No Addition can be made on Undisclosed Contract Receipt from the Business of Purchase and Sale of Fish: ITAT Deletes the Addition [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has recently held that no addition can be made to an undisclosed contract receipt from the business of purchase and sale of fish therefore the bench deleted the addition made by the assessing officer.

Assessee Sanjibar Rahman filed the appeal against the order of the CIT (A) on the ground of an addition made on the deposits in the bank accounts of the assessee which arose on the purchase and sale of fish. 

During the assessment proceedings, the AO concluded that deposits in these banks are the undisclosed business receipt. He took taxable profit at 8% on the said undisclosed sales.  

When the said appeal was filed before the CIT (A), they confirmed the addition and considered that 8% is a fair estimate of net taxable profit.

Thereafter the assessee filed a second appeal before the tribunal.

Before the bench, the assessee submitted that Deposits were from the sale proceeds of fish. Also, the whole of such sale proceeds should not be taxed. The sums deposited in the bank accounts were remitted to the suppliers subsequently. After consideration of contra entries, the assessee had correctly offered Rupees 6,03,762/- for taxation.

N.T. Sherpa counsel for the revenue submitted that the assessee was having substantial receipt from the sale of fish. The sale proceeds were deposited in an undisclosed bank account. Assessee offered a sum of Rs.6,03,762/- out of such sales. The offer of the assessee has no basis

The tribunal after considering the contentions observed that the assessee estimated the profit at 8%. Moreover, while taking the profit at 8%, he has not referred to any comparative case where an agent like an assessee has disclosed the profit at 8%.

Therefore, the estimation of profit is always involved in guesswork. It can never be accurate but there must be some material justifying the guesswork of the adjudicating authority.

Rajpal Yadav, (Vice-President) and Manish Borad, (Accountant Member) of the tribunal allowed the appeal filed by the assessee and direct the AO to take an estimated income at 4% and credit of income disclosed by the assessee to be given Rs.6,03,762/-.

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