Estimated profit rate in liquor trade reduced to 3% after factual review of turnover and privilege fee impact

Where cash memos were not maintained for cash sales in liquor trade, income had to be estimated on a factual basis rather than by mechanical application of a fixed rate. The applicable net profit margin depended on the circumstances of each case, and the later introduction of privilege fee was treated as relevant to the profit margin. On a holistic appraisal of the record, the lower estimate was found appropriate, and the net profit was directed to be estimated at 3% of turnover with recomputation of income accordingly.

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Issues: Whether the net profit from liquor trade should be estimated at 5% of the turnover or reduced to 3%.

Analysis: The assessee had not maintained cash memos for cash sales, requiring an estimation of income. The adopted rate of profit was found to depend on the facts of each case, and the subsequent introduction of privilege fee was considered relevant to the profit margin. On a holistic appraisal of the record and circumstances, a lower estimate was found to be appropriate.

Conclusion: The net profit was directed to be estimated at 3% of the turnover, and the Assessing Officer was directed to recompute the income accordingly.

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