The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) in ACIT v. Kitman International, held that once the Addition is made by estimating Gross Profit as a whole, then there is no need for separate additions or disallowances under the Income Tax Act.
In the instant case, the Assessing Officer issued notices to various suppliers to confirm the purchase transactions made by the assessee. However, the same elicited no satisfactory response with respect to eight suppliers aggregating to Rs.69.46 Lacs, the details of which have been extracted in the quantum assessment order. Further, the Assessing Officer opined that the gross profit rate reflected by the assessee, was not commensurate with earlier years. Therefore, while rejecting the books of accounts.
The first appellate authority reversed the decision by holding that the books of accounts has been rejected and the profit has been estimated by applying earlier years’ Gross Profit rate to Sales Turnover reflected by the assessee in the impugned AY.
Upholding the above decision, the bench noted that “Once the addition was made by estimating Gross Profit as a whole, separate additions / disallowances to increase the same further was not warranted / justified. The Ld. AO, in our opinion, erred in making multiple additions, which, in effect, resulted into increase in Gross Profit Rate only. Therefore, finding the stand of Ld. CIT(A) quite reasonable one, we see no reason to interfere with the same.”
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