2013 (1) TMI 1004 - AT - Income Tax

Summary

Issues involved: Appeal against estimation of profits from business & profession and addition of unsecured loans.

Estimation of profits from business & profession:
The assessee, engaged in trading of milk and earning commission, declared net profit of 6.69% of total sales for A.Y. 2007-08. AO estimated profit at 15% based on discrepancies in sales figures. Assessee argued for profit estimation at 8% citing circular from Maharashtra Rajya Sahakari Dhood Mahasnagh limiting gross profit margin to 5%. CIT(A) rejected book results and estimated profit at 8% based on past years' results. Assessee contended that 8% estimation was excessive and unreasonable. Tribunal estimated profit at 5% of total sales, considering the fixed profit margin by the federation.

Addition of unsecured loans:
Assessee showed unsecured loan of &8377; 19,607 from a friend without furnishing confirmation letter. AO added the amount u/s 68 of the Act for lack of proof of identity, genuineness, and creditworthiness. CIT(A) upheld the addition, and the Tribunal rejected the ground due to lack of material proving the creditor's identity.

The Tribunal partly allowed the appeal, estimating profit at 5% of total sales and rejecting the addition of unsecured loans due to insufficient evidence of the creditor's identity.

Order pronounced on 31st January, 2013.