GOVINDARAJ KENNEDY,THRIVARUR vs. ITO, WARD-1,, THIRUVARUR

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ITA 76/CHNY/2026Status: DisposedITAT Chennai22 July 2026AY 2020-218 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO and CIT(A) arbitrarily estimated the assessee's income without any cogent reason or material to justify estimating it at a higher percentage than what was offered by the assessee. The Tribunal found no evidence of suppression of income or comparable cases to support the higher estimation.

What were the facts?

The assessee, a document writer, did not file an income tax return for AY 2020-21. The AO reopened the assessment upon noticing significant deposits in the assessee's bank account, which the assessee explained as remittances to the registration department on behalf of clients. The AO estimated the assessee's income at 8% of these remittances.

What were the issues?

Whether the estimation of business income at 8% by the AO/CIT(A) was justified without rejecting the assessee's books of account and without any supporting material. Whether reassessment proceedings initiated under Section 148 were valid.

Which sections of the Income-tax Act were involved?

Section 148,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI GAGAN GOYAL

Hearing: 15.06.2026Pronounced: 22.07.2026

आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeal)/NFAC, (hereinafter referred to as ‘Ld.CIT(A)’), Delhi, dated 03.12.2025 for the Assessment Year (hereinafter referred to as ‘AY’) 2020-21.

ITA No. 76/Chny/2026 (AY 2020-21) Govindaraj Kennedy :: 2 :: 2. Grounds of appeal preferred by the assessee are as under: - “GROUNDS OF APPEAL 1. For that the order of the Ld. Commissioner of Income-Tax (Appeals). National Faceless Appeal Centre (NFAC) under section 250 of the Income- Tax Act, 1961 (Act) dated 03.12.2025 is erroneous, bad in law, and was passed ignoring the facts and merits of the case. 2.1. For that the Ld. CIT(A) ought to have noted that the issue of notice u/s 148 of the Act by the Jurisdictional Assessing Officer (JAO) after 29.03.2022, are invalid, and consequentially the whole reassessment proceedings are liable to be quashed. 3.1. For that the Ld. CIT(A) erred in estimating the profits of the appellant without rejecting the books of account. 3.2. For that the Ld. CIT(A) failed to appreciate that assessment cannot be completed on the basis of guess work without reference to any evidence or material. 3.3. For that the Ld. CIT(A) failed to appreciate that 8% commission on online remittance made by the assessee to the Registration Department is totally unrealistic. 4.1. For that the Ld. CIT(A) failed to note that reopening cannot survive when the reason for reopening ceased to survive, in the light of the fact that no addition was made in respect of the reason for reopening. 5. For these and other additional grounds that may be adduced before or at the time of hearing, the appellant prays that the appeal be allowed.”

3.

The main grievance of the assessee is against the action of the Ld.CIT(A) estimating the income of the assessee at 8% on the amount of online remittance made by the assessee to the registration department. The brief facts are that the assessee is a document writer who prepares sale deeds after verifying the encumbrances certificate and title of the property, and other documents etc. and register the documents with registration department of State of Tamil Nadu. The assessee didn’t file his return of income (ITR) for AY.2020-21. The AO noticing that the

ITA No. 76/Chny/2026 (AY 2020-21) Govindaraj Kennedy :: 3 :: assessee has deposited an amount of Rs.2,05,42,000/- during the previous year relevant to the assessment year 2020-21 in his State Bank of India (SBI Current Account) No.38336557538 reopened the assessment of the assessee by issuing statutory notices and issued notice u/s 148 of the Income-Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 27.03.2024. Pursuant to which assessee filed return of income on 01.04.2024 declaring income of Rs.6,00,780/-. In his return, the assessee declared gross receipts from document writer business at Rs.10,12,080/- (commission charges from his document writing business) and shown income earned from such document writing activities at Rs.5,91,451/- (refer computation of total income statement and income and expenditure account). The AO asked the assessee about the nature and source of the cash deposit of Rs.2,05,42,000/- in his SBI Current Account. In response, the assessee furnished the details of deposit made in the said account as under : - Payment to registration department Cash deposits 2,05,42,000 Online (through) NEFT/RTGS from clients) 40,67,030 2,46,09,030 Less: Total amount transferred to registration dept. 2,46,09,030

ITA No. 76/Chny/2026 (AY 2020-21) Govindaraj Kennedy :: 4 :: 4. The assessee claimed that the cash deposited as online transfer from his clients was not his money but the amount collected from his customers for e-payment (by way of stamp-duty and registration charges) to the “TAMILNADU REGISTRATION DEPARTMENT”. In other words, the assessee asserted that the sum of Rs.2,46,09,030/- didn’t belong to the assessee which was remitted to the registration department and filed copy of the bank statement to prove the aforesaid facts as discernible from the table (supra). However, AO without finding any fault with the aforesaid explanation about nature and source of cash deposit was of the view that the business income of the assessee should be estimated at 8% of the gross business receipts which amount he revised at Rs.2,47,54,600/- and taking note that the assessee has shown commission income of Rs.10,12,080/- he made net addition on this issue at Rs.11,40,493/- (estimated income at 8% of Rs.2,47,54,600/- i.e. Rs.21,52,573/- MINUS Rs.10,12,080/-).

5.

Aggrieved by the estimated addition (supra) the assessee preferred an appeal before the Ld.CIT(A) who was pleased to confirm the same.

6.

Aggrieved the assessee is before us.

7.

We have heard both the parties and perused the records. We note that the assessee is a document writer who was having a current account

ITA No. 76/Chny/2026 (AY 2020-21) Govindaraj Kennedy :: 5 :: with the State Bank of India which bank account, which was used for making online payments for remittance of stamp-duty and registration charges to the Registration Department, Government of Tamil Nadu. The AO received information that the assessee had deposited in his bank account Rs.2,05,42,000/- and didn’t file his return of income, hence reopened the assessment. Pursuant to which, the assessee filed the return of income declaring total income of Rs.6,00,780/- wherein, he showed gross commission income at Rs.10,12,080/- after claiming expense of Rs.4,20,629/- has shown net income of Rs.5,91,451/- which has been offered to tax under the head ‘business income’. Assessee when asked by the AO to prove the nature and source of Rs.2,05,42,000/- is noted to have brought to the notice of the AO that the said bank account was maintained for making online payments of stamp-duty and registration charges to the Registration Department; the assessee explained that clients who approached him for writing documents, used to deposit cash in his bank-account, or through on-line, which documents were registered by him after remitting the requisite stamp- duty/registration charges digitally with the registration department and thus he got the document registered; and also brought to the notice of AO that other than the ibid cash deposit, he received an amount of Rs.40,67,030/- through online from his clients for the same purpose for e-payment to the Registration Department and thus total amount of

ITA No. 76/Chny/2026 (AY 2020-21) Govindaraj Kennedy :: 6 :: Rs.2,46,09,030/- was remitted on-line in the previous year to the account of the Government of Tamil Nadu. This assertion made by the assessee could not be disproved by the AO, so it is implied that he has accepted the same, when there is digital traces to prove it. However, the AO was of the view that assessee ought to have offered commission income at 8% on the sum of Rs.2,47,54,600/- rather than showing commission income at 4% i.e. Rs.10,12,080/- hence, he estimated the income at 8% of the total credit of Rs.2,47,54,600/- which works out to Rs.21,52,573/- and since, assessee has offered commission income of Rs.10,12,080/- in his ITR, the balance amount was added i.e. Rs.11,43,493/- Which action has been confirmed by the Ld.CIT(A).

8.

We do not countenance the action of the AO/CIT(A) for the simple reason that there is no cogent reason given by them for tinkering with the income returned by the assessee, which is noted to be arbitrary, and merely on surmises and conjectures. The assessee’s income has been estimated at 8% of the remittance made on-line to the Government of Tamil Nadu, whereas assessee has shown 4% income on such remittance. The AO has not brought on record any material to support his action of estimating on higher percentage than what has been offered by assessee. It is not the case of AO that the Government has fixed higher percentage as commission income for document-writers. No comparable cases have

ITA No. 76/Chny/2026 (AY 2020-21) Govindaraj Kennedy :: 7 :: been cited to show that the income returned by the assessee is comparatively low. No material or information is even brought on record to show any suppression of income. Without bringing any comparable cases or finding fault with the income returned by the assessee, the impugned action of the authorities below to estimate the income at 8% cannot be accepted when the assessee has shown commission income of 4% of the total remittance made to the Government of Tamil Nadu. Hence, we allow the appeal of the assessee and direct deletion of the Rs.11,43,493/-.

9.

In the result, the appeal of the assessee is allowed.

Order pronounced on the 22nd day of July, 2026, in Chennai.

Sd/- Sd/- (गगन गोयल) (एबी टी. वक�) (ABY T. VARKEY) (GAGAN GOYAL) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER चे�नई/Chennai, �दनांक/Dated: 22nd July, 2026. YS आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF YASHVIR Digitally signed by YASHVIR SINGH SINGH Date: 2026.08.03 12:03:55 +05'30'

ITA No. 76/Chny/2026 (AY 2020-21) Govindaraj Kennedy :: 8 ::

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