2020 (1) TMI 1063 - HC - Income Tax

Low sales turnover - addition of 2% gross profit by the assessing officer during the course of assessment proceedings - HELD THAT - Tribunal has rightly observed when there is no allegation by the assessee that assessing officer had pressurized for addition, nor there being any contention that as per profit and loss account no such addition of 2% came to be made, held that appeal was bereft of merit and accordingly rejected the same. Gross profit declared by the assessee at 5.33% on the sales turnover, which was found by the assessing officer to be considerably low on comparison basis namely in comparison with other traders, who are in the same line of business and as such addition of 2% was made by the assessing officer as it would be reasonable for which the assessee himself had accepted. As such contentions raised by learned counsel appearing for appellant does not merit consideration. Consequently, appeal deserves to be rejected. Accordingly, it stands rejected.

Summary

Issues:
Challenge to addition of 2% gross profit by assessing officer during assessment proceedings.

Analysis:
The appellant, engaged in the business of wines, contested the addition of 2% gross profit by the assessing officer for the assessment year 2014-15. The assessing officer noted that the declared gross profit of 5.33% was significantly lower compared to similar businesses. The appellant, during the assessment proceedings, agreed to the addition of ?8,60,646 to the income without objection. The assessment was concluded based on this agreement. The Commissioner of Income Tax (Appeals) rejected the appeal, stating that no appeal could be filed against an agreed assessment. The appellant then approached the tribunal, reiterating their grounds, but the tribunal upheld the assessing officer's decision, noting the absence of any allegation of pressure for the addition or discrepancies in the profit and loss account.

The appellant relied on certain judgments before the tribunal, but the court found them inapplicable as the facts differed. In a previous case, it was observed that the assessee had been pressurized by the department, unlike in the present case where no such contention was raised. The court emphasized that the gross profit declared by the appellant was indeed low compared to industry standards, justifying the 2% addition accepted by the appellant. Consequently, the court rejected the appeal, affirming the assessing officer's decision.

In conclusion, the court upheld the addition of 2% gross profit by the assessing officer, as the appellant's declared profit was significantly lower than industry norms. The court dismissed the appeal, emphasizing that the appellant's acceptance of the addition during assessment proceedings precluded any challenge on appeal. The court also highlighted the absence of any evidence of coercion or discrepancies in the profit and loss account, supporting the assessing officer's decision.