2015 (3) TMI 97 - HC - Income Tax

Total income reduced below the Returned Total income by ITAT - Held that - A.O. has estimated the total income at ₹ 10,12,289/-. During the assessment year under consideration, the assessee has shown gross profit @0.5% on the total turn over. It also appears from the record that in the earlier years, the Department had accepted the turn over @ 0.6%. But the fact remains that during the assessment year under consideration, the quantum of turn over was higher so the Tribunal has rightly observed that the gross profit shown by the assessee @ 0.5% is justifiable. From the above, it is clear that addition was made on estimate basis. Needless to mention that the estimation is a question of fact which is based merely on guess work and addition on estimate basis is not sustainable. The issue involved in this appeal is a question of fact, which was rightly decided by Tribunal. - Decided in favour of assessee.

Summary

Issues involved:
1. Appeal against the order of the Income Tax Appellate Tribunal for the Assessment Year 1991-92.
2. Whether the total income can be reduced below the Returned Total income by the Income Tax Appellate Tribunal in an appeal.
3. Dispute regarding the estimation of gross profit by the Assessing Officer.

Analysis:

1. The Department filed an appeal against the order of the Income Tax Appellate Tribunal for the Assessment Year 1991-92. The Tribunal had deleted an addition made by the Assessing Officer concerning the gross profit shown by the assessee. The Department challenged this decision in the present appeal.

2. A substantial question of law was admitted by a coordinate Bench of the Court, which pertained to whether the total income can be reduced below the Returned Total income by the Income Tax Appellate Tribunal in an appeal. This question was crucial in determining the outcome of the appeal.

3. The case involved a dispute regarding the estimation of gross profit by the Assessing Officer. The assessee had shown a gross profit of 0.5% on the total turnover, while the Assessing Officer had determined it at 1%. The Tribunal, considering the higher turnover during the assessment year, found the gross profit shown by the assessee at 0.5% to be justifiable.

4. The Court heard arguments from both parties and examined the material on record. It noted that the addition made by the Assessing Officer was based on an estimate. Referring to various legal precedents, the Court emphasized that additions made on an estimate basis are not sustainable.

5. Citing cases such as Commissioner of Income Tax Vs. Bala Ji Wire Pvt. Ltd. and Sudarshan Silk Vs. Commissioner of Income Tax, the Court concluded that the issue involved in the appeal was a question of fact. It upheld the Tribunal's decision, stating that the estimation made by the Assessing Officer was not justified.

6. Ultimately, the Court ruled in favor of the assessee and against the Department. The appeal filed by the Department was dismissed, affirming the Tribunal's order regarding the estimation of gross profit.