Dabros Industrial Co. (P.) Ltd. V. CIT 108 ITR 424 (Cal.) We have to ascertain whether there was any evidence or material before the Tribunal to estimate the profits. It is not disputed that the books of account of the assessee were not accepted. That being so, profit had to be estimated. Such estimate was […] PFA |
Gemini Pictures Circuit Ltd. V. CIT (Madras High Court) 33 ITR 547 ( Mad.)by CA Sandeep Kanoi |
The question arising for consideration both in the reference under section 66(2) of the Indian Income-tax Act as well as in W.P. No. 925 of 1955 are identical and relate to the proper rule to be applied for determining the amortisation of films for computing the income, profits and gains of the assessee which is carrying on business as a film distributor. The assessee in the Reference Case No. 27 of 1955 is the petitioner in the writ petition.
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ITO must estimate Income on fair basis and not arbitrarily if Assessee not maintained sufficient books of accountby CA Sandeep Kanoi |
Badrinath Agarwal v. CIT (Allahabad High Court) 65 ITR 242 (All. ) In estimating the income the conditions of trade obtaining and the average margin of profit in the particular line of business are to be borne in mind. It is clear that these factors in the present case have been kept in view and, therefore, it is not possible to say that the estimate of income was arbitrary or capricious to justify holding that some error of law had been committed by the Tribunal in confirming the flat rate of 5% applied by the departmental authorities
ITO must estimate Income on fair basis and not arbitrarily if Assessee not maintained sufficient books of account
Allahabad High Court
Badrinath Agarwal.
Vs
Commissioner Of Income-Tax, U. P.
Date- 19 January, 1967
Equivalent citations: 1967 65 ITR 242 All
JUDGMENT MANCHANDA J. – This is a case stated under section 66(2) of the Income-tax Act 1922 (hereinafter referred to as the Act).
The two questions referred are :
"1. Whether, in the circumstances of the case, the application of the flat rate of 5 per cent. was justified when in the case of another dealer of the same place, namely, M/s. Abid Hussain Sajjad Hussain of Mubarakpur, who is also an assessee, a rate of 2% disclosed was accepted?
2. Whether, in any case, the income-tax authorities were not liable to split up the total estimated turnover of Rs. 1,50,000 into turnover of business on commission and turnover of business on own account and applied a lower rate on turnover from business on commission?"
The material facts are these. The assessee is a Hindu undivided family and the assessment is for the year 1950-51. The assessee was dealing in Banarsi goods and the sales were both on commission basis as well as on his own account. An income of only Rs. 1,443 from business was returned. In response to the notice under section 23(2), only a register which contained particulars of goods purchased and sold either by V. P. P. or railway was produced. No other accounts in the shape of case book, ledger, etc., were maintained. In these circumstances, the proviso to section 13 of the Act was applied. The Income-tax Officer estimated the sales at Rs. 2,50,000 on which a flat rate of 5% was applied. In applying this rate the Income-tax Officer took into consideration the fact that the assessee did some business also on his own account. On appeal, the Appellate Assistant Commissioner confirmed the assessment. He observed that there was no check either on purchases or on sales and, therefore, it could not be said that all the transactions had been accounted for. Further, that in a similar commission business at Banaras a profit of one anna in the Rupees was charged and brokerage of 6 pies in the Rupees on purchase. On second appeal, the Tribunal agreed that the proviso to section 13 of the Act had properly been applied but on the facts and circumstances of the case, reduced the turnover to Rs. 1,50,000 retaining the flat rate of 5% gross profit.
For the first time before the Tribunal, by an application dated 22nd February, 1954, the assessee referred to what it considered to be a comparable case. Thereupon the Tribunal directed the departmental representative to obtain the record of that case. At the hearing it seems no reference to that case was made by the assessee for the reason best known to him. The Tribunal did not consider that any interference with the rate 5% was called for. It was mentioned that most of the sales were "invoice sales", which means outstation sales, and the inference was that such sales usually carry a larger margin of profit than local sales. No attempt also appears to have been made at any time before the Tribunal to split up the turnover of the business on commission basis and the turnover on own account so that different rates might be applied to such turnovers. In these circumstances, the question as to the consideration of comparable case mentioned by the assessee does not really arise nor does the question regarding the splitting up of the turnover arise out of the order of the Tribunal. In any event, it is well settled that, once a proviso to section 13 applies, it is for the Income-tax Officer to determine fairly and not arbitrarily the basis on which the income will be estimated. In estimating the income the conditions of trade obtaining and the average margin of profit in the particular line of business are to be borne in mind. It is clear that these factors in the present case have been kept in view and, therefore, it is not possible to say that the estimate of income was arbitrary or capricious to justify holding that some error of law had been committed by the Tribunal in confirming the flat rate of 5% applied by the departmental authorities. It is again well settled that an estimate can be made by applying a flat rate and, so long as the Income-tax Officer has exercised his judgment reasonably and not arbitrarily or capriciously, the finding given by him will be one of fact and not of law.
For the reasons given above the questions referred are answered against the assessee. The assessee will pay the costs of this reference, which we assess at Rs. 200. Counsels fee is also assessed at Rs. 200.
Questions answered against the assessee.
- See more at: ITO must estimate Income on fair basis and not arbitrarily if Assessee not maintained sufficient books of account
Income estimate by applying a flat rate can be fair if AO exercises his judgment reasonably and not arbitrarilyby CA Sandeep Kanoi |
CIT v. S Sen & Others (Orissa High Court) 17 ITR 355 (Orissa) The proceeding arises out of two application consolidated because of the facts being identical, by the Commissioner of Income-tax/Excess profits Tax, Bihar and Orissa, under Section 66(1) of the Income-tax Act read with Section 21 of the Excess profits tax Act for the stating a case and a case stated for the opinion of this Court on the following three question of law :-
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In respect of Shortage of stock during survey only profit element can be added to Income of the Assesseeby CA Sandeep Kanoi |
ACIT Vs Surajbhan Agrawal (ITAT Indore), ITA No. 352/Ind/2013, Date of pronouncement- 26.8.2013 It was contended that the assessee accepted the undisclosed income to the tune of Rs. 20 lacs on account of shortage of gold ornaments and excess of stock of silver. The facts, in brief, are that a survey u/s 133A of the
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In respect of Shortage of stock during survey only profit element can be added to Income of the Assessee
ACIT Vs Surajbhan Agrawal (ITAT Indore), ITA No. 352/Ind/2013, Date of pronouncement- 26.8.2013
It was contended that the assessee accepted the undisclosed income to the tune of Rs. 20 lacs on account of shortage of gold ornaments and excess of stock of silver.
The facts, in brief, are that a survey u/s 133A of the Act was carried out at the business premises of the assessee. As per the Revenue, an amount of Rs. 20 lacs was accepted as undisclosed income by the assessee on account of shortage of gold ornaments weighing 758.475 gms and excess stock of silver at 91.134 kms. The claim of the assessee is that the assessee duly disclosed a sum of Rs.7,42,872/- by crediting it to the profit and loss account with respect to shortage in gold jewellery. The learned Assessing Officer did not accept the plea of the assessee on the ground that if the assessee was aware of transfer of stock to Abhushan Jewellers, how and why this fact was not disclosed while recording the statement during survey proceedings. The impugned addition of Rs. 12,57,128/- was, therefore, made.
On appeal before the learned CIT(A), it was claimed by the assessee that during survey physical inventory of gold and silver ornaments and also of cash was prepared by the survey party and gold ornaments weighing 1439.280 gms, silver ornaments weighing 1135.134 kms and cash amounting to Rs. 3,06,585/- were found. There is uncontroverted finding in the impugned order that the learned CIT(A) duly verified different silver accounts which were submitted by the assessee during survey and the Assessing Officer overlooked the stock of silver/silver ornaments copies of which were made available at the time of survey. The correct excess stock of silver was 71.295 kms valued at Rs.7,40,515/- which was offered by the assessee in its profit and loss account. We are also in agreement with the finding of the learned CIT(A) that so far as the shortage in gold ornaments is concerned, only profit embedded in the sale can be taken as income of the assessee. There is further uncontroverted finding that correct difference of income has been offered by the assessee in its profit and loss account. In view of these facts, we find no infirmity in the conclusion drawn in the impugned order. It is affirmed.
- See more at: In respect of Shortage of stock during survey only profit element can be added to Income of the Assessee
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