Subhkaran & Sons Vs DCIT (ITAT Mumbai)
ITAT Mumbai: Estimation of Income in Alleged Circular Trading—Additions Deleted for Lack of Evidence
The Mumbai ITAT (C Bench) dealt with cross-appeals by Subhkaran & Sons and the Revenue for AYs 2013-14 to 2017-18 arising from search assessments under section 153A. The Assessing Officer alleged accommodation/circular trading using LC facilities and, after rejecting books under section 145(3), estimated additional income at 7% of turnover. The CIT(A) partly allowed relief by restricting the addition to 0.5% of sales, holding that regular trading profits were already accounted for and that any further income, if at all, could only be modest.
On further appeal, the Tribunal deleted even the 0.5% estimation, relying heavily on a coordinate bench decision in Duli Trade Commodities Pvt. Ltd. arising from the same search. The ITAT held that:
- There was no incriminating material or evidence of cash receipts found during search.
- Statements recorded did not establish any extra-book cash consideration.
- The alleged commission was already embedded in the profits disclosed in audited books.
- Conjectural estimation without identifying the payer or cash trail is unsustainable.
- Industry margins are thin; a higher presumptive commission is commercially illogical.
Accordingly, the Tribunal allowed all appeals of the assessee and dismissed all Revenue appeals, deleting additions across all years; jurisdictional grounds were left open as academic.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
