ITAT rules 85% gross profit addition unjustified; turnover estimated at 8% lump sum, no precedent set

The ITAT Delhi held that the addition of gross profit at 85% of turnover by the department was not justified as the assessee failed to substantiate business expenditure claims, and the department could not provide comparable evidence for such a high profit margin. Consequently, the tribunal directed the turnover to be estimated at a lump sum rate of 8%, emphasizing that this assessment shall not be treated as a precedent.

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The Appellate Tribunal (ITAT Delhi) in the appeal for AY 2017-18 against CIT(A)/NFAC's order u/s 143(1) r.w.s. 264 of the Income Tax Act, 1961, addressed the addition of Rs. 4,70,442/- representing 85% of the assessee's gross turnover from sale of milk and allied products. The Revenue upheld the addition, noting a 15% allowance for expenditure/wastage despite lack of supporting details from the assessee. The Tribunal found that neither party's submissions were fully acceptable: the assessee failed to prove business expenditure claims, while the Revenue lacked comparable data to justify an 85% profit margin. Consequently, the Tribunal directed assessment of the turnover at a lump sum estimated rate of 8%, explicitly stating that "the same shall not be treated as a precedent." The appeal was partly allowed, with the assessing authority instructed to finalize computations accordingly.

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