 .... Respondent

For Appellant: Shri Pravin N. ShahFor Respondent: Shri A.K.Kardam
Section 143(3)

sought to be canvassed that that even if assessee fails to 3 prove the purchases in question, what can be assessed is only the profit element of such purchases as laid down by the Hon'ble Gujarat High Court in the case of Simit P. Sheth(supra). In my considered ... opinion, under similar circumstances the Hon'ble Gujarat High Court upheld the plea of the assessee for an addition equivalent to the profit element embedded in such purchases. Considering the aforesaid ratio, in my view, it would be in the fitness of thing that the addition is sustained

Jacobs Engineering India P.Ltd, Mumbai vs. DCIT RG 8(2), Mumbai

In the result, the appeal of the assessee is treated as allowed

ITA 7194/MUM/2012[2008-09]Status: FixedITAT Mumbai17 May 2017AY 2008-09

Bench: Shri B.R. Baskaran (Am) & Shri C.N. Prasad I.T.A. No. 7194/Mum/2012 (Assessment Year 2008-09)

Section 144C(5)

wrongly included “Infrastructure charges” in the transactions, since the same is mere recovery of overhead charges and it does not involve any profit element. According to Ld A.R, if it is excluded then the Related Party transaction would be well within the criteria of 25%. We find merit ... expenses incurred by a group concern on behalf of the assessee and hence the same should not be considered as a commercial transaction involving profit element. Accordingly we direct the AO to exclude “Infrastructure and overhead recoveries” while computing the percentage of Related party transactions. 16. The TPO had rejected

Powerful India P.Ltd, Mumbai vs. DCIT 8(2), Mumbai

In the result, appeal of the assessee is treated as partly allowed for statistical purposes, as above

ITA 7086/MUM/2012[2008-09]Status: DisposedITAT Mumbai17 May 2017AY 2008-09

Bench: Shri G.S.Pannu & Shri Pawan Singhpowertel India Private Limited, C/O. Unit No.94/95, Sdf-Iii, Seepz-Sez, Andheri (East), Mumbai 400 096 Pan:Aabcp 4490K ...... Appellant Vs. The Dcit 8(2), Aaykar Bhavan,M.K.Road, Mumbai -400 020 .... Respondent

For Appellant: Shri Ramesh S. IyerFor Respondent: Mrs. Malathi Sridharan
Section 143(3)Section 92B

Officer difference in the risk perception vis-a-vis the comparables; another aspect which was 6 asserted by the assessee was the absence of profit element on the raw material cost because 95% of the raw material was free of cost in the hands of the assessee company, whereas

DCIT, Chennai vs. Florind Shoes (P) Ltd., Chennai

In the result, the appeal of the Revenue is allowed for statistical purpose

ITA 820/CHNY/2014[2003-04]Status: DisposedITAT Chennai12 May 2017AY 2003-04

Bench: Shri N.R.S. Ganesan & Shri D.S.Sunder Singhआयकर अपील सं./Ita Nos.265 & 820/Mds/2014 "नधा+रण वष+ /Assessment Year: 2003-04

For Respondent: 13.03.2017
Section 143(3)Section 147Section 148

Loss A/c both debit and credit sides. The Ld.AR submitted that the High Sea Sales were made at cost price and there was no profit element in the transaction. Accordingly, the Ld.AR contended that the addition made by the AO required to be deleted. On the other hand, the Ld.DR

Floring Shoes P Ltd., Chennai vs. DCIT, Chennai

In the result, the appeal of the Revenue is allowed for statistical purpose

ITA 265/CHNY/2014[2003-04]Status: DisposedITAT Chennai12 May 2017AY 2003-04

Bench: Shri N.R.S. Ganesan & Shri D.S.Sunder Singhआयकर अपील सं./Ita Nos.265 & 820/Mds/2014 "नधा+रण वष+ /Assessment Year: 2003-04

For Respondent: 13.03.2017
Section 143(3)Section 147Section 148

Loss A/c both debit and credit sides. The Ld.AR submitted that the High Sea Sales were made at cost price and there was no profit element in the transaction. Accordingly, the Ld.AR contended that the addition made by the AO required to be deleted. On the other hand, the Ld.DR

Gemological Institute International, Inc, Mumbai vs. DDIT (It) -3(1), Mumbai

In the result, both the appeals are allowed

ITA 4659/MUM/2014[2009-10]Status: DisposedITAT Mumbai09 May 2017AY 2009-10

Bench: Shri Ashwani Taneja () - 2009-10 - 2011-12 Gemological Institute Dy.Cit 2(2)(1), Mumbai International Inc, C/O Gia India Laboratory P Ltd, 10Th Floor, Trade Centre, Bandra Vs. Kurla Complex, Bandra (E), Mumbai-400 051 Pan – Aadcg6758M Appellant Respondent

For Appellant: Shri JD Mistrty / Niraj ShethFor Respondent: Shri Shahi Sanjay Kumar, CIT DR

that. However, if an amount is not part of FTS and if the amount is merely on account of reimbursement of expenses wherein no profit element is embedded, then it cannot be taxed as part of FTS. In support of this proposition, he relied upon a very recent judgement ... upon the copy of transfer pricing study report and order passed by the TPO in the case of GIA India to show that no profit element was involved in the amount paid by it to the assessee on account of reimbursement of expenses. 7. Per contra, the Ld. DR relied

ACIT 25(1), Mumbai vs. Bharat Gajani, Mumbai

In the result, the appeal of the Revenue is dismissed

ITA 5175/MUM/2014[2011-12]Status: DisposedITAT Mumbai08 May 2017AY 2011-12

Bench: Shri D.T. Garasia, Jm & Shri Rajesh Kumar, Am

For Appellant: Shri Suman Kumar, DRFor Respondent: Shri Sanjay Kapadia, AR
Section 133ASection 147

through cheques, the ITO found that they were not available. Therefore, in view of the case only entire profits cannot be added but only profit element can be added. 8. The learned AR submitted that the assessee is a contractor carried out the work of Government. To executive the identified

ACIT 25(1), Mumbai vs. Bharat Gajani, Mumbai

In the result, the appeal of the Revenue is dismissed

ITA 5174/MUM/2014[2010-11]Status: DisposedITAT Mumbai08 May 2017AY 2010-11

Bench: Shri D.T. Garasia, Jm & Shri Rajesh Kumar, Am

For Appellant: Shri Suman Kumar, DRFor Respondent: Shri Sanjay Kapadia, AR
Section 133ASection 147

through cheques, the ITO found that they were not available. Therefore, in view of the case only entire profits cannot be added but only profit element can be added. 8. The learned AR submitted that the assessee is a contractor carried out the work of Government. To executive the identified

ACIT 25(1), Mumbai vs. Bharat Gajani, Mumbai

In the result, the appeal of the Revenue is dismissed

ITA 5173/MUM/2014[2009-10]Status: DisposedITAT Mumbai08 May 2017AY 2009-10

Bench: Shri D.T. Garasia, Jm & Shri Rajesh Kumar, Am

For Appellant: Shri Suman Kumar, DRFor Respondent: Shri Sanjay Kapadia, AR
Section 133ASection 147

through cheques, the ITO found that they were not available. Therefore, in view of the case only entire profits cannot be added but only profit element can be added. 8. The learned AR submitted that the assessee is a contractor carried out the work of Government. To executive the identified

ACIT 25(1), Mumbai vs. Bharat Gajani, Mumbai

In the result, the appeal of the Revenue is dismissed

ITA 5172/MUM/2014[2008-09]Status: DisposedITAT Mumbai08 May 2017AY 2008-09

Bench: Shri D.T. Garasia, Jm & Shri Rajesh Kumar, Am

For Appellant: Shri Suman Kumar, DRFor Respondent: Shri Sanjay Kapadia, AR
Section 133ASection 147

through cheques, the ITO found that they were not available. Therefore, in view of the case only entire profits cannot be added but only profit element can be added. 8. The learned AR submitted that the assessee is a contractor carried out the work of Government. To executive the identified

ACIT 25(1), Mumbai vs. Bharat Gajani, Mumbai

In the result, the appeal of the Revenue is dismissed

ITA 5171/MUM/2014[2007-08]Status: DisposedITAT Mumbai08 May 2017AY 2007-08

Bench: Shri D.T. Garasia, Jm & Shri Rajesh Kumar, Am

For Appellant: Shri Suman Kumar, DRFor Respondent: Shri Sanjay Kapadia, AR
Section 133ASection 147

through cheques, the ITO found that they were not available. Therefore, in view of the case only entire profits cannot be added but only profit element can be added. 8. The learned AR submitted that the assessee is a contractor carried out the work of Government. To executive the identified

Dimension Data Asia Pacific Pte. Ltd, Mumbai vs. DCIT (It) 2(1)(2), Mumbai

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

ITA 684/MUM/2016[2011-12]Status: DisposedITAT Mumbai05 May 2017AY 2011-12

Bench: S/Shri Jason P Boaz,(Am) & Saktijit Dey, (Jm) Dimension Data Asia Pacific The Dy. Commissioner Of Pte.Ltd,(Formerly Known As Income Tax (International Datacraft Asia Pte. Ltd), Taxation), 2(1)(2), फनधभ/ C/O Dhruva Advisors Llp, 12Th Fl., 17Th Floor, Air India Building, Discovery Of India Building, Vs. Nariman Point, Dr.Annie Besent Road, Mumbai-400021 Worli, Mumbai-400018 (अऩीरधथी /Appellant) (प्रत्मथी / Respondent) : स्थधमी रेखध सं./ Pan : Aadcd4348L अऩीरधथी की ओय से / Assessee By : S/Shri Sunil Moti Lala & Tushar Hathiramani प्रत्मथी की ओय से/Revenue By : S/Shri Jasbir Chauhan & M V Rajguru सुनवधई की तधयीख /Date Of Hearing : 28.4.2017 घोषणध की तधयीख /Date Of Pronouncement : 5.5.2017

For Appellant: S/Shri Sunil Moti Lala and Tushar HathiramaniFor Respondent: S/Shri Jasbir Chauhan and M V Rajguru
Section 143(3)Section 144C(13)

India PE was not submitted either before AO or DRP. Thus, as could be seen, assessee’s claim and contentions with regard to the profit element of fees received from DDIL and income attributable to the India PE has not been properly considered either

Geolife Organics, Mumbai vs. Asst CIT 23(2), Mumbai

In the result, the appeals of all the assessees are allowed in part

ITA 3699/MUM/2016[2009-10]Status: DisposedITAT Mumbai05 May 2017AY 2009-10

Bench: Shri R.C.Sharma, Am & Shri Sandeep Gosain, Jm M/S. Geolife Organics Vs. Acit – 23(2), Mumbai- 301, Marathon Max, 400051 L.B.S.Marg, Opp. Nirmal Lifestyle, Mulund(W), Mumbai – 400 080 Pan/Gir No. Aahfg7722N Appellant) .. Respondent) Shri Vikram N. Chandan, Vs. Ito – 19(3)(5), Mumbai- Shop No.756/54, Nanubhai 400 007 Desai Road, Mumbai – 400 004 Pan/Gir No. Acypc2583N Appellant) .. Respondent) Shri Jabarsingh B Daiya, Vs. Ito – 19(2)(1), Mumbai – R.No.16, 1St Floor, Mulji 400 007 Madhavji Building, 160, C.P.Tank Road, Mumbai – 400 064 Pan/Gir No. Ahypd4454E Appellant) .. Respondent) Shri Rajendra Nemichandji Vs. Ito – 19(3)(1), Mumbai – Chandan, 38, Ground Floor, 400 007 Alankar Building, 245/247, Khetwadi Lane, S.V.P. Road, Mumbai – 400 004 Pan/Gir No. Aeypc6575L Appellant) .. Respondent) M/S. Geolife Organics, Mumbai & Others

Section 14Section 143(3)Section 145(3)Section 234BSection 271(1)(c)

made by the AO to the income of the Appellant on M/s. Geolife Organics, Mumbai and others account of possible profit element @ 12.5% embeded in purchases made through alleged non-genuine parties on the basis of information of the Sales Tax Department about suspicious dealers having rejected the accounts u/s.145 ... considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. d) Without prejudice, the rate or percentage of profit element embeded in such purchases as fixed by the AO and confirmed by the CIT(A) is excessive and unreasonable on the facts

Rajen Nanalal Shanghvi, Mumbai vs. ITO - 25(3)(3), Mumbai

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

ITA 703/MUM/2017[2009-10]Status: DisposedITAT Mumbai04 May 2017AY 2009-10

Bench: Shri B.R. Baskaran (Am) I.T.A. No. 703/Mum/2017 (Assessment Year 2009-10)

decision rendered by Hon’ble Gujarat High Court in the case of Smit P Shah (ITA No.553 of 2012), took the view that the profit element from the purchases should be estimated. Accordingly he completed the assessment by adding 15% of the purchase value of Rs.35,99,438/- referred above