Entire Unaccounted Sales Cannot Be Taxed as Only Profit Element Is Assessable: ITAT Delhi

Al-Aali Exports Pvt Ltd Vs DCIT (ITAT Delhi)

The Delhi Income Tax Appellate Tribunal (ITAT) partly allowed four appeals filed by the assessee relating to Assessment Years 2020-21 to 2023-24 concerning additions made on account of alleged unaccounted sales of buffalo meat products. The additions arose from a search conducted on 03.01.2023.

For Assessment Years 2020-21 and 2021-22, the Tribunal observed that the additions were made solely on the basis of extrapolation without any seized material or evidence discovered during the search or subsequent inquiries. Relying on judicial precedent, the Tribunal held that such extrapolated additions were not justified and deleted the additions for these years.

For Assessment Years 2022-23 and 2023-24, the Tribunal noted that actual evidence of unaccounted sales amounting to ₹24,11,786 and ₹2,33,39,943, respectively, had been detected during the search. However, it accepted the assessee’s contention that the entire unaccounted sales could not be treated as income and that only the profit element embedded in such sales was taxable. Considering the facts of the case, the Tribunal directed that net profit be estimated at 3% of the unaccounted sales for both years, clarifying that the estimation was case-specific and should not be treated as a precedent. Accordingly, two appeals were allowed and two were partly allowed.