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2016 (7) TMI 729 - AT - Income TaxProfit on sale of deficit stock - whether the entire deficit stock has to be taken as profit of the assessee or the profit element embedded in the deficit stock has to be taken as income of the assessee? - Held that:- The Assessing Officer himself has taken only 20% of gross profit on the deficit stock arrived by him. Therefore, it is obvious that the Revenue intended to take only the profit element embedded in the deficit stock. In other words, the presumption was that the deficit stock was sold by the assessee outside the books and the profit on such sale is liable for taxation. Therefore, what we have to do is, we have to estimate the profit on the so-called sale of deficit stock to the extent of ₹ 55,75,603/- Coming to the gross profit, the Assessing Officer determined the gross profit at 20%. The Assessing Officer has not taken the past history of the assessee or the profit, etc. of the similarly placed industries. The Assessing Officer without any basis determined the profit at 20%. The assessee otherwise claims before this Tribunal that the profit in this kind of industry is 12 to 15%. Therefore, this Tribunal is of the considered opinion that estimation of profit at 15% of the deficit stock of ₹ 55,75,603/- would meet the ends of justice. Accordingly, the orders of the authorities below are modified and the Assessing Officer is directed to take 15% on the deficit stock of ₹ 55,75,603/- as income of the assessee for the year under consideration. - Decided partly in favour of assessee
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