Assessing Officer Can’t make Addition on Estimate Basis: ITAT [Read Order]

Assessing Officer - claim - ITAT - Taxscan

In Arup Kumar Hazra vs. ITO, the Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) held that when the books of accounts are not rejected, gross profit cannot be estimated.

The assessee is a dealer in liquified petroleum gas of Indian Oil Corporation Ltd. Returns were filed disclosing total income at Rs.6,74,512. The Assessing Officer (A.O.) completed the assessment by determining the total income of the assessee at Rs.38,66,460/-, interalia making addition on account of concealed investment, alleged gross profit earned on commission on estimate basis, violation of provision of Section 269SS of the Income Tax Act, 1961.  The First Appellate Authority granted part relief.  Thereafter appeal was made before the ITAT.

The issue before the ITAT was the addition of Rs.11.07 Lacs made by the Assessing Officer on estimate basis on the ground that the assessee has earned the undisclosed gross profit.

The Bench comprising of Accountant Member J. Sudhakar Reddy found that the Assessing Officer had made the addition on estimate basis, without disturbing the opening stock, purchase and sales and closing stock of High Speed Diesel and Motor Spirit. The member noted that the books of accounts of the assessee had not been rejected. He pointed out that the assessee had maintained books of accounts and those were duly audited u/s 44AB of the Income Tax Act. The tribunal found that all the purchases were made through proper banking channels and that the sales were made in cash.

Relying on the decision of the Calcutta High Court in the case of Swadeshi Commercial Co. Ltd. vs. CIT, the Tribunal observed “The Assessing Officer has no evidence to come to a conclusion that the assessee had earned undisclosed profit. The entire addition was made on surmises and conjectures. Even otherwise, I find that the assessee has explained the issue with facts and figures. Under these facts and circumstances, the addition made by the Assessing Officer as sustained by the ld. CIT(A), is bad in law.”

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