KUMARAVEL SENTHILKUMAR,SALEM vs. ITO, WARD-1(6), SALEM

ITA 1803/CHNY/2026Status: DisposedITAT Chennai30 September 2026AY 2020-219 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal noted that grounds 2, 3, and 4 challenging the validity of reassessment proceedings were not pressed and were dismissed. Ground 1 was general and dismissed. Regarding ground 5 (and 6, which were remitted back), the Tribunal observed that while the AO was justified in resorting to estimation due to non-compliance with notices, the estimation must not be vindictive or capricious. It should be based on past history or comparable cases, as held by the Supreme Court in Commissioner of Sales Tax vs. Esufal H.M. Abdulali [1973] 90 ITR 271. The Tribunal found that the AO had not provided the basis for adopting 10% profit estimation, nor was it clear if it was based on past history or comparable cases. Consequently, the orders of the lower authorities were set aside. The matter was remanded back to the AO to adopt the net profit based on the assessee's past history or comparable cases in the same line of business, after providing an opportunity of being heard to the assessee. The entire assessment was remitted back to the AO for de novo disposal.

What were the facts?

The assessee, an individual, failed to file a regular return of income for Assessment Year 2020-21. Based on information regarding reported sales, purchases, and cash deposits, the Assessing Officer (AO) issued a notice under section 148 on March 27, 2024. The assessee filed a return on July 4, 2024, disclosing a total income of Rs. 1,62,360, but did not comply with notices under sections 142(1) and 143(2). The AO proceeded with a best judgment assessment under section 147 read with section 144B, vide order dated January 20, 2025, determining total income at Rs. 1,05,58,207. This included an addition of Rs. 74,66,187 by estimating net profit at 10% of reported turnover and an addition of Rs. 19,29,660 for unexplained cash deposits. The CIT(A) upheld these additions. The assessee appealed to the ITAT.

What were the issues?

1. Whether the reassessment proceedings are bad in law due to the notice issued under section 148 dated 27/03/2024 being contrary to the provisions prior to substitution by the Finance (No.2) Act, 2024, and granting more time than mandated? (Question of law and fact, concerning Section 148). 2. Whether the assessment made on the basis of the return filed after the period mentioned in the notice under section 148 is null and void, in view of the third proviso to section 148 prior to substitution by the Finance (No.2) Act, 2024? (Question of law and fact, concerning Section 148). 3. Whether the addition of Rs. 74,66,187, representing the estimation of net profit at 10%, is baseless, given that the net profit for the immediate subsequent assessment year was 1.87%? (Question of law and fact, concerning Section 147/144B). 4. Whether a separate addition under section 69A is sustainable when turnover from GSTR-3B is used for income estimation and the declared income is also considered? (Question of law and fact, concerning Section 69A). Assessee's Contentions: - Grounds 2, 3, and 4 challenging the reassessment proceedings were not pressed. - The estimation of net profit at 10% is baseless, as the net profit in the subsequent year was 1.87%. The AO should not have estimated profit without rejecting books of accounts. Reliance was placed on M/s. Redzsqare Fashions Pvt. Ltd. vs. ITO (ITA No.32/CHNY/2026). - Cash deposits were out of business sale proceeds. Revenue's Contentions: - The appellant had not furnished details as called for by the AO, leaving no option but to estimate business profits at 10%.

Which sections of the Income-tax Act were involved?

Section 148,Section 148A,Section 139,Section 142(1),Section 143(2),Section 147,Section 144B,Section 69A,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CHENNAI BENCHES,

Before: SHRI GEORGE GEORGE K, VICE- & SHRI INTURI RAMA RAO

Pronounced: 29.09.2026

PER INTURI RAMA RAO, ACCOUNTANT MEMBER :

This is an appeal filed by the Assessee directed against the order passed by learned Commissioner of Income Tax(Appeal)[NFAC], dated 30.01.2026 passed u/s.250 of the Income Tax Act, 1961 for the Assessment Year 2020-21. 1 KUMARAVEL SENTHILKUMAR [A]

2.

The Assessee raised these following grounds of appeal : “1) The Impugned Order is unjust, unreasonable and bad in law.

2) The reassessment is bad in law, as notice u/s. 148 dated 27/03/2024 is not as per the section prior to subs

The order continues below.

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