Commissioner of Income Tax vs Pradeep Goel

The revenue is aggrieved by an order dated 30-11-2006 passed by the income tax Appellate Tribunal, Delhi Bench "B" in I.T. (S.S.) Appeal Nos. 128/Delhi/2003 and 282/Delhi/2003 relevant for the block period 1988-89 to 1998-99. A search was conducted in the premises of the assessee who was in the business of trading in "Saria" and other steel items through a proprietary concern M/s. Kamal Steel. It appears that the assessee had two concerns called Kamal Steel-I and Kamal Steel-II.

As a result of the search, the Assessing Officer noted that there were undisclosed sales of Rs. 8 crores and he estimated the net profit at the rate of 5 per cent and levied tax accordingly.

On appeal, the Commissioner of income tax (Appeals) was of the opinion that the net profit would be 2.5 per cent and, therefore, he disagreed with the Assessing Officer to this extent.

In further appeal before the Tribunal it transpired that for some of the assessment years that is 1994-95, 1996-97 and 1997-98 the assessee had already filed its returns and it disclosed the net profit at the rate of 0.75 per cent. The Tribunal accepted this and for the other years, the Tribunal took the estimated net profit at the rate of 1.5 per cent. The Tribunal also came to the conclusion that there was no material on the basis of which the Assessing Officer could have come to the conclusion that the net profit was 5 per cent.

In our opinion the estimate of net profit does not raise any substantial question of law. There is no material on the basis of which the Assessing Officer could come to the conclusion that the net profit was 5 per cent. It may be noted that the CIT(A) had taken the net profit at the rate of 2.5 per cent which was further reduced by the Tribunal to 1.5 per cent, partly based on the fact that for the assessment years 1994-95, 1996-97 and 1997-98 the net profit of the assessee was 0.75 per cent and according to the assessee for the other years it may be estimated at double the amount which is 1.5 per cent.

The other issue that has been raised by the Assessing Officer is with regard to unexplained and undisclosed investment of Rs. 10 lakhs. This amount is also based on an estimate made by the Assessing Officer who was of the opinion that this was the capital invested by the assessee in its business of steel items under the name of Kamal Steel-II.

There is nothing on record to show how much investment, if any, was made by the assessee who explained that having been in the business of steel, he had the goodwill of the vendors and so there was no necessity of a capital investment. Moreover, it has been found that the regular returns were filed by the assessee in 1994-95 and the investments, if any, could have been investigated in the regular return rather than in the block assessment.

We may also note that the unexplained investment was reduced from Rs. 10 lakhs as estimated by the Assessing Officer to Rs. 5 lakhs by the CIT(A). Really, the entire exercise was done on the basis of an estimate and not on the basis of facts and no evidence of any sort has been shown to us in this regard. No substantial question of law arises in respect of this issue also.

Dismissed.