Tribunal directs 5% profit estimation in IMFL business, remits unexplained investment issue for re-examination.

The Tribunal partially allowed the appeal, directing the Assessing Officer to estimate the profit in the IMFL business at 5% of total purchases net of deductions, following a precedent. The issue of unexplained investment of Rs. 7,99,000 was remitted back to the Assessing Officer for re-examination due to insufficient evidence and lack of proper enquiry by the CIT(A).

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Issues involved:
1. Estimation of profit in IMFL business
2. Unexplained investment of Rs. 7,99,000

Estimation of profit in IMFL business:
The appeal was against the order of the Commissioner of Income Tax (Appeals) regarding the assessment year 2011-12. The assessee, an individual in the business of purchasing and selling IMFL, initially declared a total income of Rs. 2,20,210. The assessment was completed under section 143(3) of the Income Tax Act, estimating income at 20% of stock put to sale. The CIT(A) granted partial relief by reducing the percentage to 10% and directed the Assessing Officer (A.O.) to re-compute income at 8% of the purchase price. The Tribunal heard arguments from both parties, with the assessee citing a previous decision where a 5% profit margin was deemed reasonable in a similar case. The Tribunal agreed with the assessee, directing the A.O. to estimate the profit at 5% of total purchases net of all deductions, based on the precedent set by the coordinate bench.

Unexplained investment of Rs. 7,99,000:
Regarding the unexplained investment, the assessee provided confirmation letters from creditors but failed to explain the purchase of demand drafts (DDs) by third parties. The CIT(A) upheld the addition of Rs. 7,99,000 as unexplained investment since the source was not adequately proven. The Tribunal considered the confirmation letters and the lack of proper details during assessment proceedings. It noted that the Assessing Officer doubted the transaction without proper enquiry and remanded the issue back to the A.O. for re-examination. The Tribunal found the actions of both the Assessing Officer and the CIT(A) unjustified and partially allowed the appeal, remitting the matter back to the A.O. for fresh consideration.

In conclusion, the Tribunal allowed the appeal in part, directing the A.O. to re-compute the income based on a 5% profit margin for the IMFL business and remitting the issue of unexplained investment back for further examination.

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