Hardayal Milk Products Private Limited Vs DCIT (ITAT Agra)
When Comparables Fail, History Guides—Relief to Milk Processor- Ad-hoc 1% Profit Estimate Cut to 0.50%:
Guesswork Curbed: Past Performance Prevails: 1% Ad-hoc Estimation Trimmed- ITAT Slashes Dairy Profit Estimate to 0.50%
In Hardayal Milk Products Pvt. Ltd. vs. DCIT, Circle 2(2)(1), Firozabad (ITA No.342/Agr/2025, AY 2013-14; order dated 29-12-2025), the Agra Bench of the ITAT dealt with rejection of books u/s 145(3) and estimation of profits in a large dairy manufacturing business. The AO, doubting the low net profit of ~0.4% and relying on enquiries in cases of certain buyers/suppliers, rejected the books and estimated income @ 1% of turnover, resulting in a substantial addition. The Ld. CIT(A)/NFAC sustained the 1% estimation while granting partial relief on other disallowances.
Before the Tribunal, the Assessee demonstrated consistent past results, audited books, quantitative records, electricity consumption evidencing actual production, and lack of any specific defect in its own books. The ITAT noted that while the AO spoke of industry margins (0.8%–1.25%), no cogent comparables were brought on record; the estimation at 1% was thus presumptive and ad-hoc. Given the stable historical NP of ~0.4% over multiple years and ongoing genuine manufacturing activity, the Tribunal held that some estimation was warranted but 1% was excessive.
Balancing facts and past performance, the ITAT restricted the estimation to 0.50% of turnover, directing the AO accordingly. The appeal was partly allowed, granting meaningful relief while sustaining a reasonable estimate.
FULL TEXT OF THE ORDER OF ITAT AGRA
