2023 (2) TMI 911 - AT - Income Tax

Tribunal confirms undisclosed sales addition based on net profit rate, purchase sources & legal precedents.

ITO, WARD- NAGAON Versus SMT. MANUMATI BORO

The Tribunal upheld the ld. CIT(A)'s decision to sustain the addition for undisclosed sales to the extent of 3.90% as net profit, based on the business ... Undisclosed sales and estimated profit of the outside book sales at 3.9% - CIT(A) deleting the addition for undisclosed sale and sustaining the addition only to the extent of net profit element embedded in the alleged undisclosed sale - HELD THAT:- Finding of the ld. CIT(A) is in line with the judicial precedents as held consistently including in the judgment of President Industries [1999 (4) TMI 8 - GUJARAT HIGH COURT], as well as by the decision of the ITAT Delhi Bench in the case of Anil Kumar Bajaj [2018 (6) TMI 1512 - ITAT DELHI] We fail to find any infirmity in the order of the ld. CIT(A) who has rightly taken into consideration the net profit offered by the assessee in the last three years and has also taken into consideration that purchases made by the assessee are only made from Bharat Petroleum Ltd. and the ld. Assessing Officer has not disputed the said purchases and since the sale prices are not in control of the assessee and they have to be kept as per the rates decided by the oil marketing companies, the margin of profit can only be subject to tax. Thus, since the CIT(A) has applied highest of the net profit rate i.e., 3.90 % on the alleged undisclosed sales, we do not find any reason to interfere in the said finding. Thus, the effective ground of appeal raised by the revenue stands dismissed. Issues:- Undisclosed sales and estimated profit addition challenged by revenueAnalysis:1. The appeal pertains to undisclosed sales and estimated profit addition by the revenue for the Assessment Year 2017-18. The Assessing Officer concluded that the assessee did not disclose sales of Rs.2,39,42,814 based on impounded records during a survey. The ld. CIT(A) sustained the addition to the extent of 3.90% as net profit on the alleged undisclosed sale, partly allowing the assessee's appeal. 2. The key contention was whether the entire undisclosed sales should be taxed or only the net profit element. The ld. CIT(A) considered the nature of the business, where purchases were not in dispute, and observed that sales were made at rates directed by the Oil Marketing Companies. The ld. CIT(A) referred to precedents like CIT vs. President Industries and estimated the profit on the undisclosed sales at 3.90% amounting to Rs.9,33,770. 3. The ld. CIT(A) justified the decision by comparing the net profit rates offered by the assessee in the past years and the fact that purchases were solely from Bharat Petroleum Ltd. Since the sale prices were regulated by the oil marketing companies, only the profit margin could be subjected to tax. The ld. CIT(A) applied the highest net profit rate of 3.90% on the undisclosed sales, aligning with legal principles and previous judgments.4. The Tribunal upheld the ld. CIT(A)'s decision, dismissing the revenue's appeal. The Tribunal found no reason to interfere as the ld. CIT(A) correctly considered the net profit rates, the source of purchases, and the lack of control over sale prices. The effective ground of appeal raised by the revenue was thus dismissed, with other general grounds not requiring adjudication.In conclusion, the Tribunal upheld the ld. CIT(A)'s decision to sustain the addition for undisclosed sales to the extent of 3.90% as net profit, based on the business nature, purchase sources, and legal precedents. The revenue's appeal was dismissed, affirming the application of the highest net profit rate on the alleged undisclosed sales.