Jain Brothers vs Deputy Commissioner Of Income Tax Central

PER VIKAS AWASTHY, JUDICIAL MEMBER:

These two appeals by the assessee are directed against the orders of Commissioner of Income Tax (Appeals), Lucknow-3 [in short ‘the CIT(A)’] for Assessment Years 2019-20 & 2020-21, respectively. Both the impugned orders are of even date i.e. 26.02.2026.

Shri K.R. Rastogi, appearing on behalf of the assessee submits that the assessment in the case of the assessee was reopened on the basis of a search carried out in the case of M/s. Ravindra Oil and Ginning Mills on 02.06.2022. The assessee had purchased oil from M/s. Ravindra Oil and Ginning Mills during the period relevant to assessment year under appeal. Admittedly, part of oil purchased from M/s. Ravindra Oil and Ginning Mills was not disclosed by the assessee in its books. The Assessing Officer (AO) made addition of Rs.30,16,091/- u/s.69C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) i.e. the entire undisclosed purchases. Aggrieved by the assessment order dated 21.03.2024, the assessee carried the issue in appeal before the CIT(A). The CIT(A) granted part relief to the assessee by reducing GST, and estimating profit rate at 8%. Thus, restricting the addition to Rs.25,64,374/-facts has made addition @1.78%. He stated that the addition @8% is very much on the higher side and prayed for restricting it to the GP already declared by the assessee i.e. 1.61% on the undisclosed sales.

Per contra, Shri Manoj Kumar, representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee. The ld. DR submits that the assessee has not declared the purchases, the CIT(A) has rightly estimated sales by applying profit rate @8% under the provisions of section 44AD of the Act i.e. on a presumptive basis.

Both sides heard, orders of the lower authorities examined. It is an admitted fact that the assessee had made certain undisclosed purchases from M/s. Ravindra Oil and Ginning Mills. The limited dispute in the instant appeal is the rate of GP that has been applied by the CIT(A). The AO made addition of the entire amount of undisclosed purchases, the CIT(A) in First Appellate proceedings has restricted the addition by applying GP rate @8%. The assessee has furnished a chart showing that the average GP of the assessee of the two preceding and two succeeding assessment years comes to 1.35%. Considering entire facts of the case and to meet the ends of justice, GP addition @2% is estimated. The AO is directed to restrict the addition to 2% of total purchases.

The ld. Counsel for the assessee submits that the facts in the impugned assessment year are identical to the facts in AY 2019-20. The ld. DR endorsed the same. Since, the facts and grounds of appeal raised by the assessee in both appeals are similar, the findings given while adjudicating appeal of the assessee for AY 2019-20 would mutatis mutandis apply to AY 2020-21.

In the result, appeals of the assessee are partly allowed.