ACIT Vs Vega Aviation Products Pvt. Ltd. (ITAT Panaji)
One Helmet Cannot Wear Two 15% Profit Margins—5% on Manufacturer’s Unaccounted Sales Upheld; Revenue’s Appeal Also Falls Below ₹60-Lakh Limit
Unaccounted Helmet Sales Unearthed
The Assessee-company manufactured plastic products, including safety helmets & toilet blocks. The helmets were sold under the “Vega” brand owned by its sister concern, Vega Auto Accessories Pvt. Ltd. Both companies had common directors.
The Assessee filed its return declaring income of ₹38,68,830. A search u/s 132 was conducted on 28.11.2019, followed by proceedings u/s 153A.
During the search, unaccounted retail cash sales of helmets amounting to ₹15,90,449 were discovered through delivery challans. A survey u/s 133A at the Assessee’s factory also resulted in the impounding of a pen drive containing unaccounted sales of ₹4,87,68,333 made to Vega Auto Accessories.
These sales were not recorded in the books of either company. The AO added the entire amounts & assessed total income at ₹5,42,27,612.
CIT(A) Taxes Profit, Not Entire Turnover
Before the CIT(A), the Assessee argued that the entire sales value could not represent income because no goods could be manufactured or sold without incurring material, manufacturing & incidental costs.
Regarding retail sales of ₹15.90 lakh, the Assessee claimed that some delivery challans related to free samples, promotional distribution, employee welfare, repairs or replacement of defective helmets. Nevertheless, the CIT(A) estimated profit at 15% by referring to the settlement reached by the group’s sister concern before the Interim Board for Settlement.
