NAMRITA KABRA,CHANDIVALI, SAKINAKA vs. COMMISSIONER OF INCOME TAX (APPEALS), NEW MARINE LINES

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ITA 8548/MUM/2025Status: DisposedITAT Mumbai28 July 2026AY 2016-20177 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found merit in the assessee's contention that advance payments for job work should not be considered as turnover until the work is done and invoices are raised. The matter was remanded to the AO for verification and determination of appropriate profit margins for job work transactions.

What were the facts?

The assessee, who did not file a return of income, was subject to reassessment proceedings based on export transactions. The Assessing Officer (AO) estimated 10% profit on gross receipts due to lack of books. The CIT(A) reduced this to 6% on export transactions and sustained a part of the addition.

What were the issues?

Whether advance payments received for job work constitute taxable turnover for the year, and what is the appropriate profit margin to be applied to job work transactions in the absence of books of accounts.

Which sections of the Income-tax Act were involved?

Section 148,Section 142(1),Section 28,Section 144,Section 144B,Section 44AA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “K(SMC

Before: SHRI VIKRAM SINGH YADAV & SHRI SIDDHARTHA NAUTIYAL

Hearing: 20.07.2026Pronounced: 28.07.2026

IN THE INCOME TAX APPELLATE TRIBUNAL“K(SMC)” BENCH; MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No. 8548/Mum/2025 (Assessment Year: 2016-17)

Namrita Kabra Income Tax Officer Ward A/12, 2ndFloor, Narayan Plaza, 41(1)(3), Mumbai. A/26, Chandivali, Sakinaka, vs. Pratishtha Bhavan, 3rd and 4th Mumbai, Maharashtra, Floor, M. K. Road, Mumbai, 400072. Maharashtra, 400020.

PAN: AGAPK1819K (Appellant) (Respondent) For Assessee : Shri Rakesh Kabra For Revenue : ShriAjay Uke, Sr.DR Date of Hearing : 20.07.2026 Date of Pronouncement : 28.07.2026 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [‘Ld.CIT(A)’], dated 29.10.2025, pertaining to Assessment Year (AY) 2016-17, wherein the ld. CIT(A) has sustained an addition of Rs. 9,92,787/- against which the assessee is in appeal before us.

2.

Briefly, the facts of the case are that the reassessment proceedings were initiated, basis information available in non-filers monitoring system (NMS) showing export transactions of Rs. 60,23,106/- undertaken by the assessee and given the fact that the assessee did not

ITA No. 8548/Mum/2025; A.Y. 2016-17 Namrita Kabra file a return of income, the case of the assessee was reopened by issuance of notice u/s. 148 dated 27.03.2023. In response to the notice, the assessee did not file any return of income. Thereafter, notices u/s. 142(1) were issued calling for necessary information and documentation. Basis information available on record, the Assessing Officer observed that the assessee has received payment of Rs. 57,18,030/- and Rs. 47,25,000/- from Sangam India Limited and has also received a sum of Rs. 95,012 from the office of Commissioner of Police, Solapur and the said receipts were considered as business income u/s. 28 of the Act, totaling to Rs. 1,65,46,451/- including the export transactions and in absence of books of accounts and supporting purchase bills, a show cause was issued to the assessee as to why the profit should not be estimated at 10% of the gross receipts. In response to the show cause, the assessee submitted copy of the shipping bills, invoices, bills of lading for export shipment, Form 26AS and computation of income showing loss of Rs. 10,23,251/-. However, the assessee failed to justify the loss in absence of supporting books of accounts and the AO thereafter proceeded and estimated 10% of the gross receipts as business income in the hands of the assessee and assessment proceedings were completed u/s. 147 read with section 144read with section 144B vide order dated 23.03.2024 by assessing total income at Rs. 16,54,645/-.

3.

The assessee thereafter carried the matter in appeal before the ld. CIT(A). During the appellate proceedings, the assessee submitted copy of the export invoices, shipping bills, form 26AS and computation of income showing the business loss and it was submitted that she was carrying on a legitimate business of manufacturing and export of garments under the proprietary concern, Namrita Exim (India) and the receipts reflected in Form 26AS were duly accounted for as part of her business turnover.

ITA No. 8548/Mum/2025; A.Y. 2016-17 Namrita Kabra

4.

The submissions so filed by the assessee were considered by the ld. CIT(A) and ld. CIT(A) recorded his finding stating that the assessee did make genuine business transactions, the receipts were through recognized counter-parties including an established textile company, Sangam India Limited and a government department. Hence, the genuineness of the receipt is not in dispute and the limited issue is the quantum of income to be estimated in absence of complete books of accounts. The ld. CIT(A) further held that it is true that non- maintenance of books is a statutory lapse particularly when turnover exceeds the threshold u/s. 44AA.At the same time, estimation of income should be reasonable and fair considering the nature of business, volume of operations and surrounding circumstances. It was held that the Assessing Officer has applied a flat 10% rate without citing any comparable data or industry standard and in export oriented garment businesses, the average profit margin normally ranges between 4 to 8% depending upon cost of fabric, labour and freight involved. It was held that considering the absence of verifiable books, the admitted lapse of the assessee in timely filing her return of income but at the same time, considering the genuineness of the transactions and the export nature of business, a profit rate of 6% of total receipts would meet the end of justice. Hence, as against the addition of Rs. 16,54,645/- made by the Assessing Officer, the ld. CIT(A) deleted the addition of Rs. 6,61,858/- and the balance addition of Rs.9,92,787/- was sustained. Against the said finding, the assessee is in appeal before us.

5.

During the course of hearing, the ld. AO submitted that this is the first year of business of the assessee and initially she had started thebusiness of manufacturing and export of garments. However, due to financial crisis, the export business ceases and assessee started job work in the garments industry and during the year, she started job work for Sangam India Ltd. and has received a sum of Rs. 57,18,030/-

ITA No. 8548/Mum/2025; A.Y. 2016-17 Namrita Kabra and Rs. 47,25,000/- from Sangam India Ltd. and an amount of Rs. 95,012/- from the office of Commissioner of Police, Solapur. It was submitted that since the assessee was in financial difficulty, so advances were taken for job work and parties used to give advance against the job work cost and overhead expenses which were later on adjusted at the time of final bills/debit notes and during the year under consideration, Sangam India Ltd. has made payment of Rs.1,06,78,478/- against the proforma invoices and out of which, the assessee has raised final invoices in two parts totaling to Rs. 35,50,874/-. It was accordingly submitted that the turnover for the year should be considered at Rs. 35,50,874/- and the balance amount of Rs. 71,27,604/- is the advance payment, against the job work and overhead expenses for the subsequent financial year and same cannot form the basis for considering the turnover and the gross receipts for the year under consideration. It was further submitted that as reflected in Form 26AS, Sangam India Ltd has reported a payment/credit of Rs 104,43,030/- and has deducted TDS of Rs 104,430/- and while the AO has brought to tax the gross receipts, corresponding TDS credit has not been allowed to the assesse. It was further submitted that since the export business ceases, the assessee incurred heavy losses and further, the assessee was engaged in job work of garments, where the assessee generally charged an amount of Rs. 50/- per piece which covers office and admin expenses and further, the assessee was taking another charge of Rs. 100/- to Rs. 175/- per piece for job work which includes packing charges, manufacturing, material charges etc. It was submitted that though the assessee has shown gross profit of Rs.21,78,756/-, however, because of the heavy operational losses, the assessee has incurred a loss of Rs. 10,23,250/- and in view of the same, the addition so sustained by the ld. CIT(A) be directed to be deleted.

ITA No. 8548/Mum/2025; A.Y. 2016-17 Namrita Kabra 6. The ld. DR has been heard, who has relied on the order passed by the Assessing Officer as well as that of the ld. CIT(A).It was submitted that the Assessing Officer has estimated 10% profit on the gross receipts and the ld. CIT(A) has reduced the same to 6% which is a reasonable benchmark in respect of export garment business being carried out by the assessee and heaccordingly supported the order and the findings of the ld. CIT(A).

7.

We have heard the rival contentions and perused the material available on record. Admittedly, there are exports sale transactions and domestic job work transactions undertaken by the assessee during the year under consideration. In respect of export sales, there is no dispute on the quantum of export receipts, and as against profit margin of 10% estimated by the AO in absence of books of accounts and supporting purchase and expense documentation, the ld CIT(A) has reduced the profit margin to 6% which has not been specifically contested by the assesse before us and thus, the same requires no interference and the findings of the ld CIT(A) in this regard are confirmed wherein he has determined the profit margin of 6% on the export transactions amounting to Rs 60,08,409/-.

8.

As regarding domestic job work transactions, it has been contended before us that Sangam India Ltd. has made payment of Rs. 1,06,78,478/- against the proforma invoices and out of which, the assessee has raised two final invoices totaling to Rs. 35,50,874/-and the turnover for the year should therefore be considered at Rs. 35,50,874/- and the balance amount of Rs. 71,27,604/- is the advance payment, against the job work and overhead expenses for the subsequent financial year and same cannot form the basis for considering the turnover and the gross receipts for the year under consideration. We prima facie find merit in the contention so advanced by the ld AR on behalf of the assesse for the reason that where the

ITA No. 8548/Mum/2025; A.Y. 2016-17 Namrita Kabra money has been received in advance against future work, until the assesse carries out the necessary job work and raises the the invoices, the advance payment cannot be considered as accured/due and forms part of the taxable business receipts for the year under consideration. However, the same needs necessary verification and we accordingly set- aside the matter to the file of the AO to verify the aforesaid contention and where the same is found to be in order, allow the necessary relief to the assessee by giving into consideration the gross receipts in terms of actual work undertaken by the assesse and in respect of which final invoices have been raised by the assesse.

9.

Regarding estimating of profits margins on the job work transactions, where the assesse is carrying out the transactions on principle to principle basis in respect of export sales and transactions on job work basis, both set of transactions carry their respective cost and risk structure and profits margins therefore cannot be equated. In view of the same, it would not be appropriate to apply same profit margins of 6% as so applied by the ld CIT(A) in respect of export sales to job work transactions and in absence of comparable third party data, we deem it appropriate to set-aside the matter in terms of determination of appropriate profit margins to the AO. The assesse is also at liberty to adduce necessary evidence in support of appropriate profit margins on such transactions. The AO is also directed to allow corresponding TDS credit as so reflected in Form 26AS to the extent of gross receipts which will be finally brought to tax in the hands of the assesse.

10.

In the result, the appeal filed by the assesse is partly allowed for statistical purposes.

Order pronounced on 28.07.2026

ITA No. 8548/Mum/2025; A.Y. 2016-17 Namrita Kabra Sd/- Sd/- SIDDHARTHA NAUTIYAL VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated: 28.07.2026 Karishma J. Pawar, SR. PS

Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

By Order

Dy./Asst. Registrar I.T.A.T, Mumbai

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