2019 (5) TMI 302 - HC - Income Tax

Best judgment assessment - Estimate of Profit Ratio - non furnishing of evidence - Substantial Question of Law - addition on provision of Section 69A - HELD THAT - Estimate of Profit Ratio remains a fact finding exercise and unless the perversity in the findings of the Tribunal, from which the Substantial Question of Law can be said to be arising, is established by the Assessee on the basis of material on record or evidence adduced by him, in our considered opinion, no Substantial Question of Law arises in such matters. This Court does not have any material on record to establish either 1% or 3.5%, as being the reasonable rate of income. It is for the Assessing Authority to make any such 'Estimate of Income' in the hands of the Assessee. Assessee, claiming to be only acting as an Agent, in the absence of any disclosure about the identity of the purchasers, could only be treated as engaged in the said business of his own and, therefore, the Estimate of Income in the business of purchase and sale of gold was required to be assessed by the Assessing Authority. Estimate of Income, in such cases, even undertaking Best Judgment Assessment exercise while rejecting the Books of Accounts and Profits of the Assessee, is a fact finding exercise to be made, based on material to be placed on record by the Assessee. In the absence of any evidence placed by the Assessee in this regard, the Assessee cannot simply contend that Estimate of Income at 3.5% is unreasonable or perverse. The three authorities below have consistently upheld the said 'Ratio of Profit', to be assessable in the hands of the Assessee, and the Assessee has consistently failed before the authorities below to produce any cogent material to establish that 1% was reasonable Ratio of Profit in the said trade. Therefore, we do not find any Substantial Question of Law arising in this case and, accordingly, we do not find any merit in this Appeal filed by the Assessee.

Summary

Issues:
1. Interpretation of Section 69A of the Income Tax Act, 1961.
2. Validity of estimation of income at 3.5% of profits.
3. Addition of unaccounted income under Section 69A.
4. Rejection of refund claim and addition of income.

Interpretation of Section 69A:
The appellant raised questions on the invocation of Section 69A of the Income Tax Act, 1961, concerning the estimation of income at 3.5% of profits. The Tribunal dismissed the appeal and upheld the lower authorities' orders for Assessment Year 2013-2014. The appellant failed to disclose details of purchasers involved in the gold transactions, leading to an addition of unaccounted income under Section 69A.

Validity of Estimation of Income:
The Assessing Authority estimated the income of the Assessee at 3.5% of the turnover of gold purchased and sold, as opposed to the 1% disclosed by the Assessee. The Assessee contested this estimation, claiming to act as an agent earning only commission. However, the authorities found discrepancies in the Assessee's claims and upheld the estimation of income at 3.5% based on the lack of evidence provided by the Assessee.

Addition of Unaccounted Income under Section 69A:
The CIT (Appeals) and the Income Tax Appellate Tribunal upheld the addition of unaccounted income under Section 69A, emphasizing the Assessee's failure to disclose details of the purchasers involved in the gold transactions. The Tribunal noted that the Assessee's inability to produce evidence supporting the claim of acting on behalf of others led to the reasonable presumption that the Assessee was conducting business independently, justifying the addition of income under Section 69A.

Rejection of Refund Claim and Addition of Income:
The Assessing Authority rejected the Assessee's refund claim of Tax Collected at Source by M/s.Manappuram Finance Ltd. The Authority estimated income at 3.5% due to the Assessee's failure to provide evidence supporting the 1% profit ratio claimed. The rejection of the refund claim and the subsequent addition of income under Section 69A were deemed fair and in accordance with the law by the authorities.

In conclusion, the High Court dismissed the appeal, stating that no substantial question of law arose in the case. The estimation of profit ratio was considered a fact-finding exercise, and the Assessee's failure to provide evidence to support the claimed profit ratio of 1% led to the upholding of the 3.5% estimation by the authorities. The Court highlighted the importance of the Assessee substantiating their claims with evidence in such matters and upheld the decisions of the lower authorities in adding unaccounted income under Section 69A.