Case Law Details
Ankit Ispat Private Limited Vs ACIT (Madras High Court)
In the present case, the assessing officer, while completing the assessment for the assessment year 2014-15, made disallowance of 10% on purchases on adhoc basis. On appeal, the said disallowance was restricted to 2.5% of the total turnover, by the CIT(A) on estimate basis and the same was also affirmed by the Tribunal, by order dated 11.11.2021, which is impugned herein.
For effective adjudication of the issue involved herein, the findings of the appellate authorities are quoted below for ready reference:
Commissioner of Income Tax (Appeals):
“….For want of the books of accounts or other details in support of the income returned, the Assessing Officer was not able to verify the correctness of the income. The assessment was taken up for scrutiny only because the profit was very less when compared to the turnover. The profit before tax Rs.16,71,741/- on the turnover of Rs.53.14 cr. The net profit ratio works out to 0.30% which is very low. Even as per the appellant, the gross profit rate has come down to 23.27% against 25.77% shown in the earlier year. In the absence of any details furnished by the AO, the assessing officer was handicapped with determining the correct income of the appellant. Considering the financial results and the low gross and net profit, I estimate the gross profit at 25.77% as in last year against 23.27% shown in this year. The fall in gross profit rate works out to 2.50%. Adopting this rate on the sales turnover of Rs.53,14,30,550/-, the addition to the gross profit works out to Rs.1,32,85,764/-. I therefore sustain an addition of Rs.1,32,85,764/- made by the assessing officer under purchases account and delete the balance estimated disallowance of Rs.2,22,71,708/- and allow the grounds partly.”
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