AMAR KESARINATH MHATRE,PANVEL vs. ASSESSING OFFICER WARD 4, PANVEL

PDF · subscribers
ITA 2530/PUN/2025Status: DisposedITAT Pune14 May 2026AY 2017-186 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the lower authorities failed to provide proper reasoning for estimating the net profit rate, especially when the assessee had already offered a higher profit rate than in preceding years and consistent with presumptive taxation provisions. Therefore, no further addition was justified.

What were the facts?

The assessee, engaged in transport and civil contracting, did not file a return of income for AY 2017-18. Upon notice, the assessee declared income at 8.17% of gross receipts, considering presumptive taxation provisions. The Assessing Officer estimated net profit at 10%, then 20%, and the CIT(A) sustained it at 15%.

What were the issues?

Whether the estimation of net profit by the revenue authorities was arbitrary and lacked proper basis, disregarding the assessee's past performance and declared income.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B,Section 145(3),Section 148A,Section 148,Section 139,Section 44AD,Section 44AE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCHES “A”, PUNE

Before: DR.MANISH BORAD & SHRI VINAY BHAMORE

For Appellant: Shri Suresh Kumar
For Respondent: Shri Vidya Ratna Kishore
Hearing: 18.03.2026Pronounced: 14.05.2026

आदेश / ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER : The captioned appeal at the instance of assessee pertaining to A.Y. 2017-18 is directed against the order dated 26.08.2025 framed by National Faceless Appeal Centre, Delhi arising out of Assessment Order dated 26.03.2022 passed u/s.147 r.w.s.144B of the Income Tax Act, 1961 (in short ‘the Act’).

2.

Assessee has raised following grounds of appeal :

“Ground 1: Arbitrary Estimation without Basis or Rejection of Books The authorities below erred in making an ad-hoc estimation of income at 15% or 20% of gross receipts without: a) Identifying any specific defects in the books of account.

ITA No.2530/PUN/2025 Amar Kesarinath Mhatre

b) Invoking the provisions of Section 145(3) for rejection of books. c) Providing a cogent reason for deviating from the historically accepted profit rates and the JAO's quantified income u/s 148A(d). Ground 2: Disregard of Consistent Past Performance The Ld. CIT(A) erred in upholding an estimation that ignores the appellant's consistent profit history (5.25% in A.Y. 2015-16, 5.00% in A.Y. 2016-17) and the voluntarily declared higher profit of 8.17% for the current year, which was supported by financial statements. Ground 3: Invalid Reliance on a Non-Comparable Year The authorities erred in relying on A.Y. 2014-15 (8.79% profit on a small turnover of Rs. 56 lakh) as a benchmark, ignoring the fundamental economic principle that profit margins are not scalable and are not comparable across significantly different turnover levels. Ground 4: Violation of Natural Justice and Judicial Propriety The Ld. CIT(A) erred by not acknowledging that the re-assessment order passed by FAO after the Ashish Agarwal judgment unjustly increased the profit rate from the previously accepted 10% to 20% and also ignoring order u/s 148A(d), without any change in facts or material on record, violating principles of consistency and natural justice. Ground 5: Denial of Tax Liability Without prejudice to the above, the appellant denies the tax liability of Rs. 35,16,440/-to the extent it arises from the unjust and arbitrary additions, as the assessment order is bad in law and on facts. PRAYER The appellant therefore prays that the addition of Rs.45,49,893/- [as modified by CIT(A)] be deleted and the returned income be accepted, or such order relief be granted as deemed it.”

3.

At the outset, ld. Counsel for the assessee submitted that the only grievance in the instant appeal is that ld.CIT(A) erred in estimating the net profit @15% as against 8.17% declared by the assessee in the income tax return.

ITA No.2530/PUN/2025 Amar Kesarinath Mhatre 4. Ld. Counsel for the assessee submitted that during A.Y. 2013-14 net profit declared by the assessee is 8.79%; during A.Y. 2014-15 is 5.25% and A.Y. 2015-16 is 5%. He submitted that ld. Assessing Officer grossly erred in firstly estimating the net profit @10% in the assessment order dated 26.03.2022 and subsequently in the second round of assessment proceeding vide order dated 04.05.2023 estimated net profit @20% solely on the ground that books of account were not audited but failed to consider that the assessee is carrying the same business activity and that the assessee failed to file the regular return of income. He also submitted that books of account were regularly maintained, balance sheet and profit and loss account were submitted. However, the same were not audited for reasons beyond control.

5.

On the other hand, ld. DR supported the order of ld.CIT(A).

6.

We have heard the rival contentions and perused the record placed before us. We observe that the assessee is an individual engaged in the business of Transport Civil Contractor and supply of building material. Assessee did not file the return of income for A.Y. 2017-18 u/s.139(1) of the Act. Ld. Assessing Officer based on the information about the contract receipts of Rs.2,67,10,320/- and income from renting plant and machinery at Rs.1,24,400/- received on the basis of Form 26AS statement, issued notice u/s.148 of the Act to which assessee made compliance and filed income tax return declaring income of Rs.30,74,670/-. Assessee has shown gross turnover at Rs.3,81,33,816/-. As

ITA No.2530/PUN/2025 Amar Kesarinath Mhatre the assessee could not get the books of account audited, he offered net profit @8.17% keeping in view the provisions of section 44AD and section 44AE of the Act. However, ld. Assessing Officer concluded the proceedings estimating net profit @10% thereby making addition of Rs.7,38,712/- and assessed income at Rs.38,13,380/-. Subsequently, in the second round of reassessment proceedings initiated vide notice u/s.148A(b) of the Act dated 01.06.2022 followed by issue of notice u/s.148 of the Act dated 27.07.2022, ld. Assessing Officer concluded the proceedings estimating net profit @20% as against 10% made in the previous assessment proceedings and made addition of Rs.45,49,893/-. Income assessed at Rs.76,24,563/-. Assessee went in appeal before ld.CIT(A) who partly sustained the addition estimating net profit @15%. Now the assessee is in appeal before this Tribunal.

7.

Before us, ld. Counsel for the assessee with the help of detail of turnover and net profit rates for preceding financial years has successfully demonstrated that during A.Y. 2013- 14, A.Y.2015-16, A.Y. 2016-17, on the turnover of Rs.55,99,442/-, Rs.3,68,95,360/- and Rs.6,67,69,925/-, net profit has been declared @8.79%, 5.25% and 5% respectively. Books of account for all the preceding three assessment years were duly audited. Now for the year under consideration, the turnover of the assessee is declared at Rs,3,81,33,816/- which is much higher than the information received by the Assessing Officer about the contract receipt by the assessee at Rs.2,67,10,320/-. Assessee has prepared the financial statement but they are

ITA No.2530/PUN/2025 Amar Kesarinath Mhatre not audited. Admittedly, the assessee has also not furnished regular return of income for A.Y. 2017-18 u/s.139 of the Act. However, for not getting the books of account audited, the assessee keeping in view the deemed provisions of section 44AD and 44AE of the Act had suo motu offered net profit @8.17% and declared income of Rs.31,60,335/-. Revenue authorities have not disputed the fact that nature of business activity carried out by the assessee during the year is at par with the business activities carried out in the preceding three financial years.

8.

Now under these given facts and circumstances we find that the assessee has already offered higher amount of net profit rate as compared to the preceding two assessment years but ld. Assessing Officer in the first reassessment proceedings has estimated at 10% and in the second round has estimated 20%. Ld.CIT(A) sustained at 15%. But for making such estimation there is no proper reasoning by both the lower authorities except the books of account not audited. We therefore fail to find any consistency in the finding of ld. Assessing Officer as well as ld.CIT(A) and are of the considered view that considering the past pattern and also the deeming provisions of section 44AD where the presumptive taxation rate is 8%, assessee has already offered net profit @8.17% and therefore, no further addition deserves to be made in the hands of assessee. Impugned addition. is deleted. Grounds of appeal raised by the assessee on merit are allowed.

ITA No.2530/PUN/2025 Amar Kesarinath Mhatre 9. Since we have deleted the impugned addition sustained by ld.CIT(A), dealing with remaining grounds would be merely academic in nature and therefore they are dismissed as Infructuous.

10.

In the result, the appeal of the assessee is allowed as per terms indicated hereinabove.

Order pronounced on this 14th day of May, 2026.

Sd/- Sd/- (VINAY BHAMORE) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; दिन ांक / Dated : 14th May, 2026. Satish Satish Kumar Madishetty Digitally signed by Satish Kumar Madishetty Date: 2026.05.15 10:38:20 +05'30'

आदेश की प्रतिलिपि अग्रेपिि / Copy of the Order forwarded to : अपील र्थी / The Appellant. 1. प्रत्यर्थी / The Respondent. 2. 3. The Pr. CIT concerned. विभ गीय प्रतितनधि, आयकर अपीलीय अधिकरण, “A” बेंच, 4. पुणे / DR, ITAT, “A” Bench, Pune. ग र्ड फ़ इल / Guard File. 5. आिेश नुस र / BY ORDER,

// True Copy // Assistant Registrar, आयsकर अपीलीय अधिकरण, पुणे / ITAT, Pune.

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Latest GST High Court judgments

Search GST case law →