2025 (2) TMI 575 - AT - Income Tax

ITAT reduces profit estimation on cash purchases from retailer rate to 1.50% for livestock transportation business

Haroon Shaikh Versus ITO, Ward-1, Dhule

Haroon Shaikh Versus ITO, Ward-1, Dhule - TMI The issues presented and considered in the judgment are as follows:1. Whether the assessment order issued without a Document Identification Number (DIN) is null and void in law.2. Whether the addition of Rs. 19,36,753 by estimating net profit at 8% on total sales of livestock is justified.3. Whether the assessee was engaged in wholesale trading business of livestock and if the addition made by estimating net profit at 8% was justified.The detailed analysis of the identified issues is as follows:Issue 1:The relevant legal framework and precedents were not explicitly mentioned in the judgment. The Court dismissed the legal issue raised by the assessee regarding the absence of a DIN in the assessment order as 'Not Pressed.'Issue 2:The Court considered the argument that the addition of Rs. 19,36,753 by estimating net profit at 8% on total sales of livestock was not justified. The Court analyzed the evidence presented by the assessee, including financial statements and submissions. The Court noted that the assessee was involved in transporting livestock on a commission basis, not wholesale trading. The Court found that the assessment made by the AO at 8% net profit was high and not based on a proper basis. The Court determined a net profit rate of 1.50% on the turnover and adjusted the profit amount accordingly.Issue 3:The Court examined whether the assessee was engaged in wholesale trading business and if the addition based on the 8% net profit estimation was justified. The Court considered the nature of the assessee's business as a transporter of livestock and not a retailer. The Court found that the net profit rate of 1.50% was more appropriate for the assessee's business activities. The Court applied this rate to calculate the profit for both assessment years, resulting in adjustments to the income declared by the assessee.Significant Holdings:The core principle established in the judgment is that the estimation of net profit should be based on the nature of the assessee's business activities. The Court determined that the assessee, engaged in transporting livestock on a commission basis, should be assessed at a lower net profit rate than that applied to wholesale traders. The final determinations on each issue led to the partial allowance of the assessee's appeals, with adjustments made to the assessed income based on the more appropriate net profit rate of 1.50%.Overall, the Court's analysis focused on the nature of the assessee's business, the evidence presented, and the proper application of net profit rates to determine the correct taxable income for the assessment years in question.