PRAKASH PARMANAND NATHANI,MUMBAI vs. ITO 20(2)(1), MUMBAI

ITA 22/MUM/2026Status: DisposedITAT Mumbai30 September 2026AY 2018-198 pages
AI SummaryRemanded

What were the facts?

The assessee, Prakash Parmanand Nathani, is an individual engaged in trading mobile accessories through Amazon. The assessment year in question is 2018-19. The case was selected for scrutiny due to a change in the assessee's method of accounting for indirect taxes (Sales Tax and GST) from an inclusive method to an exclusive method. The Assessing Officer (AO) made an addition of Rs. 12,28,177, considering it as an understatement of profit. The assessee appealed to the Commissioner of Income-tax (Appeals) [CIT(A)], who confirmed the addition. The assessee then filed an appeal before the Income Tax Appellate Tribunal (ITAT), Mumbai, seeking condonation of a 290-day delay due to personal and financial circumstances. The ITAT condoned the delay.

What did the Tribunal hold?

The Tribunal condoned the delay of 290 days in filing the appeal, finding the assessee's explanation to be bona fide and supported by exceptional humanitarian and financial circumstances. On the substantive issue, the Tribunal held that the mere change in the method or manner of accounting, from inclusive to exclusive for indirect taxes, cannot lead to taxation unless the underlying transactions establish that such a change has actually resulted in an increase in real profit or taxable income. The Tribunal noted that the assessee's explanation regarding the treatment of collected taxes, paid taxes, and input tax credit required examination with reference to the actual books of account and underlying transactions. The Tribunal set aside the impugned order of the CIT(A) and restored the matter to the Assessing Officer for fresh examination. The AO is directed to examine the books of account, relevant records, and details of taxes collected and paid to determine the actual effect of the accounting change on the profit and taxable income. If no increase in profit is found, no addition should be made. If an increase is found, the AO shall adjudicate accordingly after providing an opportunity of being heard to the assessee.

What were the issues?

1. Whether the delay of 290 days in filing the appeal by the assessee is liable to be condoned? (Question of fact) 2. Whether the change in the method of accounting for indirect taxes from the inclusive method to the exclusive method resulted in an understatement of profit, justifying the addition made by the Assessing Officer? (Question of mixed law and fact, turning on the interpretation of accounting principles and Section 145 of the Income Tax Act, 1961). Assessee's arguments: The assessee argued that the delay was due to exceptional humanitarian and financial circumstances beyond his control, including the serious illness and hospitalization of his sister and severe financial distress leading to the closure of his business. Regarding the addition, the assessee contended that the change from the inclusive to the exclusive method for accounting indirect taxes was a mere change in the manner of accounting and did not result in any real increase or decrease in income. The overall profit remained the same under both methods. Revenue's arguments: The Revenue relied upon the orders of the lower authorities, supporting the addition made by the Assessing Officer and confirmed by the CIT(A).

Which sections of the Income-tax Act were involved?

Section 145

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

Before: SHRI CHALLA NAGENDRA PRASAD & SHRI G. M. DOSS

For Respondent: Shri. Danish Shukla, Sr. AR
Pronounced: 30.09.2026

PER G.M. DOSS, ACCOUNTANT MEMBER :

This appeal by the assessee is directed against the order dated 21.01.2025 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2018-19, arising from the assessment order dated

1 Prakash Parmanand Nathani

04.02.

2021. The assessee has also filed an affidavit seeking condonation of delay in filing the present appeal before the Tribunal.

2.

We have

The order continues below.

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