DEPUTY COMMISSIONER OF INCOME TAX, KOLKATA vs. S.H. MUMTAZUDDIN TIMES PVT LTD, KOLKATA

ITA 1993/KOL/2025Status: DisposedITAT Kolkata25 June 2026AY 2017-184 pages

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that estimation of income is permissible only after rejecting the books of account. Since the AO did not reject the assessee's books of account, the addition made by estimating income cannot be sustained.

What were the facts?

The Assessing Officer estimated the assessee's income at 8% of total turnover due to partial compliance. The CIT(A) reduced this estimation to 1.50%, sustaining a partial addition. The assessee filed an application under Rule 27 of ITAT Rules, challenging the estimation without rejecting books of account.

What were the issues?

Whether income can be estimated by applying a rate on turnover without rejecting the books of account.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA

Before: SHRI RAJESH KUMAR & SHRI PRADIP KUMAR CHOUBEY

For Appellant: Shri Dheeraj, Sr. DR

For Respondent: Shri Manish Tiwari, FCA

Hearing: 16.06.2026Pronounced: 25.06.2026

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘D’ BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER I.T.A. No.1993/KOL/2025 (Assessment Year:2017-18) DCIT, S. H. Mumtazuddin Times Pvt. Circle – 5(1), Vs. Ltd., Kolkata 4, Radha Bazar Street, Lal Bazar, Kolkata – 700001 [PAN: AAKCS6915K] (Appellant) .. (Respondent) Appellant by : Shri Dheeraj, Sr. DR Respondent by: Shri Manish Tiwari, FCA Date of Hearing 16.06.2026 Date of Pronouncement 25.06.2026

O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER:

This appeal preferred by the revenue is against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (hereinafter referred to as the “ld. CIT(A)”], dated 27.06.2025 for the Assessment Year (AY) 2017-18.

The revenue has filed this appeal challenging the deletion of addition by ld. CIT(A) of Rs.2,77,55,969/- as against the addition made by the Assessing Officer (In short, ‘the AO’) of Rs.3,41,61,192/- by estimating the income of the assessee by applying 8% on the total turnover. The revenue has also challenged the admission of additional evidences by the ld. CIT(A) in violation of Rule 46A of Income-tax Rules, 1962.

ITA No.1993/Kol/2025/AY 2017-18 DCIT vs. S.H. Mumtazuddin Times Pvt. Ltd. 3. The assessee has also filed an application under Rule 27 of ITAT Rules, 1963, by raising the following grounds:

“1. That on the facts and in the circumstances of the case, Ld. CIT(A) erred in estimating the net profit at the rate of 1.50 percent i.e. Rs.64,05,224/- of the total turnover of Rs.42,70,14,904/- as income of the respondent company during the relevant assessment year. 2. That on the facts and in the circumstances of the case, Ld. CIT(A) erred in confirming the estimation of net profit by AO without rejecting the books of accounts of the respondent company. 3. That the respondent craves leave add, alter, adduce or amend any ground or grounds on or before the date of hearing.” 4. Since the assessee has raised a legal issue under Rule 27 of ITAT Rules, 1963 that the ld. CIT(A) has erred in estimating the net profit @1.50% of total turnover, thereby sustaining addition of Rs.64,05,224/- on estimation basis without rejecting the books of account of the assessee-company.

We have heard rival submissions and perused the materials available on record. We find that the application filed under Rule 27 of ITAT Rules, 1963 on the issue, which is decided against the assessee for which the assessee has not preferred any appeal, is maintainable. Accordingly, we admit the application filed by the assessee under Rule 27 of ITAT Rules, 1963, challenging the assessment order on the ground that the estimation of income without rejecting books of account.

Brief facts of the case are that the assessee-company had filed its return of income on 31.10.2017, declaring total income of Rs.75,27,370/- under normal provisions of Act and income of Rs.35,90,791/- u/s 115JB of the Act. The return was revised by the assessee on 16.02.2018, declaring total income of Rs.73,86,510/- under normal provisions of the Act and showing

ITA No.1993/Kol/2025/AY 2017-18 DCIT vs. S.H. Mumtazuddin Times Pvt. Ltd. income of Rs.35,90,791/- u/s 115JB of the Act. The case was selected for scrutiny under CASS and notices u/s 143(2) and 142(1) of the Act were issued to the assessee, but there was part compliance to the said notices and the AO computed the estimated the income @ 8% and therefore, estimated the income at Rs.3,41,61,192/-, and added the same to the income returned by the assessee thereby assessing the income at Rs.4,15,47,702/- in the assessment order framed u/s 143(3) of the Act on 24.12.2019.

In the appellate proceedings, the Ld. CIT(A) after taking into account the arguments and contentions , computed the average net profit rate from A.Y.2014-15 to 2020-21, @1.06%. The ld. CIT(A) thereafter applied @1.50% thereby sustaining the addition of Rs.64,05,223/- as against the addition made by the AO of Rs.3,41,61,192/-.

After hearing the submissions and perused the materials available on record, we find that undisputedly the income of the assessee was estimated by the Ao by applying @8% on the total turnover when there was part compliance on the part of the assessee. It is also disputed that during the assessment proceeding, the AO has not rejected the books of account and estimated the income of assessee by applying @8%, which is not permissible under the Act. In our opinion, where the income is estimated , the books of account are to be compulsorily rejected, failing which the addition made by the AO by estimating the income cannot be sustained. The Hon’ble Supreme Court in CIT v. A. Krishnaswami Mudaliar (53 ITR 122) has categorically held that estimation of income is permissible only after rejecting the books of account and recording a finding that the accounts do not correctly reflect the true state of affairs. This settled legal position has been consistently followed by various High Courts and Tribunals. Thus, having accepted the books of

ITA No.1993/Kol/2025/AY 2017-18 DCIT vs. S.H. Mumtazuddin Times Pvt. Ltd. account as such, the Assessing Officer could not estimate the unaccounted turnover or profit. Consequently, we set aside the order of ld. CIT(A) and direct the AO to delete the addition. The application filed by the assessee under Rule 27 of ITAT Rules, 1963 and ground raised therein are allowed.

The appeal of the revenue challenging part deletion by ld. CIT(A) becomes infructuous in view of allowing the grounds raised by the assessee under Rule 27 of ITAT Rules, 1963. Consequently, the appeal of the revenue is dismissed.

10.

In the result, the application under rule 27 is allowed and appeal of the revenue is dismissed.

The order is pronounced in the open Court on 25/06/2026.

Sd/- Sd/- (Pradip Kumar Choubey) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated: 25/06/2026 SAMANTA ] �ȯ��ȧĤǓ�ͧ �ͪ �\ Ē ȯͪ��/Copy of the Order forwarded to : 1. \ �Ȣ�ȡ�ȸ/ The Appellant 2. Ĥ×��ȸ/ The Respondent. 3. Ȳ�Ȳͬ��] ��] �ǕÈ�/ Concerned CIT 4. ] ��] �ǕÈ�(अपील) / The CIT(A) 5. ��ȡ�Ȣ�ĤǓ�Ǔ�ͬ �, ] ��\ �Ȣ�ȣ�\ͬ ��,/ DR, ITAT, Kolkata 6. �ȡ�[�ȡ_�/ Guard file.

BY ORDER, // TRUE COPY // Asstt.Registrar, ITAT, Kolkata

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