Suresh Kumar Toshiniwal Vs ITO (ITAT Hyderabad)
Edible Oil Trader’s Profit Estimate Reduced to 2%: ITAT Orders Verification of Bank Credits and Turnover
The Income Tax Appellate Tribunal, Hyderabad “B” Bench, in Suresh Kumar Toshiniwal v. ITO, ITA No. 2068/Hyd/2026, reduced estimated net profit from 5% to 2% of turnover in the case of an edible oil trader. The Tribunal also restored the turnover dispute to the Assessing Officer after the assessee alleged that bank credits included auto-sweep transactions, debtor collections and duplicate entries.
The order, pronounced on 23 October 2026, concerned Assessment Year 2019–20. The Bench comprised Shri Sanjay Garg, Judicial Member, and Shri Madhusudan Sawdia, Accountant Member. The appeal was partly allowed, with the profit rate settled at 2% and the turnover figure requiring fresh examination.
Background of the Assessment Dispute
The assessee was engaged in trading in edible oil.
The Assessing Officer treated aggregate deposits of Rs. 10,14,28,721 in accounts maintained with Dena Bank and Kotak Mahindra Bank as business turnover.
He estimated net profit at 5% of that amount.
The assessee disputed both components of the calculation. He maintained that actual turnover was Rs. 8,04,93,948, while the net profit disclosed was approximately 1.4%.
The CIT(A)/National Faceless Appeal Centre, Delhi, confirmed the assessment through an order dated 9 March 2026.
The assessee consequently approached the Tribunal seeking correction of the turnover and reduction of the estimated profit rate.
Delay in Filing Appeal Condoned
The Tribunal appeal was filed 13 days beyond the prescribed period.
The assessee submitted a separate application seeking condonation. After considering the averments in that application, the Tribunal condoned the delay and proceeded to examine the grounds.
The order does not reproduce a detailed account of the circumstances causing the delay.
Accordingly, the relevant procedural finding is limited to the Bench’s acceptance of the explanation furnished. The appeal was admitted for substantive consideration rather than rejected on limitation.
The Tribunal thereafter addressed the turnover and profit estimation disputes separately.
Bank Deposits Allegedly Included Non-Turnover Entries
The assessee argued that the Assessing Officer had misinterpreted the bank statements.
According to him, the aggregate credits included auto-sweep deposit entries and amounts received from debtors, resulting in duplication when the entire deposits were treated as current-year turnover.
The difference between the Department’s figure and the assessee’s stated turnover therefore required transaction-level examination.
The Tribunal did not accept the lower turnover merely on the basis of this submission. Equally, it did not uphold the assumption that every bank credit necessarily represented a separate business sale.
It identified the bank-entry explanation as a factual issue requiring verification.
Turnover Restored for Fresh Examination
The Tribunal directed the Assessing Officer to examine the bank accounts afresh.
The assessee must receive an opportunity to explain the entries and establish the correct turnover.
After considering that explanation, the officer must pass a fresh speaking order in accordance with law.
Thus, neither Rs. 10.14 crore nor Rs. 8.04 crore was conclusively adopted by the Tribunal.
The remand concerns identification of the correct turnover base. Its outcome will determine the amount to which the profit rate fixed by the Tribunal is applied.
The bank-credit dispute therefore remains open for factual adjudication.
Audited Books and Low-Margin Business Cited
On profit estimation, the assessee submitted that his books of account were duly audited.
His representative argued that the Assessing Officer had applied 5% without identifying any defect in those accounts.
She also explained that edible oil trading operates on relatively low profit margins and relied on M/s Siddi Vegetable Oil Products v. ITO, ITA No. 1182/Hyd/2014, decided on 17 April 2015.
The Revenue defended the estimate, pointing out that the assessee had originally not filed a return of income.
It maintained that the Assessing Officer was justified in estimating profit at 5%.
Tribunal Restricts Net Profit to 2%
During the hearing, the assessee’s representative stated that she had no objection to a 2% profit estimate, instead of the declared 1.4%.
The Revenue continued to support 5%.
The Tribunal found no valid justification for the higher estimate, particularly because the accounts were audited and no defect had been pointed out.
It also considered the explanation concerning the low-margin nature of edible oil trading.
Accordingly, it restricted the profit element to 2% of turnover.
The Bench did not fully accept the returned margin. Its decision adopted a higher rate than the assessee had declared but materially reduced the rate sustained by the CIT(A).
Scope of the Relief
The order records additional grounds concerning jurisdiction to issue the Section 148 notice and estimation without rejecting the books.
However, its operative discussion resolved the bank-credit and profit-rate issues. It recorded that no other grounds were raised during arguments.
The Tribunal did not separately invalidate the reassessment on jurisdictional grounds.
Final Outcome
The appeal was partly allowed.
The Assessing Officer must determine the correct turnover after examining the bank entries and providing a hearing. The 2% net profit rate, replacing 5%, governs the profit estimation directed by the Tribunal.
Cases Discussed
- M/s Siddi Vegetable Oil Products Vs ITO, Ward-8(2), Hyderabad — ITA No. 1182/Hyd/2014; Assessment Year 2008-09; ITAT Hyderabad; order dated 17.04.2015. The assessee relied on this decision to support the contention that edible oil trading carries low profit margins and that estimation at 5% was excessive. A verified TaxGuru publication link for this particular order was not located.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The present appeal has been preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as “Ld. CIT(A)”), dated 09/03/2026 for the Assessment Year (AY) 2019-20.
2. The appeal is time barred by 13 days. A separate application for condonation of delay has been filed. Considering the averments made in the application, the delay in filing the appeal is hereby condoned.
3. The assessee has taken the following grounds of appeal before us:
“1) The order of the learned CIT (A) is erroneous both on facts and in law;
2) The learned CIT (A) erred in confirming the action of the Assessing Officer in holding that all the deposits made into the bank account of Dena Bank and Kotak Mahindra Bank of Rs. 10,14,28,721/- as the turnover of the appellant herein;
3) The learned CIT (A) ought to have considered the fact that the actual turnover was only Rs.8,04,93,948/- and the balance deposits into the bank account are on account of auto sweep deposits and the amounts received from the debtors;
4) The learned CIT (A) erred in confirming the action of the Assessing Officer in estimating the net profit at 5% of Rs. 10,14,28,721/-;
5) The learned CIT (A) ought to have considered the fact that the actual net profit is about 1.4% and the said profit rate is reasonable in the circumstances;
6) The learned CIT (A) erred in confirming the assessment made by the Assessing Officer;
7) Any other ground/grounds that may be urged at the time of hearing”
4. Also, the assessee has raised the following additional grounds appeal:
(1) The Income-Tax officer, Ward-10(1), Hyderabad has no jurisdiction to issue notice u/s 148 of the I.T. Act and all the consequent proceedings including the order of assessment are invalid and the CIT(A) ought to have held that the proceedings are invalid.
(2) The estimation of income without rejecting the books of account regularly maintained is against the settled law and cannot be done by the Assessing Officer. The CIT(A) erred in confirming the addition made by resorting to estimation of income.”
Grounds No.1 to 3:
5. The issue raised vide Grounds No.1 to 3 is as to whether the annual turnover of the assessee is Rs.10.14 crores or of Rs.8.0 crores. The plea of the assessee is that the turnover of the assessee is Rs.8.0 crores, however, the Assessing Officer (hereinafter referred to as “AO”) has wrongly taken at Rs.10.14 crores by misinterpreting the bank statement of the assessee as the said statement included auto sweep deposit entries, etc., and there were duplication of entries. The issue needs to be examined at the hands of the Assessing Officer. Therefore, the issue raised vide Grounds No.1 to 3 is restored to the file of the Assessing Officer with a direction to examine the bank accounts of the assessee afresh and give the assessee an opportunity of hearing to explain the bank entries and quantum of turnover, and then pass a fresh speaking order on this issue in accordance with law.
Grounds No.4 to 6:
6. The assessee, vide Grounds No.4 to 6, has contested the estimation of net profits @ 5% of the turnover as against declared by the assessee @ 1.4%. The assessee is in the business of trading in edible oil. The Ld. Counsel for the assessee has submitted that the books of accounts of the assessee were duly audited. She had further relied upon the decision of the coordinate Bench of the Tribunal in the case of M/s. Siddi Vegetable Oil Products vs. Income Tax Officer, Ward-8(2), Hyderabad in ITA No.1182/Hyd/2014 for the AY 2008-09, vide order, dated 17/04/2015, and has submitted that in the case of business of edible oil, the margin is very less. She has submitted that the estimation of profit margin @ 5% was on higher side and that it was made by the AO even without pointing out any defect in the books of account furnished by the assessee.
7. The Ld. DR, however, has submitted that the assessee had originally not filed the return of income and that the AO was justified in estimating the profit @ 5%.
8. After hearing the Learned Representatives of both parties, the Ld. AR has agreed in the open Court that she has no objection if the estimation of profit be restricted @ 2% of the turnover, as against declared @ 1.4% by the assessee. Though the Ld. DR has pressed that the profit has been rightly estimated @ 5%, however, we find that in this case there is no valid justification on the part of the AO in estimating the profit @ 5%, when the books of account of the assessee were duly audited and no defect being pointed out in the same. Further, the Ld. Counsel for the assessee has explained that in the nature of business of edible oil the profit element is very less. Therefore, the profit element is restricted to @ 2% of the turnover as against 5% of the turnover assessed by the AO.
9. Ground No.7 taken by the assessee is general in nature and, therefore, the same is dismissed.
10. No other Grounds of appeal have been raised during the arguments.
11. With the above observations, the appeal of the assessee is treated as partly allowed.
Order pronounced in the open court on 23rd October, 2026.
