2017 (6) TMI 20 - AT - Income Tax

Estimation of profit in respect of IMFL business carried by the assessee - Held that - The coordinate bench of the Tribunal in the case of Tangudu Jogisetty (2016 (7) TMI 379 - ITAT VISAKHAPATNAM) has considered the profit level in the line of business and decided that 5% of purchase price is reasonable profit margin in the line of IMFL business and directed the A.O. to re-compute the profit of the assessee. In view of the above we direct the A.O. to re-compute the income of the assessee at 5% of purchase price. Accordingly, this ground of appeal raised by the assessee is allowed. Unexplained investment - Held that - The assessee has not given any explanation and also not filed any details before the Assessing Officer, therefore, the Assessing Officer has treated the impugned amount as unexplained income and the same is added to the total income of the assessee. On appeal, ld. CIT(A) confirmed the order of the Assessing Officer. Now, the assessee filed a petition for admission of additional evidence, wherein he stated that he is pursuing to gather the information. He has not specifically mentioned that what is pursuing to gather the information. Find that the explanation given by the assessee is a vague and the request made by the assessee cannot be accepted. Thus, this petition filed by the assessee for admission of additional evidence is rejected. So far as merits of the case is concerned, the assessee except stating that his wife has given a gift to the tune of ₹ 4,01,079/-, no other material has placed before me. Therefore, find no infirmity in the order passed by the ld. CIT(A). Thus, this ground of appeal raised by the assessee is dismissed.

Summary

Issues:
1. Estimation of income in an appeal against the order of the Commissioner of Income Tax.
2. Treatment of unexplained investment in the assessment order.

Estimation of Income:
The appeal involved the estimation of income by the Assessing Officer at 20% of the stock put for sale, which was later scaled down to 10% by the Commissioner of Income Tax (Appeals). The issue was whether this estimation was reasonable for an individual engaged in the business of purchase and sale of IMFL. The Tribunal considered a similar case where a 5% profit margin was deemed reasonable for such a business, citing precedents from the ITAT Visakhapatnam bench and emphasizing the controlled nature of the IMFL trade by the State Government. The Tribunal directed the Assessing Officer to re-compute the profit at 5% of the purchase price, following the decision of the coordinate bench and rejecting the higher estimation based on different facts.

Unexplained Investment:
Regarding the unexplained investment of ?4,01,079, the Assessing Officer treated the amount as unexplained income due to the lack of details provided by the assessee. The Commissioner of Income Tax (Appeals) upheld this decision as the assessee failed to submit any evidence or explanation. The assessee later filed a petition before the Tribunal seeking admission of additional evidence, claiming that the amount was a gift from his wife. However, the Tribunal found the explanation vague and lacking specific details, leading to the rejection of the petition. As no substantial material was presented to support the claim, the Tribunal dismissed the ground of appeal related to the unexplained investment, upholding the decision of the lower authorities.

In conclusion, the Tribunal partially allowed the appeal by directing the re-computation of income at a lower profit margin for the IMFL business. However, the Tribunal upheld the treatment of the unexplained investment as part of the total income, as the assessee failed to provide sufficient evidence to support the claim. The judgment emphasized the importance of presenting clear and specific details to substantiate claims during income tax assessments and appeals.