KAMALA AGENCY,KOLKATA vs. INCOME TAX OFFICER, WARD 49(1), KOLKATA, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH AT KOLKATA Before SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER Kamala Agency Income Tax Officer, Ward- Vs. 49(1), Kolkata (Appellant) (Respondent) PAN: AAGFK3274J Appearances: Assessee represented by : Himadari Mukhopahyay & P.K. Ray, AR. Department represented by : Manav Adak, Sr. DR. Date of concluding the hearing : 15.07.2026 Date of pronouncing the order : 03.08.2026 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for AY 2019-20 dated 24.02.2026. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: "I. Challenge to Jurisdiction & Legal Validity 1. Invalid Assumption of Jurisdiction by NFAC: That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the assessment order passed by the National Faceless Assessment Centre (NFAC) u/s 143(3) read with Section 144B of the Income Tax Act, 1961. Since a survey u/s 133A of the Income Tax Act, 1961 was conducted on the business premises of the appellant on 19.09.2018, the jurisdiction over the case ought to have remained with the Jurisdictional Assessing Officer (JAO). The transfer of the case to the NFAC is in violation of the CBDT's own instructions and schemes governing faceless assessments, which specifically excluded cases involving surveys from the purview of the NFAC during the relevant period. Consequently, the assessment order is void ab initio and liable to be quashed. 2. Violation of Principles of Natural Justice: That the Ld. CIT(A) failed to appreciate that the assessment was completed in a mechanical manner without providing a meaningful opportunity for the appellant to cross-examine or rebut the findings of the survey team, particularly when the books of accounts were available for verification. II. On Merits of the Case 3. Arbitrary Rejection of Books of Accounts u/s 145(3): That the Ld. CIT(A) erred in law and on facts in confirming the action of the Assessing Officer in rejecting the audited books of accounts u/s 145(3) of the Income Tax Act, 1961. The rejection was based on a mere allegation of non-maintenance of a daily stock register, ignoring the fact that the appellant is a wholesale distributor of FMCG goods (Nestle, Colgate, etc.) where stock is managed through computerized systems and verified during the survey without any discrepancy. 4. Error in Adopting "Projected" Turnover over "Actual" Audited Turnover: That the Ld. CIT(A) erred in confirming the estimation of turnover at Rs. 23,00,00,000/- based on a "projected" figure mentioned in a statement recorded during the survey. The Ld. CIT(A) failed to consider the actual audited turnover of Rs. 21,69,51,333/- as reflected in the Tax Audit Report u/s 44AB of the Income Tax Act, 1961 and the statutory books of accounts, which were neither impounded nor found to be fraudulent. 5. Unjustified Estimation of Net Profit at 8%: That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in estimating the Net Profit at a flat rate of 8% by wrongly invoking the presumptive provisions of Section 44AD of the Income Tax Act, 1961. The Ld. CIT(A) failed to appreciate that the appellant is a high-volume, low-margin wholesale trader in the FMCG sector with historical profit margins ranging between 0.24% and 0.46%. Such an estimation is arbitrary, excessive, and fails to consider the audited books of account and the turnover data already verified by the GST Authorities. 6. Selective Reliance on Survey Statement: That the Ld. authorities below erred in law by adopting the "projected turnover" from the partner's survey statement while conveniently ignoring the "projected profit rate" of 0.45% mentioned in the very same statement. It is a settled position of law that a statement must be read as a whole and cannot be used selectively to the detriment of the Assessee. 7. Failure to Apply Rule of Consistency: That the Ld. CIT(A) erred in ignoring the comparable cases of M/s Soumak Agency and M/s Priyo Agency, where the department had accepted significantly lower profit margins for similar business models involving the same partners. III. GENERAL 8. The appellant craves leave to add, amend, or alter any of the above grounds or to submit additional grounds before or at the time of the hearing of the appeal.” 3. Brief facts of the case are that the assessee had filed the return of income for the AY 2019-20 on 31.10.2019 declaring the total income at ₹10,02,540/-. The case was selected for compulsory scrutiny following a survey action u/s 133A of the Act. During the assessment proceedings, the Assessing Officer (hereinafter referred to as Ld. 'AO') noted that the assessee had failed to furnish quantitative details of traded goods and stock registers, which led to the rejection of the books of account u/s 145(3) of the Act. The Ld. AO then estimated the net profit margin at 10% on a projected total turnover of ₹23,00,00,000/- as agreed upon during the survey proceedings, which resulted in an addition of ₹2,19,97,460/- to the total income. The assessment was framed u/s 143(3) r.w.s. 144B of the Act assessing the total income at ₹2,30,00,000/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who upheld the rejection of the books of account u/s 145(3) of the Act due to fundamental defects and missing documentation, but held that an 8% profit margin was a reasonable estimate for the FMCG sector in light of the presumptive provisions of section 44AD of the Act on the admitted turnover of ₹23,00,00,000/-, and he thereby restricted the addition to ₹1,73,97,460/-. Accordingly, the Ld. CIT(A) modified the action of the Ld. AO and partly allowed the appeal of the assessee. 4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal. 5. Rival contentions were heard and the submissions made have been examined. It was submitted at the outset by the Ld. AR that only two days’ time was given to file the reply and the Ld. AR requested the matter to be remanded remand to the Ld. AO. It was also submitted that the assessee has raised additional grounds of appeal. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld. 6. 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). In the interest of justice and fair play it was considered by the Bench that the request of the assessee to set aside the case before the Ld. AO may be allowed so that a proper opportunity of being heard may be provided. Hence, after examining the facts of the case, we deem it appropriate to set aside the order of the Ld. CIT(A) and remit the matter to the Ld. AO for making the assessment de novo. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of its grounds of appeal. The assessee shall be at liberty to raise all the legal issues and shall not seek unnecessary adjournments. Accordingly, the grounds taken by the assessee in the appeal are partly allowed for statistical purposes. 7. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 3rd August, 2026. [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 03.08.2026 Bidhan (Sr. P.S.) Copy of the order forwarded to: 1. Kamala Agency, 93, Feeder Road, Belghoria, Kolkata, West Bengal, 700056. 2. Income Tax Officer, Ward-49(1), Kolkata, Aayakar Bhawan, Uttarapan Complex, Manicktala Civic Centre, Kolkata, West Bengal, 700054. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //// By order