M/s. Goodwill Corporation vs. ITO, Ward–17(3)(1)

Parties Involved

Facts Summary

The assessee, a partnership firm engaged in the business of trading of various items of engineering products, filed an appeal challenging the order passed by the Ld. Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi. The assessee was aggrieved by the decision of the Ld.CIT(A) in confirming the addition of Rs.4,67,208/- made by the Assessing Officer (AO) on account of a fall in the Gross Profit ratio of the assessee during the year under consideration vis-à-vis the prior year. The AO had estimated the Gross Profit amount by applying an average rate of 16% and added the difference amount to the total income of the assessee. The Ld.CIT(A) also confirmed the same. The assessee submitted that it was dealing in various items of engineering products and in a competitive market, it was not possible to maintain a uniform rate of Gross Profit. The assessee would be adjusting the rate of Gross Profit depending upon the market requirements, rate quoted by competitors, the manner of payments expected from the customers, and various other factors.…

Legal Issues

• 1. Whether the AO was justified in estimating the profit at a higher rate without bringing any material on record to show that the rate of profit declared by the assessee suffers from deficiencies?

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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