DEBDEEP COMMERCIAL PVT. LTD.,KOLKATA vs. I.T.O., WARD - 11(1), KOLKATA

ITA 1386/KOL/2026Status: DisposedITAT Kolkata30 September 2026AY 2023-20244 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal noted that the Assessing Officer had not found any defects in the books of account, nor had the books been rejected for any reasons. The Ld. CIT(A) had also found that the invocation of Section 40A(2)(b) was not relevant. In these circumstances, the Tribunal held that the Assessing Officer was not justified in estimating the income. Furthermore, the Tribunal observed that neither the AO nor the Ld. CIT(A) had referred to any comparable case, rendering the estimation at 10% baseless. Consequently, the Tribunal directed the Assessing Officer to delete the impugned addition. The ratio decidendi is that ad hoc estimation of income is not permissible without rejecting the books of account, especially when no defects are found and no comparable cases are cited to justify the estimation.

What were the facts?

The assessee, Debdeep Commercial Pvt. Ltd., is in appeal against the order of the Ld. CIT(A)-NFAC, Delhi, for Assessment Year 2023-24. The Assessing Officer (AO) had made an addition of Rs. 2,29,48,530/- by estimating the gross profit at 12% of the turnover, whereas the assessee had declared 5.44%. The Ld. CIT(A) directed the AO to restrict the profit estimation to 10% of the gross receipts. The assessee had sub-contracted the entire construction work to an associated entity, M/s Bharat Vanijya Eastern Pvt. Ltd., after retaining a profit of 5.44%. The assessee argued that the Ld. CIT(A) found Section 40A(2)(b) irrelevant but then incorrectly directed an estimation of profit at 10%. The AO had not found any specific defects in the assessee's books of account.

What were the issues?

1. Whether the Ld. CIT(A) was justified in directing the estimation of profit at 10% of the turnover, despite finding that Section 40A(2)(b) was not relevant to the assessee's case, and in the absence of any defects in the books of account? (Question of law and mixed fact and law, turning on Section 250 and potentially Section 40A(2)(b) of the Income Tax Act, 1961). Assessee's Contentions: - The Ld. CIT(A) erred in estimating profit at 10% after acknowledging that Section 40A(2)(b) was not applicable. - The AO was at fault for disregarding the verified book results and making an ad hoc estimation without rejecting the books of account. - Relied on judgments: Co-ordinate Bench of Delhi in Tapi JWIL JV vs. ITO; PCIT vs. R. G. Buildwell Engineers Ltd. (SC); Swadeshi Commercial Co. Ltd. vs. CIT (Cal); Rakhi Mondal vs. Assessment Unit (ITAT Kolkata); Ajay Kumar Hazra vs. ITO (ITAT Kolkata); Hitesh Trading Company vs. ITO (ITAT Kolkata). Revenue's Contentions: - The Ld. DR vehemently supported the order of the Ld. CIT(A).

Which sections of the Income-tax Act were involved?

Section 250,Section 40A(2)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH: KOLKATA

Before: Shri George Mathan & Shri Gopalan Gurusamy

Per Gopalan Gurusamy, AM: This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)- NFAC, Delhi (hereinafter referred to as the “Ld. CIT(A)”] passed u/s 250 of the Act dated 10.02.2026 in appeal no. NFAC/2022-23/10487896 for the AY 2023-24. 2 Assessment Year: 2023-24 Debdeep Commercial Pvt. Ltd.

2.

Brief facts of the case of the assessee is that the Assessing Officer vide its order dated 26.03.2025 made an addition of Rs. 2,29,48,530/- to the returned income by way of estimation of gross profit at 12% of the turnover as against 5.44% declared

The order continues below.

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