In a recent case, the Calcutta High Court set aside the order of the Income Tax Appellate Tribunal ( ITAT ) which affirms the Commissioner of Income Tax (Appeal)’s Order. It was found that the CIT(A) failed to properly estimate the Income and profit. The Court held that the overall gross profit as offered by the assessee at 9.64% was just and proper and does not call for any enhancement.
The appeal has been filed under Section 260A of the Income Tax Act, 1961 against the order passed by the ITAT order. Kohinoor Sarees Pvt Ltd, the assessee has raised the question whether, the Tribunal grossly erred in confirming the order of the Commissioner of Income Tax (Appeals) in not deleting the addition retained on assumption and estimate. The only question which falls for consideration is whether the estimation of the gross profit of the assessee for the assessment year under consideration namely 2013-14 as done by the assessing officer at 15.36% was justified.
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The assessee being aggrieved by the estimation done by the assessing officer in his order preferred appeal before the Commissioner of Income Tax (Appeals) CIT(A). The Commissioner by order allowed the appeal in part by fixing the gross profit at 12.16%. In doing so, the CIT(A) adopted the gross profit as reported by the assessee for the assessment year 2016-17. Against the order passed by the CIT(A), the assessee preferred appeal before the Tribunal. The Tribunal has dismissed the assessee’s appeal.
The CIT(A) holds that the books of accounts maintained by the assessee particularly the quantitative details of month-wise purchase and sales have been produced by the assessing officer and the assessing officer himself notes that the purchase/sale bills have also been produced before him. None of the evidence produced by the assessee has been refuted or called in question by the assessing officer.
The CIT(A) also noted all transactions were through banking channels and the assessing officer did not reject the books of accounts. The CIT(A) thus came to the conclusion that there is no scope for estimation of profits at 25% of the said purchase and also held that the finding of the Assessing Officer was without any basis.
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The CIT(A) noted the legal position that while estimating the income or profits of the assessee there should be a proper and reasonable basis. Applying this legal principle the CIT(A) drew a comparative table of the details of the book re-sales from the assessment year 2012-13 to assessment year 2015-16 and adopted the gross profit at 12.16%, which was the gross profit for the assessment year 2016-17.
The Coram comprising of Chief Justice T.S Sivagnanam and Justice Hiranmay Bhattacharyya viewed that if CIT(A) had faulted the assessing officer for not considering all the details and in absence of disbelieving the evidence and books produced by the assessee, the CIT(A) ought to have affirmed overall gross profit as offered by the assessee at 9.64%. That apart, the CIT(A) had adopted the highest gross profit that was for the assessment year 2016-17 whereas the case on hand is with regard to the assessment year 2012-13.
The court found that CIT(A) felt in error in doing so for adopting the highest gross profit that too which was for the assessment year 2016-17. The Court held that the overall gross profit as offered by the assessee at 9.64% was just and proper and does not call for any enhancement.
While allowing the appeal , the bench set aside the orders of Tribunal and the CIT(A) and the Assessing Officer. Further determined the gross profit of the assessee is determined at 9.64% for the assessment year under consideration.
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