INCOME TAX ACT, 1961

Section 145(3)

Accounting method - Estimation of income - Applicability of rate of net profit on declared and undeclared turnover -

AO found undisclosed turnover of assessee. Therefore, income was estimated at 8% and brought the same to tax. CIT(A) directed the AO to adopt the same net profit at 7.43% on entire turnover both disclosed and undisclosed. Assessee's contention was that the assessee was into business of selling of vegetables both from dealers as well as farmers, therefore, profit on sale of vegetables on commission basis was much lesser and could not be adopted at a uniform rate of 7.43%.Held: The assessee himself had contended before the AO that his trading activities were to be bifurcated into two categories, i.e., selling vegetables on behalf of farmers and on behalf of dealers and retailers. The CIT(A) seemed to have mis-read Note given by the assessee as he had recorded that the assessee had not stated that he had sold vegetables on behalf of farmers. The assessee in his Note had mentioned 'farmers' who were also known as agriculturists. The assessee had failed to bifurcate the sales and also in estimating of profit from such sales. No discrepancy was found in the CIT(A)'s adopting the same rate of net profit declared by assessee on the declared turnover to the undisclosed turnover as well. However, in the peculiar circumstances of the case, the net profit could be reduced to do justice to the assessee. Therefore, the AO was directed to adopt 6.5% as net profit on the entire turnover of the assessee.

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2014-15

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