Only profit element to be added as income if there was diff in turnover declared in P&L and Sales Tax order: ITAT

Case Details: Nikhil Garg v. ITO - [2022] 145 taxmann.com 171 (Jaipur-Trib.)

Judiciary and Counsel Details

• • Sandeep Gosain, Judicial Member & Vikram Singh Yadav, Accountant Member
  • Mahendra Gargieya, Adv. & Devang Gargieya, (ITP) for the Appellant.
  • Smt. Monisha Choudhary, (JCIT) for the Respondent.

Facts of the Case

Assessee, was an individual, engaged in the business of wholesale trading of ghee, edible oil, and vanaspati ghee. The assessee filed his return of income declaring losses and subsequently, after making certain additions, the assessment under section 143(3) was completed.

During the audit, the audit party of the Income-tax Dept. observed that the turnover as declared by the assessee in the profit and loss account was distinct from the turnover declared in the sales tax assessment order. Thus, to check the genuineness, an order under section 263 was passed setting aside the earlier assessment order passed by Assessing Officer (AO).

AO passed an order under section 263 by making an addition for the difference in turnover and disallowing the losses. On appeal, the CIT(A) upheld the order of AO. Aggrieved-assessee filed an instant appeal before the Jaipur Tribunal.

ITAT Held

The Tribunal held that it is true that the assessee could not prove the difference on account of the consignment sale. It is immaterial whether the sales are in relation to consignment sales or ordinary sales, the entire sales cannot be considered as an income of the assessee. Additions can only be made for the profit element embedded in the sales.

Thus, it was held that the matter should be remanded back for fresh consideration. The reasonable and adequate opportunity of being heard shall be given to the assessee while considering the matter. Entire sales should not be treated as income but only the profit element by considering the gross profit declared by the assessee.

List of Cases Reviewed

• • K. Venkatesh v. ITO [2016] 47 CCH 447 (Bang. – Trib.)
  • CIT v. President Industries [2002] 124 Taxman 654/258 ITR 654/[2000] 158 CTR 372 (Guj.) (para 9) followed.

List of Cases Referred to

• • K. Venkatesh v. ITO [2016] 47 CCH 447 (Bang. – Trib.) (para 6)
  • CIT v. President Industries [2002] 124 Taxman 654/258 ITR 654/[2000] 158 CTR 372 (Guj.) (para 6).