Rajesh Trading Company Vs CIT(A)/NFAC (ITAT Pune)
Gross Profit Addition Reduced to 2% Considering Past Scrutiny Records and Comparable Cases: ITAT Pune
The assessee, a partnership firm engaged in wholesale trading of tobacco and non-tobacco products of ITC Ltd., appealed against the order of the National Faceless Appeal Centre dated 24.09.2025 for Assessment Year 2017-18. The return declaring income of Rs.6,00,390 was selected for complete scrutiny. During assessment under Section 143(3), the Assessing Officer found shortcomings including non-maintenance of quantitative records, non-production of sale bills, and certain expenses not being accounted for in the regular books. The books of account were rejected, and Gross Profit was estimated at 4.5% on turnover of approximately Rs.38.49 crore, resulting in an addition of Rs.1,23,89,791. A further addition of Rs.1,00,38,987 for suppressed business income was also made.
In appeal, the CIT(A) deleted the addition for suppressed business income but sustained the rejection of books of account. On the issue of Gross Profit estimation, the CIT(A) reduced the Gross Profit rate from 4.5% to 3%, sustaining an addition of Rs.66,16,838. The assessee challenged the rejection of books and the Gross Profit rate before the Tribunal.
The assessee submitted that the books were regularly maintained following the customary practice in the trade and argued that the Gross Profit rate should be determined considering the results of the assessee and sister concerns, where the Gross Profit had consistently remained below 2%. The Revenue supported the order of the CIT(A), contending that quantitative details were not maintained and the books were properly rejected.
