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Issues involved: Assessment of taxable income based on estimation of net profit percentage u/s 5% of stocks put to sale, dispute over estimation of profit margin, comparison with previous trading results, application of relevant case laws.
The Miscellaneous Application was filed by the assessee challenging the ex-parte order of ITAT, Hyderabad. The assessee clarified that non-attendance at the hearing was due to inadvertence, not disinterest. The ITAT recalled its order upon finding that the assessee was interested in prosecuting the appeal. The issue raised in the appeal was disposed of along with the Miscellaneous Application, as it was covered by a decision of the co-ordinate bench of ITAT, Hyderabad. In the assessment order, the AO proposed estimating profit at 27% on the cost of goods sold due to non-verifiableness of sales figures and lack of sale bills/receipts. The CIT(A) directed the AO to recompute taxable income by estimating net profit at 5% of stocks put to sale. The assessee appealed this decision, arguing that the 5% estimation did not meet the ends of justice and cited a previous case where profit estimation was restricted to 3% on purchases. The ITAT upheld the CIT(A)'s decision, stating that net profit should be estimated at 5% of purchases or stock put for sale, subject to the assessed income not being less than the returned income. The learned counsel for the assessee argued for following the analogy of restricting profit estimation to 3% on purchases based on a previous case. The learned DR highlighted cases where rejection of books of account and estimation of GP@30% of sales were upheld by the ITAT. The DR emphasized the need for appropriate tax collection from the liquor trade, citing instances of sales above MRP and the contribution of the liquor trade to the state exchequer. The ITAT upheld the CIT(A)'s decision to estimate net profit at 5% of purchases, considering the arguments presented by both parties. In conclusion, the ITAT allowed the Miscellaneous Application and partly allowed the appeal, upholding the CIT(A)'s order to estimate net profit at 5% of purchases or stock put for sale during the year, ensuring the assessed income is not less than the returned income.
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