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2015 (11) TMI 1746 - AT - Income TaxEstimation of income of the assessee @ 5% on the cost of goods sold - Held that - We find that the assessee has not maintained any books of account and therefore, the estimation of income is justified. It is only the rate at which the income is to be estimated is before us. A.O. has estimated the income at 5% of the cost of goods sold, while the assessee is seeking the estimation at 3% of the cost of goods sold. Remuneration paid to the partners to be allowed to be deducted from the estimated income - Held that - We find that the same is not allowable as the income of the assessee itself has been estimated on the cost of the goods sold and not on the turnover or receipts of the assessee. - Decided against assessee.
Issues: Estimation of income based on cost of goods sold, Disallowance of remuneration paid to partners
Estimation of income based on cost of goods sold: The case involves an appeal by the assessee against the order of the Ld. CIT(A) confirming the estimation of income at 5% on the cost of goods sold for the A.Y. 2011-12. The assessee failed to produce sale invoices during the assessment proceedings, leading the A.O. to estimate profits based on the cost of sales. The A.O. relied on previous decisions and estimated the net profit at 5% of the goods put to sale. The Ld. CIT(A) upheld the A.O.'s decision. The assessee contended for a lower estimation of 3% of the cost of goods sold, citing a Tribunal decision approving a 2.5% estimation. The Tribunal noted that uniform net profit cannot be adopted for all cases and allowed the assessee's appeal, agreeing to the 3% estimation based on similar cases. Disallowance of remuneration paid to partners: The assessee sought to deduct remuneration paid to partners from the estimated income. However, the Tribunal rejected this claim, stating that since the income was estimated based on the cost of goods sold and not on turnover or receipts, the deduction of remuneration paid to partners was not allowable. Consequently, the Tribunal partly allowed the assessee's appeal, approving the 3% estimation of income based on the cost of goods sold but rejecting the deduction of remuneration paid to partners.
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