Britannia Biscuit Wholesale Dealer's Estimated Income Reduced to 1% from 1.5%: ITAT Reduces Income citing Earlier Years estimation [Read Order]

The Cuttack Bench of the Income Tax Appellate Tribunal reduced the estimated income of the assessee to 1% from 1.5% as estimated by the Assessing Officer (AO) due to the varying comparative percentages of profit in earlier years.

Madan Lal Gupta (assessee), a wholesale dealer of Britannia Biscuits in the course of assessment, the assessee's books of accounts were rejected, and the AO estimated the income at 1.5% of the total turnover, although the AO had initially proposed treating the Net Profit (NP) at 5%.

The assessee had disclosed a net profit of 0.62% for the impugned assessment year. Aggrieved by the AO’s order, the assessee filed an appeal before the commissioner of the Income Tax (appeals)[CIT(A)]. The CIT(A) confirmed the estimation.

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The Single Member Bench, comprising George Mathan, (Judicial Member) noted that for A.Y. 2009-10, the tribunal had estimated the income at 0.39%, considering that the comparative profit percentages for the earlier years varied between 0.25% and 0.45%. The Tribunal further noted that for the current Assessment Year, the percentage of profit was admittedly 0.62%.

The tribunal also observed that the facts for A.Y. 2009-10 could not be applied to the current year, as applying the same would affect the provisions of Section 140 of the Act, which could lead to the assessed income going below the returned income.

In the interest of justice, the Tribunal directed that the income of the assessee be estimated at 1% against the 1.5% estimated by the AO. In the result, the appeal filed by the assessee was partly allowed for statistical purposes.

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