When purchases are not in dispute only the net profit on undisclosed sales can be subjected to tax: ITAT

Brief facts of the case are that the assessee is an individual and engaged in the business of running a petrol pump. E-return for the Assessment Year 2017-18 was filed on 28/03/2018 declaring total income f Rs.13,26,310/-. Case manually selected for compulsory scrutiny followed by notice u/s 143(2) & 142(1) of the Act. During the course of assessment proceedings, the ld. Assessing Officer referred to the survey proceedings carried out u/s 133A of the Act, conducted at the business premises of the assessee on 01/03/2017. Based on the daily sales recording register with identification mark JFS/I/-1, impounded during the course of survey, the ld. Assessing Officer came to the conclusion that assessee has not disclosed sales of Rs.2,39,42,814/-. It was contended on behalf of the assessee that they are not very well-versed in accounting and the total purchases are from Bharat Petroleum and sales were made as per the prevailing rates as directed by Bharat Petroleum Ltd.. However, the ld. Assessing Officer was not satisfied and he completed the assessment making addition for undisclosed sale at Rs.2,39,42,814/- and assessed income at Rs.2,52,69,128/-.

Aggrieved the assessee preferred an appeal before the ld. CIT(A) who after considering the submissions of the assessee which was filed through online mechanism also considering the net profit rate offered by the assessee in past and also the fact that purchases were duly disclosed, sustained the addition only to the extent of 3.90%, being net profit on the alleged undisclosed sale and partly allowed the assessee’s appeal.

Aggrieved the revenue is in appeal before Tribunal.

Through this appeal, the revenue has challenged the finding of the ld. CIT(A) deleting the addition for undisclosed sale and sustaining the addition only to the extent of net profit element embedded in the alleged undisclosed sale.

ITAT noticed that the ld. Assessing Officer based on the seized records impounded during the course of survey made the addition for the undisclosed sale of Rs.2,39,42,814/-. The ld. CIT(A) after making a detailed discussion and also referring to various judgments including that of the Hon’ble Gujarat High Court in the case of CIT vs. President Industries (2002) 258 ITR 654, came to the conclusion that since the purchases are not in dispute, only the net profit on the said undisclosed sales can be subjected to tax.

ITAT concluded that the above finding of the ld. CIT(A) is in line with the judicial precedents as held consistently including in the judgment of the Hon’ble Gujarat High Court in the case of President Industries (supra), as well as by the decision of the ITAT Delhi Bench in the case of Anil Kumar Bajaj vs. DCIT in ITA No. 4392/Kol/2014; dt. 28/06/2018.

We fail to find any infirmity in the order of the ld. CIT(A) who has rightly taken into consideration the net profit offered by the assessee in the last three years and has also taken into consideration that purchases made by the assessee are only made from Bharat Petroleum Ltd. and the ld. Assessing Officer has not disputed the said purchases and since the sale prices are not in control of the assessee and they have to be kept as per the rates decided by the oil marketing companies, the margin of profit can only be subject to tax. Thus, since the ld. CIT(A) has applied highest of the net profit rate i.e., 3.90 % on the alleged undisclosed sales, we do not find any reason to interfere in the said finding.

Thus, the effective ground of appeal raised by the revenue stands dismissed. Other grounds raised by the revenue being general in nature need no adjudication.

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