NAGIMOUDDIN LASKAR,HOWRAH vs. I.T.O., WARD - 47(1), KOLKATA

That on the facts and in the circumstances of the case, the Learned CIT(A) erred in confirming the assessment order passed under section 147 read with section 144B of the Income-tax Act, 1961, which is arbitrary, unjustified and bad in law.

That the Learned CIT(A) erred in upholding rejection of books of account under section 145(3) without pointing out any specific defect, discrepancy or falsity in the revised audited books of account and supporting records produced by the appellant.

That the Learned CIT(A) failed to appreciate that the revised financial statements were voluntarily furnished during assessment proceedings after reconciliation of omitted invoices and were duly supported by books of account, audit report and confirmations from parties.

That the Learned CIT(A) erred in sustaining estimation of business income by applying arbitrary net profit rate of 8% on turnover without any cogent basis, comparable instances or material evidence.

That the authorities below failed to appreciate that no material whatsoever was brought on record to establish suppression of profit, bogus purchases or concealment of income and therefore the impugned addition based merely on suspicion, conjecture and surmises is liable to be deleted.

That the Learned CIT(A) failed to appreciate that corresponding purchases against the revised turnover were duly available and verified and therefore enhancement of turnover alone could not justify arbitrary estimation of profit.

That the Learned CIT(A) erred in ignoring the confirmation received under section 133(6) from Diamond Textiles corroborating the revised purchase figures disclosed by the appellant.

That the Learned CIT(A) wrongly relied upon judicial precedents which are distinguishable on facts and not applicable to the case of the appellant.

That the Learned CIT(A) erred in confirming levy of interest under sections 234A, 234B and 234C without granting proper relief and credit for taxes already paid by the appellant.

That the appellant craves leave to add, alter, amend or withdraw any ground or grounds of appeal at or before the time of hearing."

Brief facts of the case are that the assessee had filed the return of income for AY 2020-21 on 18.01.2021 declaring total income at ₹7,98,260/-. The return of income was selected under the E-Verification Scheme, 2021 to investigate cash deposits in the bank accounts of the assessee aggregating to ₹5,06,00,000/-, which far exceeded the declared turnover of ₹3,33,60,497/-. Subsequently, a notice u/s 148 of the Act was issued. During the assessment proceedings, the assessee submitted that the original turnover was understated due to inadvertently omitted invoices and he furnished revised financial statements reflecting the turnover of ₹5,90,14,925/- and purchases of ₹5,86,29,387/-, while keeping the gross and net profits identical to those originally declared. The Assessing Officer (hereinafter referred to as Ld. 'AO') observed that the revised books did not present a true and correct picture and rejected the books of account u/s 145(3) of the Act. The Ld. AO thereafter, estimated the business income by applying net profit rate of 8% on the admitted enhanced turnover of ₹5,90,14,925/-, which resulted in the business income of ₹47,21,194/-, and thereby he made an addition of ₹38,86,682/- to the income of the assessee and assessed the total income at ₹46,84,292/- u/s 147 r.w.s. 144B of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who noted that the assessee had admitted the original audited books were incorrect and revised them post-reopening with identical profit margins, despite the substantial turnover escalation, which indicated an attempt to cap the tax liability. Relying on judicial precedents, the Ld. CIT(A) held that the Ld. AO was justified in rejecting the books of account u/s 145(3) of the Act and applying a reasonable 8% net profit rate. Accordingly, the Ld. CIT(A) confirmed the action of the Ld. AO and dismissed the appeal of the assessee vide his findings as under:

Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.

Rival contentions were heard and the submissions made have been examined. The Ld. AR submitted that the assessee had voluntarily reconciled the business records and discovered that certain sales and purchase invoices had inadvertently been omitted while preparing the original accounts and GST returns and, therefore, the revised audited financial statements were furnished before the Ld. AO which were supported by the books of account, the audit report and confirmations from the parties as one of the major suppliers, viz., Diamond Textiles confirmed the transactions aggregating to ₹4,41,56,986/- in response to the notice issued u/s 133(6) of the Act. Though the turnover and purchases were revised, however the gross profit and the net profit originally disclosed remained substantially unchanged. The Ld. AO, however rejected the books of account and determined the business profit. It was stated that the books of account were rejected without pointing out any specific defect, discrepancy or falsity as the assessee could not properly submit the reasons for omission of both the turnover as well as the purchases. The Ld. AR requested that the assessment may be remanded before the Ld. AO. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.

We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). The Ld. AR submitted that since the accounts could not be explained properly, one more opportunity may be provided to the assessee to explain the discrepancy by producing the proper books and vouchers as the Ld. AO has not disputed the purchases and the purchases from the other 3 parties out of the 4 to whom notices u/s 133(6) of the Act were issued could not be confirmed in time despite the assessee assuring the Ld. AO on 12.01.2025 that the other parties would confirm the same as soon as possible. The letter in this regard is mentioned at page 17 of the assessment order. Thus, in our considered view, as the ITA No(s). 1789/KOL/2026 Assessment Year(s) 2020-21 turnover was not correctly reported and the assessee submits that both the purchases as well as the sales were omitted to be included; therefore, the books of account were liable to be rejected. However, the Ld. AO has not given any justification for the application of the net profit rate as once the books of account are rejected, either the past history of the case has to be considered for estimating the profit or the profit shown in similar line of business can be applied. That being so and the Ld. AO not having done so, the Bench was of the view that one more opportunity of being heard may be provided to the assessee. Therefore, in the interest of justice and fair play, the order of the Ld. CIT(A) is hereby set aside and the restore the matter back to the file of the Ld. AO for de novo assessment after providing due opportunity to the assessee. Hence, all the Grounds of appeal are partly allowed for statistical purpose.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 19th August, 2026. [Yogesh Kumar US] [Rakesh Mishra] Judicial Member Accountant Member Dated: 19.08.2026 Bidhan (Sr. P.S.)

CIT-

CIT(DR), Kolkata Benches, Kolkata.

Guard File. //// By order