ITAT Rejects 8% Profit Estimation on Logistics Firm

Case Details: Assistant Commissioner of Income-tax vs. Freightbridge Logistics (P.) Ltd. - [2026] 183 taxmann.com 744 (Mumbai-Trib.)

Judiciary and Counsel Details

• Anikesh Banerjee, Judicial Member & Girish Agrawal, Accountant Member
• Ajay R. Singh & Akshay Pawar for the Appellant.
• Ms Kavitha Kaushik, Sr. DR for the Respondent.

Facts of the Case

The assessee was a private limited company engaged in the business of logistics and freight forwarding. For the relevant assessment year, it filed its return of income, declaring a total income of ₹ 9.31 crore on a turnover of ₹ 353.68 crore.

During the scrutiny proceedings, the Assessing Officer (AO) observed that three major vendors, namely CMA CGM SA, MSC Mediterranean Shipping Company SA, and ZIM Integrated Shipping Services Limited, were non-resident shipping lines, which had either filed nil returns or had not declared business income in India. Further, the assessee furnished confirmations from 26 vendors, along with party-wise ledger accounts, bank statements, and supporting documents.

Unsatisfied with the response, AO rejected the books of account and estimated profit at 8% of turnover. Aggrieved by the order, the assessee preferred an appeal to CIT(A). The CIT(A) deleted the additions made by AO, and the matter reached the Mumbai Tribunal.

ITAT Held

The Tribunal held that the assessee was engaged in the business of logistics and freight forwarding for a long time. The three major vendors, CGM SA, MSC Mediterranean Shipping Company SA, and ZIM Integrated Shipping Services Limited, were found to be non-resident shipping lines filing returns under the applicable provisions of the Act. The remand report itself acknowledged that these entities are non-residents and file returns under the statutory framework applicable to international shipping operations.

Significantly, the CIT(A) did not rely solely on the assessee’s submissions but conducted independent verification by issuing notices under section 133(6) to the major vendors. Two of the parties responded and furnished the requisite details confirming the transactions. The findings recorded in the appellate order clearly demonstrate that the addition was based on an ad hoc estimation without any cogent material to justify the application of an 8% net profit rate.

Moreover, the net profit ratios declared by the assessee over the years reveal consistent, modest margins typical of the logistics and freight forwarding industry. The AO did not present any comparable case or industry data to justify the arbitrary 8% estimate. The rejection of books of account and the estimation of profit cannot be sustained merely because certain vendors filed nil returns in India, especially when they are non-resident shipping companies governed by specific provisions of the Act. Accordingly, there was no infirmity in the order of the CIT(A) directing the deletion of the addition.