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2012 (6) TMI 402 - HC - Income TaxWhether Tribunal is right in holding that Gross profit from the assessees' arrack business at 40 per cent. of the purchase value is sustainable in law and if not what would be the estimate of gross profit as per the principles of best judgment assessment – Held that:- The adoption of 40 per cent. as gross profit of purchase price of arrack, in our considered opinion, is arbitrary and irrational. As seen from the purchase price and sales recoveries, there is a wide variation. In some cases, it is more than nine (9) times and in some other cases less than seven (7) times. Given the fact that there is no price fixed by the Government for sale of arrack and it is generally a seller's market, to assume that the gross profit would be at 1 per cent. of the estimated sales, in our considered view, is low. Accepting the total sale price at eight (8) times of the purchase price, we feel it appropriate to hold that 2 per cent. of the estimated sale value, after considering all types of deductions mentioned hereinabove, would be reasonable. Net profit be estimated at 2 per cent. of the estimated sales or 16 per cent. of the purchase value, whichever is higher.
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