INCOME TAX OFFICER, JIND vs. KUNDAN OVERSEAS, URBAN ESTATE, JIND

आयकर अपीलीय अिधकरण,च�ीगढ़ �ायपीठ “ए” , च�ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE �ी लिलत कुमार, �ाियक सद� एवं �ी कृणव� सहाय, लेखा सद� BEFORE: SHRI. LALIET KUMAR, JM & SHRI. KRINWANT SAHAY, AM आयकर अपील सं./ ITA No. 3389/Del/ 2024 िनधा�रण वष� / Assessment Year : 2013-14 The ITO बनाम Kundan Overseas #1234, Urban Estate, Jind(Haryana) # 2145, Urban Estate, Jind (Haryana)-126102 �ायी लेखा सं./PAN NO: AAJFK6996K अपीलाथ�/Appellant ��थ�/Respondent Cross Objection No. 37/Chd/2024 In (ITA No. 3389/Del/2024) िनधा�रण वष� / Assessment Year : 2013-14 Kundan Overseas बनाम The ITO # 2145, Urban Estate, Jind #1234, Urban Estate, Jind(Haryana) (Haryana)-126102 �ायी लेखा सं./PAN NO: AAJFK6996K अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Parikshit Aggarwal, C.A राज� की ओर से/ Revenue by : Smt. Geetinder Mann, CIT, DR सुनवाई की तारीख/Date of Hearing : 22/04/2026 उदघोषणा की तारीख/Date of Pronouncement : 27/04/2026 आदेश/Order PER LALIET KUMAR, J.M: The present appeal has been filed by the Revenue and Cross Objection filed by the Assessee arises out of the order passed by the Ld. CIT(A)/NFAC, Delhi under section 250 of the Income-tax Act, 1961 for the Assessment Year 2013-14, whereby relief has been granted to the assessee against the additions made by the Assessing Officer in the assessment framed under section 147 r.w.s. 144 of the Act. 2. In the present appeal Revenue has raised the following grounds: 1. The ld. CIT(A) has erred in deleting addition of Rs.3,78,90,467/-, out of total addition made at Rs.4,33,03,350/- by the Assessing Officer in the absence of relevant information inspite of sufficient opportunities of being heard provided to the assessee. The assessee had not furnished any books of accounts and all other documents which required to examine whether profit admitted was correct. There was no specific provision in the Income-tax Act, 1961 other than section 44AD of the Income-tax Act, 1961, which only says net profit is 8% of the gross receipts or turnover. When there was no option other than section 44AD, the Assessing Officer resorted to estimate net profit

2 @8% in the case of the assessee firm on the sales turnover of Rs.54,12,92,385/-, which comes to Rs.4,33,03,390/-. 2. The Id. CIT(A) has erred in allowing relief of 7% of the net profit rate to the assessee even the assessee had not filed ITR u/s 139(1) of the Income-tax Act, 1961. The ITR filed in response to the notice u/s 148 was also not filed within the time allowed of 30 days. The Assessing Officer has applied net profit rate of 8% on the gross turnover of Rs.54,12,92,385/- as the assessee had failed to furnish the complete information, as called for by the Assessing Officer. During the course of appellate proceedings, the assessee had not furnished plausible explanation alongwith relevant documentary evidence, even then the Id. CIT(A) has restricted the net profit rate of 1% as against 8% of net profit rate applied on the gross turnover of Rs.54,12,92,385/- by the Assessing Officer. 3. The assessee had introduced capital in the hands of the firm at Rs.1,28,90,000/- during the financial year 2012-13 relevant to the assessment year 2013-14. Return of income for the assessment year 2013-14 was not filed by the assessee. Unless and until ITR not filed, no consideration could be allowed for the claims made by the assessee firm. Therefore, the Id. CIT(A) erred in deleting addition of Rs.1,28,90,000/-. 4. That the appellant craves for addition, deletion or modification in the grounds of the appeal. 3. In the Cross Objection Assessee has raised the following grounds: 1. The Commissioner of Income tax (Appeals) (hereinafter referred to as the CIT(A)) erred in upholding/confirming the addition of 1% of total turnover of the appellant. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in making the aforesaid addition of gross profit. 4. Brief facts of the case are that the assessee is a partnership firm. The assessment was reopened on the basis of information received from the Investigation Wing regarding substantial bank credits in the bank account of the assessee, despite no return of income being filed. Accordingly, notice under section 148 was issued and in response thereto, the assessee filed return of income belatedly. However, during the course of assessment proceedings, the assessee failed to furnish complete books of account and supporting evidences. Consequently, the Assessing Officer proceeded to frame assessment under section 144 r.w.s. 147 of the Act.

4.1 The Assessing Officer, in absence of verifiable books of account, treated the bank credits as turnover and estimated net profit @ 8% on the turnover of Rs.54,12,92,385/- and further made addition of Rs.1,28,90,000/- under section 68 on account of unexplained capital introduced by partners, thereby determining total income at Rs.5,61,93,390/- .

4 10.2 The Ld. DR has relied upon the findings of the Ld. CIT(A) in para 1.4 to 1.6, contending that the assessee failed to discharge its onus and therefore the estimation made by the Assessing Officer is justified. While we find merit in the contention of the Ld. DR to the extent that the assessee did not fully cooperate during the assessment proceedings /CIT(A) proceedings, the issue that arises for consideration is whether the estimation made by the Ld.CIT(A) is reasonable and based on relevant material as the Ld. CIT(A) has substantially reduce the estimation of income by comparing the earlier years results of the assessee relating to different trades / business.

10.3 In our considered opinion, the approach adopted by the Ld. CIT(A) suffers from a fundamental infirmity. It is a settled position of law that the estimation of income must be based on comparable cases, the past history of the same business, or other relevant material. In the present case, the nature of business carried on by the assessee during the year under consideration is materially different from the earlier years, as noted by the Ld. CIT(A) himself. 10.4 The earlier business of trading in edible and non-edible oil is distinct from the business of import and trading of paints, PVC resin, fabrics and auto parts, which involves different economic factors such as import costs, foreign exchange fluctuations, freight, demurrage charges, and varying profit margins. Therefore, any comparison between the two without proper analysis is not justified.

10.5 Further, it is an admitted position that the assessee had not filed return of income for the intervening period. In absence of such returns and reliable financial data, there is no valid benchmark available for determining the correct profit rate. Consequently, estimation of income merely on presumptive basis or by adopting an ad hoc rate of 1% without any comparable instance cannot be sustained. 10.6 At the same time, the failure of the assessee to produce books of account and supporting evidences cannot be ignored. Such failure justifies rejection of the book results and calls for estimation of income; however, such estimation must be reasonable and based on proper inquiry and material available on record.

10.7 Similarly, the issue relating to addition under section 68 in respect of capital introduced by partners also requires proper verification of facts, including examination of the identity, creditworthiness and genuineness of the transactions, which has not been conclusively established on record.

10.8 Considering the totality of facts and circumstances of the case, we are of the view that both the assessment order as well as the order of the Ld. CIT(A) suffer from lack of proper verification and appreciation of facts. The issues involved require fresh examination at the level of the Assessing Officer. 10.9 Accordingly, we set aside the impugned order passed by the Ld. CIT(A) and restore the entire matter to the file of the Assessing Officer for fresh adjudication de novo. The Assessing Officer shall examine all the issues afresh, including estimation of profit and addition under section 68, after providing adequate opportunity of being heard to the assessee. 10.10 The assessee is directed to furnish complete books of account, supporting evidences and necessary explanations before the Assessing Officer. The Assessing Officer shall pass a speaking order in accordance with law after considering the submissions of the assessee.

Order pronounced in the open Court on 27/04/2026 Sd/- Sd/- कृणव� सहाय लिलत कुमार (KRINWANT SAHAY) (LALIET KUMAR) लेखा सद�/ ACCOUNTANT MEMBER �ाियक सद� /JUDICIAL MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��थ�/ The Respondent 3. आयकर आयु�/ CIT 4. आयकर आयु� (अपील)/ The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar