Md. Shahbaz Alam Vs ITO (ITAT Ranchi)
Estimated Profit Reduced to 2% in Absence of Books — Egg Trader’s Income Recomputed on Reasonable Basis
The Ranchi Bench of the ITAT partly allowed the assessee’s appeal and reduced the estimated net profit rate to 2% of turnover in a case where the assessee, a wholesale egg trader, had not maintained books of account.
During assessment, based on information received under Section 133(6) from a supplier and banks, the AO noticed a difference of ₹1.88 crore between purchases reflected by the supplier and turnover disclosed by the assessee. As the assessee admitted that no books were maintained and could not satisfactorily explain the discrepancy, the AO applied a net profit rate of 8%, which was later restricted to 4% by the CIT(A).
Before the ITAT, the assessee demonstrated that the department had consistently accepted very low profit margins (around 0.9%–1.36%) in subsequent years for the same business. Considering the nature of the trade (low-margin egg wholesale business), past accepted results, and judicial precedents, the Tribunal held that the estimate adopted by the lower authorities was excessive.
Accordingly, the ITAT directed the AO to apply a net profit rate of 2% of the turnover for A.Y. 2017-18, holding it to be fair and reasonable in the facts of the case
FULL TEXT OF THE ORDER OF ITAT RANCHI
