Dilip Tillumal Lalwani Vs DCIT (ITAT Pune)
Pune ITAT Reduces Estimated Gross Profit from 10% to 7%; Arbitrary Estimation Without Comparable Cases Held Unsustainable
The Pune ITAT held that although the rejection of books of account under section 145(3) was justified due to discrepancies noticed by the Assessing Officer, the estimation of gross profit at 10% in the case of a retail liquor trader was arbitrary and excessive. The Tribunal observed that the assessee had consistently disclosed gross profit ranging between 4.79% and 6.47% and net profit between 3.11% and 4.53% over several assessment years, while the Assessing Officer had failed to bring on record any comparable cases to justify the application of a 10% gross profit rate. It further noted that adopting a 10% gross profit would result in an overall net profit exceeding 8%, which was unrealistic for the assessee’s line of business and inconsistent with its historical financial performance. Taking into account the assessee’s past profit trends, audited books, and the absence of any benchmark data from the Revenue, the Tribunal held that 7% gross profit would constitute a fair and reasonable estimate. Accordingly, it reduced the gross profit rate from 10% to 7%, restricting the addition to ₹9.74 lakh and granting partial relief to the assessee.
