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2016 (6) TMI 455 - ITAT MUMBAIEstimation of the assessee’s income - unaccounted receipt - reliance of books of accounts - Held that:- The assessee’s books of accounts (including note books and other documents) would indicate the purchase or the sale price and, therefore, yield the undisclosed profit, which may be worked either on the basis of the percentage or at ₹ 250 per box. In this regard, we do note that the assessee has also stated vide his said answer that there is no margin ‘now’. This is firstly inexplicable in-as-much as the assessee performing an economic function, as also assuming business risk, should definitely stand to gain a margin, even if nominal. Secondly, the statement of ‘no margin’ is qualified by the word ‘now’, and which would only indicate a reference to recent months, while here the year under reference is the financial year 2006-07. Coming, next, to the turnover by way of subscription, the assessee’s operating results would first be required to be reckoned after elimination of the STB turnover, against which no profit has been admittedly disclosed by the assessee. We further observe that the expenses claimed by the assessee are in the nature of semi-variable expenditure, so that they would vary with the increase in the volume, though not in linear proportion thereto. As such, to contend, as does the assessee, that its’ profit be estimated at 11.95%, i.e., as reported for A.Y. 2005-06, or justifying its results with reference thereto, is not acceptable in-as-much as the expenditure would not stand to increase in the same proportion (of sales). The turnover for A.Y. 2005-06, assuming the entire of it as of other than STBs, to our mind, represents a normative level (attained after over a decade of being in business), based on which the income for the subsequent years could be estimated. The expenditure can be said to have stabilized at 88% of the turnover. The excess turnover would therefore entail expenditure not to the extent of 88% (100-12) thereof. We estimate the same at 2/3 thereof, i.e., at say 58.66% or (say) 60%. As such, the additional turnover would entail a margin of 40%. The additional turnover (over that for A.Y. 2005-06), i.e., ₹ 17.33 lacs (Rs.79.87 lacs – ₹ 62.54 lacs) would yield a profit of 40%,while the balance turnover of ₹ 62.54 lacs would a normative rate of 12%, i.e., at a total profit of ₹ 14.44 lacs or at a net profit of a little over 18%. To this would stand to be added, of-course, the profit on the turnover on STBs, if any, as indicated above. Similarly for A.Y. 2007-08, the second year. - Decided partly in favour of assessee.
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