Media Adds India Private Limited Vs ITO (ITAT Chennai)
Past History Prevails—Arbitrary 8% Profit Rate Reduced, Cash Addition Deleted – Thin-Margin Ad Agency Wins: ITAT Cuts Estimation from 8% to 5%
Appeal was filed with a delay of 155 days, supported by affidavit. Tribunal accepted the explanation as bona fide & condoned the delay.
On merits, dispute concerned estimation of business income. Assessee, engaged in advertisement services through newspapers & other media, disclosed contract receipts of ₹8.40 crore with net profit of ₹28.72 lakh (3.42%). Past results (AYs 2009-10 to 2012-13) consistently showed margins between 3.16% & 3.70%, average 3.5%. Even under IDS-2016, assessee declared profit of ₹28.73 lakh, consistent with audited financials.
AO rejected books & estimated income at 8% of contract receipts, sustaining an addition of ₹53.81 lakh, & CIT(A)/NFAC confirmed. Assessee argued that 8%/25% is wholly arbitrary, not supported by comparables, industry benchmarks, or any defects in books. It was further argued that cash deposits were already part of business receipts, & separate addition results in double taxation.
Tribunal noted that advertisement agencies operate on thin margins as intermediaries; no evidence was brought by AO to justify higher rates. Past history is a recognized, judicially approved basis for estimation when books are rejected. Tribunal held that estimation at 8% was excessive & ad hoc.
