TaxTMI 
TaxTMI 
2025 (12) TMI 1650
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....pellate Tribunal was right in law in adopting the Gross Profit Rate of 12.5% for Clandestine Sales for the Assessment Year 2009-10, when the Assessing Officer for the later Assessment Years i.e. 2010-11 to 2014-15, has adopted an average rate of 7.65% for clandestine sales, without pointing out any difference in material facts.?" 2. The present appeal emanates from the order dated 17.09.2021 passed by the Income Tax Appellate Tribunal, Ahmedabad "A" Bench. The brief facts leading to the filing of the present appeal are as under: 2.1 The appellant is engaged in the business of manufacturing of pesticides. The appellant had filed its return of income on 26.09.2009 declaring its total income at Rs. 7,59,890/-. The said return was process....
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....e treated as income. 2.4 Meanwhile, in respect of other assessment years forming part of the same cluster i.e. Assessment Year 2010-11 to Assessment Year 2014-15, the case of the appellant was reopened. The Assessment Orders were passed on 26.12.2017, and the appellant moved for Settlement Application under Section 245C(1) of the Act offering Gross Profit at the rate of 7.75% and the said application was admitted vide order under Section 245D(1) of the Act dated 10.01.2018. The entire factum of the undisclosed sales for the Assessment Year 2010-11 to 2014-15 is discernible from order of Income Tax Settlement Commission, Mumbai, under Section 245D(2C) of the Act which was being placed before the authorities below. 2.5 Simultaneously, b....
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....ted that the Gross Profit rate for the aforesaid years for Assessment Year 2010-11 and 2014-15 has been adopted on the average rate of 7.65%, the details of which were already pointed out before the Tribunal. 3.1 Thus, it is submitted that the rate of 12.5% which has been adopted by the CIT (Appeals) was a guess work and later on the Income-tax Appellate Tribunal confirmed the same on the basis of book results of the past 20 years which could not have been adopted. He has referred to the observations recorded by the CIT (Appeals) and has submitted that the same is erroneous and the Gross Profit rate as adopted by the Assessing Officer mentioned herein above and as disclosed in the order of the Settlement Commissioner is required to be co....
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.... Rs. 76.50 crores for five years and GP of Rs. 5.90 Crores i.e. average rate of GP @7.75% on unaccounted sales is applied as per trend of GP of the company and the same has been accepted by the Hon'ble ITSC. It is also a matter of record that in scrutiny assessment for A.Y 2015-16, the A.O. has also made estimation of G.P. and he adopted a figure of 10%. In nutshell, the appellant has argued for application of a G.P. rate of 8%. This is very low in my opinion. The profit on disclosed sales will always be lower than the profit margin on undisclosed sales. At this juncture, it is advisable to refer to the settled norm on the basis of judicial decisions rendered on the issue of estimation of G.P. on unaccounted sales/purchases. In....
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.... of unaccounted sales is accepted. I agree with him on this count that some initial investment would be required to achieve any accounted as well as unaccounted sales. As mentioned supra, the undisclosed turnover of the year has been considered at Rs.1,96,31,425/ If this amount is divided into 12 months, average monthly sales would be Rs.16,36,000/- The G.P. of 12.5% has been considered on this amount and, hence, initial month's purchase can be estimated at Rs 14,54,222/ In view of A.O's observation, this amount is added to the Income of the appellant. Thus, the appellant shall get relief of Rs.2,14,42,556/-out of substantive addition. The protective addition of Rs 97,86,202/- is also deleted as the same has been considered on subst....
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....ore the Tribunal, the learned advocate appearing on behalf of the appellant submitted a chart containing the Gross Profit Ratio and Net Profit Ratio of A.Y 2006-2007 to 2009-2010. Following details were provided by the appellant. and as held by the appellate authority, the average of Gross Profit Ratio comes to 12.06%, whereas the CIT(Appeals) has confirmed the gross profit at 12.5%. "8. During the hearing of the matter, Ld. A.R. submitted a chart containing G.P. ratio and N.P. ratio in A.Y. 2006-07 to 2009-10. In the earlier year, gross profit ratio of the disclosed turnover as per books of accounts is as under: Vallabh Pesticides Private Limited A.Y Sales Gross Profit Net Profit GP Ratio NP Ratio A.Y. 2006-07 ....