Case Law Details
New Delhi Export House Vs JCIT (ITAT Delhi)
ITAT Delhi held that addition on the basis of estimation of scrap sales unjustified as AO has not brought on record any concrete material to demonstrate that the sale of Scrap recorded by the assessee is understated.
Facts- AO on perusing the Profit and Loss account statement noted that assessee had booked income from Scrap Sales amounting to Rs.8,16,618/-. AO was of the view that in the line of business of the assessee the Scrap/Waste cloth generated is huge. He also noted that the sale price of Scrap of Katran which was declared by the assessee was much lower than the market price. He thereafter conducted search on the internet and concluded that the sale price of scrap Katran ranged from Rs.30/Kg to Rs.75/Kg and the side cutting charges ranged from Rs.80/Kg to Rs.130/Kg whereas assessee has shown the sales price of the same at Rs.5/Kg and had sold Scrap of Katran at Rs.11.50/Kg. AO thereafter on the basis of the information gathered from the internet and on the basis of working noted in the order determined the sale price of the scrap that ought to have been earned by the assessee at Rs.33,65,853/- and after giving the credit of the scrap sold by the assessee of Rs.8,16,618/- made addition of net amount of Rs.25,49,235/- on account of income received from the sale of Scrap/Waste.
Aggrieved by the order of AO, assessee carried the matter before CIT(A) who upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now before the Tribunal.
Conclusion- We find that the basis of working out the alleged sale value of Scrap that assessee ought to have earned is only on the basis of the search conducted by the AO on the internet. The AO has not brought any material on record to demonstrate that the Scrap Sales found by him on the internet by various other entities were engaged in dealing with similar business as of the assessee. Further AO has also not stated the basis of the selection of parties, the name of the parties on the basis of which he has concluded the sale of scrap to be understated. Further assessee has also demonstrated the percentage of sale of Scrap in various preceding and succeeding assessment years and percentage of waste to the sale in the year under consideration are in the same range as that of earlier and subsequent years. We find that AO has not brought on record any concrete material to demonstrate that the sale of Scrap recorded by the assessee is understated. On the contrary he has presumed it on the basis of the working made by him on the basis of research undertaken on the internet. Considering the totality of the aforesaid facts, we are of the view that AO was not justified in making the estimation of Scrap Sales. We therefore set aside the addition made by AO and upheld by CIT(A).
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