Gross Profit Rate Increase: ITAT Upholds CIT(A)'s Reduction from ₹1.01 Cr to ₹10.21 Lakh [Read Order]

The Lucknow Bench of Income Tax Appellate Tribunal(ITAT) upheld the Commissioner of Income Tax(Appeals) CIT(A)’s decision to reduce the gross profit addition from ₹1.01 crore to ₹10.21 lakh.

The Revenue-appellant appealed against the order of the CIT(A).In this case,Sachit Kumar Agarwal,respondent-assessee, was assessed under Section 143(3) of the Act through an order dated December 30, 2019. The total income was determined at ₹2,75,41,208, with an additional ₹5,93,000 as agricultural income. The Assessing Officer(AO) added ₹1,22,00,000 under Section 68 for cash deposits made during the demonetization period and increased the gross profit rate, leading to another addition of ₹1,01,54,618.

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The CIT(A) reduced the addition from Rs.1,01,54,618/- to Rs.10,20,693/- and deleted the rest. He found the gross profit rate used by the AO too high and unsupported, especially when compared to the 2.55% disclosed by the taxpayer. The CIT(A) concluded that the Assessing Officer's addition was based on assumptions rather than solid evidence.

Read More: ITAT upholds CIT(A) Order Deleting ₹12.92 Crore Income Tax Addition relying on Past Agricultural Purchases to fix 5.02% Gross Profit

During the hearing, the counsel for Revenue supported the AO’s order. The authorised representative for the taxpayer argued that the disclosed gross profit was in line with industry standards and referenced relevant precedents.

She claimed the AO’s increase in the gross profit rate was unreasonable and lacked evidence. She also stated that the CIT(A) wrongly rejected the taxpayer's book results and upheld the addition of Rs.10,20,693/-, which she considered unfair and unjust.

The two member bench comprising Subhash Malguria (Judicial Member) and Anadee Nath Misshra (Accountant Member) after reviewing the case, found that the Revenue did not provide sufficient reasons to change the CIT(A)'s decision. No evidence showed that the gross profit determined by the CIT(A) was too low.

As a result, the tribunal upheld the CIT(A)'s order, agreeing with the addition of Rs.10,20,693/- for gross profit and the deletion of the rest of the Rs.1,01,54,618/- addition.

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In conclusion, the appeal filed by the revenue was dismissed.

To Read the full text of the Order CLICK HERE

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