Harish Gupta Vs ITO (ITAT Delhi)
8% deemed profit rate as specified u/s 44AD is not a fixed standard & may vary depending on nature of business – Reduces profit margin on milk sales from 8% to 3%
Assessee is an individual having commission income from milk sales. AO found that assessee had huge cash deposits in bank during demonitisation period. Assessee stated that his income consisted of commission & entire cash deposit was cash sales of milk. Since assessee had not filed further details with regard to cash deposits, AO treated it as unexplained money u/s 69A.
On further appeal, assessee submitted a detailed reply & claimed that he is having a lower profit margin on milk sales. CIT held entire cash deposits as turnover of assessee & applied 8% profit rate on the same.
Before ITAT, assessee stated that his profit margin ranges between 1% to 3% & profit rate applied by CIT is very high, therefore, same should be reduced to a reasonable percentage. It may be noted that 8% deemed profit rate as specified u/s 44AD is not a fixed standard & may vary depending on the nature of business. Tribunal concluded that maximum price of milk is fixed by principal & assessee cannot charge higher price. Therefore, 8% profit rate would be very high & 3% would be reasonable.
