2022 (7) TMI 330 - AT - Income Tax

Estimation of income - GP estimation - Assessee pleaded before CIT-A that estimation of business income at 10% of total Revenue is very harsh and that too without any material - Assessee pleaded for the estimated 5% on the gross receipts - HELD THAT - In the preceding paragraphs, while dealing with the issue for the assessment year 2012-13, we reached a conclusion that the estimate of income of the assessee at 5% of the gross receipts would be proper and would meet the ends of justice, having regard to the nature of business and the other attendant circumstances like market competition, high fluctuations, shortage of liquidity etc. With this view of the matter, we allow the contentions of the assessee and direct that the income of the assessee may be estimated at 5% of the gross receipts for the assessment year 2017-18 also.

Summary

Issues:
1. Addition of Rs. 17,66,735/- on estimate of profit on gross receipts and Rs. 7,37,935/- towards other income for AY 2012-13.
2. Estimate of business income for AY 2017-18.

Analysis:

Issue 1: AY 2012-13
- The assessee contested the addition of Rs. 17,66,735/- on gross receipts and Rs. 7,37,935/- towards other income made by the Ld. CIT(A).
- The Assessing Officer estimated income due to discrepancies between form 26AS and books of accounts, leading to the addition.
- Tribunal's previous decision for AY 2007-08 estimated income at 5% of gross receipts, which the assessee sought to follow.
- The Tribunal analyzed the nature of the business and upheld the assessee's contention, estimating income at 5% of gross receipts for AY 2012-13, aligning with previous decisions.

Issue 2: AY 2017-18
- The Assessing Officer added Rs. 28,52,083/- as business income due to lack of supporting vouchers and estimated income at 10% of receipts.
- The assessee argued for a lower estimate of 5% on gross receipts citing the nature of the business involving high competition and liquidity issues.
- Ld. CIT(A) referred to previous decisions and estimated income at 8% of gross receipts for AY 2017-18.
- The Tribunal, considering the business dynamics and past rulings, directed the income to be estimated at 5% of gross receipts for AY 2017-18, in line with the decision for AY 2012-13.

In conclusion, the Tribunal allowed the assessee's appeal in part for AY 2012-13 and fully for AY 2017-18, directing the estimation of income at 5% of gross receipts for both assessment years based on the nature of the business and market conditions.