Debdeep Commercial Pvt. Ltd. Vs ITO (ITAT Kolkata)
Profit Cannot Be Picked at Will: ITAT Rejects Ad Hoc Estimate in Road Contract Case
No Defective Books, No Comparables, No Basis for Higher Profit
The Kolkata Bench of the Income Tax Appellate Tribunal, in Debdeep Commercial Pvt. Ltd. v. ITO, deleted an addition arising from an estimated profit rate, holding that the tax authorities had neither identified defects in the books nor supported their estimate with comparable cases.
The assessee had declared a margin of 5.44% on a road construction contract subcontracted to an associated entity. The Assessing Officer estimated gross profit at 12%, resulting in an addition of ₹2,29,48,530. The CIT(A) reduced the estimated rate to 10%, but the Tribunal found that even the reduced rate lacked a factual foundation.
The appeal was allowed in ITA No. 1386/Kol/2026, concerning Assessment Year 2023-24, by an order pronounced on 30 September 2026. viewOrder-23
Road Construction Contract Passed on Back to Back
The assessee, a private limited company, obtained a contract from Ashoka Building Limited for construction of a road in Bihar.
According to the submissions before the Tribunal, the entire work was subcontracted on a back-to-back basis to its associated entity, Bharat Vanijya Eastern Pvt. Ltd. The assessee retained a margin of 5.44% of the gross receipts.
