2015 (2) TMI 1276 - AT - Income Tax

Profit at 5% from wine business - Held that - When the authority concerned has exercised discretion while estimating profit at a particular rate it cannot be interfered with such exercise of discretion unless such exercise of discretion is absolutely arbitrary. The net profit percentage declared by assessee from AY 2009-10 to 2013-14 varies between 1.54% to 3.50%. Though it is a fact that initially the Tribunal had adopted the net profit rate of 3% in case of retail trade in wine but subsequently in many cases the Tribunal has approved estimation of profit at 5%. Therefore considering the totality of facts and circumstances of the case we are of the view that estimation profit at 5% on the cost of goods in the present case is justified. - Decided against assessee.

Summary

Issues:
Delay in filing appeal, Grounds raised by assessee, Profit estimation from wine business

Delay in filing appeal:
The appeal was filed with a delay of four days, and the assessee requested condonation of the delay, which was supported by an affidavit. The Tribunal examined the cause of delay and decided to condone the delay of four days, allowing the appeal to be heard on merit.

Grounds raised by assessee:
The assessee raised four grounds in the appeal. Ground Nos. 1 & 4 were considered general and did not require adjudication. The third ground was not pressed by the assessee and was dismissed. The only issue left for consideration was Ground No. 2, which pertained to the profit estimation at 5% from the wine business.

Profit estimation from wine business:
The assessee, engaged in retail wine trade, declared a low gross profit due to heavy competition and offered a 2% discount to attract retailers. The Assessing Officer (AO) rejected the book results and estimated the profit from the wine trade at 5% of the cost of goods sold, relying on a previous ITAT decision. The CIT(A) upheld this estimation at 5%. The assessee argued that a 3% profit rate should be adopted based on another ITAT decision and a High Court ruling. The Tribunal noted that profit estimation is discretionary and should be based on the facts of each case. Considering the varying profit percentages declared by the assessee in previous years and the Tribunal's approval of 5% profit estimation in similar cases, the Tribunal upheld the CIT(A)'s order, dismissing the appeal.

In conclusion, the Tribunal dismissed the appeal, upholding the estimation of profit at 5% from the wine business based on the facts and circumstances of the case.