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2021 (6) TMI 888 - AT - Income TaxEstimation of income - bogus purchases - CIT(A) restricting the addition at 5% as against 7% made by the Assessing Officer - HELD THAT - We find that the CIT(A) has rightly applied the profit rate at the rate of 5% and we find no infirmity in the order of the CIT(A), hence, the appeal of Revenue's is dismissed.
Issues:
- Dispute over the profit rate applied by the Assessing Officer in the case of undisclosed sales. Analysis: The appeal before the Appellate Tribunal ITAT Mumbai involved a dispute regarding the profit rate applied by the Assessing Officer in the case of undisclosed sales by the assessee. The Commissioner of Income Tax (Appeals) restricted the addition made by the Assessing Officer to 5% of the undisclosed income, as opposed to the 7% initially applied by the Assessing Officer. The assessee contended that the information about the undisclosed sales was received from the Central Excise Department, amounting to ?2,90,57,030, and the Assessing Officer had applied a 7% profit rate on this amount. However, the CIT(A) restricted the addition to 5% after considering the appellant's submissions and the industry average profit ratios. The facts of the case revealed that the assessee was engaged in the manufacturing of furniture and had a sister concern enjoying area-based benefits from central excise duty. Following a search operation, it was discovered that the assessee had undisclosed sales amounting to ?2,90,57,030. The Assessing Officer added 7% of net profit to the income of the assessee based on this undisclosed income. The CIT(A) upheld the Assessing Officer's decision but reduced the profit rate to 5% after considering the appellant's submissions and industry averages. Upon reviewing the facts and circumstances, the Appellate Tribunal found that the CIT(A) had appropriately applied the 5% profit rate, and there was no error in the CIT(A)'s decision. Consequently, the appeal of the Revenue was dismissed, affirming the CIT(A)'s order to restrict the addition to 5% of the undisclosed income.
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