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2015 (8) TMI 762 - AT - Income TaxEstimation of profit - whether net profit rate adopted is add-hoc and arbitrary and the rate applied i.e., 8.5 per cent. is on the higher side? - Held that:- Commissioner of Income-tax (Appeals) has made correct observations that if the assessee had earned so much of profit then some assets would have been found during the search. Further, even the Revenue's claim was that the assessee was not having any books of account. Therefore, in such a situation the only course left to the learned Commissioner of Income-tax (Appeals) was estimation of profit. However, at the same time we find that learned Commissioner of Income-tax (Appeals) has not given detailed reasons for not finding any merit in the finding of the Assessing Officer that the assessee has shown bogus creditors. We have already seen that in the case of Gulam Mohidheen, the amounts of ₹ 14,01,013, ₹ 13,28,813, ₹ 17,53,813 and ₹ 14,70,413 during year ending March 31, 1997, March 31, 1998, March 31, 1999 and March 31, 2000 respectively were shown as sundry creditors. First of all, it is not possible to believe that a labour contractor can extend continuous credit of such huge amounts regularly. Secondly, whatever cheques were issued later on were shown as receipts which is quite clear which means that this is a book entry for sundry creditors. Similarly, in the case of Shri Murari Lal, from the receipt side of the day book i.e., document Nos. 1 to 111 of Annexure A-6 it was found that amount was entered as cash. Therefore, in our opinion, the profit should be estimated in this case at a little higher rate or a separate addition for creditors should have been made. Since the Assessing Officer himself has not made separate addition for creditors, in our opinion, considering the peculiarity of this case we estimate the profit at 11 per cent. - Decided partly in favour of revenue.
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