ITAT Adjusts Profit Estimation to 3% in Liquor Trade Case; Upholds Cash Credit Addition, Modifies Assessment.

The ITAT partially allowed the assessee's appeal, directing the Assessing Officer to recompute the income at 3% of the turnover for net profit estimation in the liquor trade, rather than the previously upheld 5%. Regarding unexplained cash credits, the ITAT confirmed the addition under section 69A, instructing separate consideration of specified banknotes deposited during demonetization, thus modifying the original assessment.

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Issues:
1. Estimation of net profit in liquor trade.
2. Treatment of unexplained cash credits under section 68 of the Income Tax Act.

Detailed Analysis:

1. Estimation of Net Profit in Liquor Trade:
The case involved an appeal by the assessee against the order of the Commissioner of Income Tax (Appeals) regarding the estimation of income for the assessment year 2017-18. The Assessing Officer estimated the income at 5% of the turnover due to the absence of sales bills. The CIT(A) upheld this estimation citing the jurisdictional ITAT's decision. The assessee contended that the estimation should vary case by case and cited other Tribunal judgments where net profit was estimated at 3%. The ITAT considered the varying profit percentages adopted in different cases and the impact of privilege fees, ultimately directing the Assessing Officer to recompute the income at 3% of the turnover, emphasizing the need for a holistic view.

2. Treatment of Unexplained Cash Credits:
Regarding the unexplained cash credits under section 68 of the Act, the Assessing Officer added a substantial amount to the income, which the assessee disputed. The CIT(A) referred to Supreme Court decisions to reject the assessee's argument that the deposits did not fall under section 68. The ITAT affirmed the CIT(A)'s decision, noting that even if the wrong section was quoted, the addition was valid under section 69A. However, the ITAT directed the Assessing Officer to separately consider the quantum of specified banknotes (SBN) deposited during the demonetization period while estimating the business income at 3% of turnover, thereby partially allowing the assessee's appeal.

In conclusion, the ITAT allowed the assessee's appeal in part, directing the re-computation of income at 3% of turnover for net profit estimation and confirming the treatment of unexplained cash credits under section 69A.

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