Navjeet Singh Bhatia Vs ITO (ITAT Raipur)
Liquor Trader Gets Relief: ITAT Cuts GP Rate from 4% to 3.13%, Deletes Separate Expense Disallowance
The Raipur ITAT granted substantial relief to a liquor trader by reducing the gross profit (GP) rate from 4% to 3.13% and deleting a separate ₹1 lakh ad hoc expense disallowance, holding that the Revenue cannot adopt a higher GP rate without justification when a comparable case in the same line of business has been accepted at a lower rate.
The Assessing Officer had rejected the books of account under Section 145(3) on the grounds that the assessee had not maintained quantitative records, sale bills and supporting vouchers, and thereafter estimated sales and applied a 4% GP rate, resulting in an addition of ₹35.12 lakh. The NFAC upheld the assessment.
Before the Tribunal, the assessee produced a comparable assessment order of another liquor trader, Gaurav Kumar Singh, for the same assessment year and under the jurisdiction of the very same Assessing Officer, wherein the Department had accepted a GP rate of 3.13%. The Tribunal noted that the Revenue failed to point out any distinguishing feature between the two cases or justify adoption of a higher GP rate in the assessee’s case.
Accordingly, the ITAT directed the Assessing Officer to recompute income by adopting a GP rate of 3.13% instead of 4%, thereby substantially reducing the addition.
The Tribunal also deleted the separate ₹1 lakh ad hoc disallowance of expenses, observing that once books of account are rejected and profits are estimated, it is not permissible to make further additions based on entries in the same rejected books. Reliance was placed on the Calcutta High Court decision in Skyscraper Projects (P.) Ltd. v. Addl. CIT.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
