2012 (8) TMI 150 - AT - Income Tax

Tribunal affirms sales estimate & net profit, upholds liability addition, dismisses Revenue challenge.

Vijay Kant Jaiswal, Versus Assistant Commissioner of Income Tax-5(1),

Vijay Kant Jaiswal, Versus Assistant Commissioner of Income Tax-5(1), - TMI Issues:1. Estimation of sales and net profit - Trading addition on account of suppression of sales.2. Addition of liability under section 41(1) of the Act.3. Adoption of net profit rate and sales amount by the Revenue.4. Deletion of addition under section 40A(3) of the Act.Estimation of sales and net profit - Trading addition on account of suppression of sales:The appeal involved a dispute regarding the estimation of sales and net profit by the Assessing Officer. The Assessing Officer estimated sales by applying the sale rate at 10% of the minimum selling rates, resulting in an addition of Rs. 22,98,053 as suppression of sales. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to estimate sales at Rs. 1,30,00,000 and net profit at 5%, providing relief to the assessee. The Tribunal found the Commissioner's estimation reasonable, affirming the decision.Addition of liability under section 41(1) of the Act:The issue revolved around confirming the addition of Rs. 8,20,628 on account of extinguishment of liability under section 41(1) of the Act. The assessee argued that the liabilities were outstanding in the balance sheet, contending that the limitation period did not apply. However, the Tribunal analyzed the facts and cited legal precedents to support the conclusion that there was no intention on behalf of the assessee to repay the amounts, upholding the decision to add the liability.Adoption of net profit rate and sales amount by the Revenue:The Revenue challenged the adoption of a net profit rate of 5% and the restriction of sales at Rs. 1,30,00,000 by the Commissioner of Income Tax (Appeals), as opposed to the 10% rate and higher sales amount estimated by the Assessing Officer. The Tribunal, having affirmed the Commissioner's decision on the appeal of the assessee, found no merit in the Revenue's grounds, considering them of academic interest only.Deletion of addition under section 40A(3) of the Act:The final issue concerned the deletion of the addition of Rs. 1,12,000 under section 40A(3) of the Act, where cash payment was made as per the directions of the excise authorities. The Tribunal noted that the purchases were made pursuant to a transfer permit issued by the excise department, and as the payments were made under the authorities' directions, it affirmed the decision to delete the addition.In conclusion, the Tribunal dismissed both the appeal of the assessee and the Revenue, upholding the decisions made regarding the estimation of sales and net profit, addition of liability under section 41(1) of the Act, and deletion of the addition under section 40A(3) of the Act. The judgment was pronounced in the open court on 5.6.2012.