2021 (2) TMI 1084 - AT - Income Tax

Estimation of income - addition qua estimated profit @8% in banana trade - cash deposits as confirmed by the buyers of the Assessee on which the Assessee did not offer any income in his return of income, therefore, treating the said cash deposits as sale proceeds of the Assessee qua banana trading - HELD THAT - CIT(A) did make any analysis qua comparable case and of the Assessee and passed the order in cryptic manner and affirmed the estimation @8%. CIT(A) further failed to base affirmation of estimation @8% on any material and/or circumstances while ignoring the comparable case. From the perusal of income tax return filed by the Viswajanani Fruit Company for the A.Y. 2012-13 as quoted by the Assessee as a comparable case, it reflects that the profit from banana trading has been estimated @ 3.6% only. Though the Ld. DR supported the orders of the authorities below, however failed to bring on record any material contrary to the comparable case. Though it is not the case of the Assessee that comparable case has attained finality, however there is no material to substantiate that the comparable case is under challenge or otherwise has not attained finality. Assessee's case and comparable case also relates to A.Y. 2012-13, hence, considering the comparable case (A.Y. 2012-13) and estimation thereof qua trading of banana, we are inclined to allow the plea of the Assessee and therefore direct the AO to re-compute the estimation @3.6% of the turnover qua banana trading. Appeal filed by the Assessee stands allowed.

Summary

Issues:
Challenge to addition of estimated profit in banana trade at 8%

Analysis:
The appeal was against the order passed by the ld. CIT(A) concerning the addition of estimated profit in banana trade for the A.Y. 2012-13. The only issue challenged was the affirmation of the addition of ?9,68,416 as estimated profit at 8% in banana trade. The AO considered cash deposits as sale proceeds of the Assessee in banana trading and estimated income at 8%, resulting in the addition to the total income. The ld. CIT(A) upheld this action, stating that the Assessee did not provide books of account for the banana business and explained cash deposits as commission income. The Assessee argued that the estimation was on the higher side and presented a comparable case, but the ld. CIT(A) found the comparable case not directly applicable due to differences in trade nature.

The Assessee contended that it dealt with liquor and banana trading, claiming a commission margin of 1.5% to 2% in banana plantation business. A comparable case, Viswajanani Fruit Company, was presented where the gross profit was 3.6% for A.Y. 2012-13. The ld. CIT(A) did not find the submissions convincing and affirmed the addition at 8%, stating the comparable case was not directly applicable. The ITAT found the ld. CIT(A) did not analyze the comparable case properly and affirmed the estimation without substantial basis, disregarding the comparable case's 3.6% profit estimation in banana trading. The ITAT directed the AO to recompute the estimation at 3.6% for banana trading based on the comparable case for A.Y. 2012-13, allowing the Assessee's plea and setting aside the impugned order.

In conclusion, the ITAT allowed the appeal filed by the Assessee, setting aside the addition of estimated profit in banana trade at 8% and directing the re-computation at 3.6% based on the comparable case for A.Y. 2012-13.