Additions cannot be made based on profit assumptions: Punjab & Haryana HC


Additions cannot be made based on profit assumptions: Punjab & Haryana HC


M/s Shree Digvijaya Woollen Mills Ltd., Amristar Vs Commissioner of Income-Tax (ITR-3- 2010)(O&M)


  1. The taxpayer discarded a copper wire cable of Rs.2,46,553, and this amount was claimed beneath the head Assets Discarded during the year. The assessee from 1955 to 1965 bought the copper wire cable and that was over-head and underground wire and cables of copper covered with PVC or rubber.
  1. The AO from the discarded goods sales discovered that the taxpayer does not reveal the sale of copper wire in the year beneath consideration. AO personally visited the factory premises of the assessee company and discovered that there was no stock of copper wire in the godown.
  1. The taxpayer furnished that, based on the foundation the wire lost its utility, and it is not normally recovered since the labour charge cost to recover the underground wire was more compared to the scrap value.
  1. The Assessing Officer (AO) ruled that the taxpayer had calculated the discarded value of the copper wire and therefore worked out the profit u/s 41(2).

Hon Punjab and Haryana HC held as below:

  1. The AO incurred the additions beneath the stated provisions on the grounds of the presumption for the stated sale, post discovering no stock in the premises.
  1. The assessee explained every question put by the Assessing Officer. Even though the Assessing Officer himself personally visited the factory premises nothing was discovered to show that the taxpayer attempted to evade tax, the Assessing Officer on assumptions and presumptions made an addition.
  1. The addition made by the AO on account of the assumed sale of copper wire is been deleted and so the appeal by the assessee is allowed.


The copy of the order is as under: