INCOME TAX OFFICER WARD-5(3)(1), AHMEDABAD, VEJALPUR vs. ANKITKUMAR PRAVINKUMAR SHAH, PALDI

ITA 542/AHD/2025Status: DisposedITAT Chandigarh06 October 2026AY 2018-197 pages
AI SummaryRemanded

What were the facts?

The Revenue filed an appeal against the order of the CIT(A) for Assessment Year 2018-19. The assessee, Ankitkumar Pravinkumar Shah, a proprietor engaged in manufacturing BOPP bags, declared Nil income after filing a return on 30.01.2018. The Assessing Officer (AO) noted a gross profit ratio of -4.88% on a turnover of Rs. 12,00,71,805/-, a significant decline from the previous year's 19.27% on Rs. 15,23,58,772/-. The AO also observed an increase in salary and wages from Rs. 60,25,312/- to Rs. 1,34,97,657/-. The AO rejected the assessee's books of accounts under section 145(3), estimated profit at 17.25% GP rate, and disallowed excess salary expenses of Rs. 74,72,345/-. The assessment was completed under section 144 r.w.s. 144B at Nil income after set-off of losses. The CIT(A) allowed the assessee's appeal.

What did the Tribunal hold?

The Tribunal found that the assessee had disclosed a substantial and abnormal variation in trading results, showing a gross loss of Rs. 58,61,129/- against positive gross profits in the preceding two years. Crucially, the assessee failed to furnish requisite details regarding purchases, sales, expenses, and other particulars despite specific requests from the AO, depriving the AO of material for verification. The assessee also did not provide a satisfactory explanation for the loss or the abnormal increase in salary expenses. The CIT(A) deleted the additions by stating the AO had not established suppression of sales or inflation of expenditure, but failed to consider the assessee's non-furnishing of basic details. The Tribunal noted that the salary and wages expenditure increased substantially despite a decline in turnover, which also lacked explanation. In the interest of justice, the Tribunal set aside the CIT(A)'s order and restored the matter to the AO for fresh adjudication, allowing the assessee one further opportunity to substantiate its claims with documentary evidence, including explanations for the loss and increased salary expenses. The AO was directed to examine the material and determine income afresh, considering the implications of rejecting books versus disallowing expenditure to avoid duplication.

What were the issues?

1. Whether, on the facts and in law, the CIT(A) was justified in deleting the addition of Rs. 2,65,73,515/- made by the AO by rejecting the books of accounts, without appreciating the facts of the case? 2. Whether, on the facts and in law, the CIT(A) was justified in deleting the addition of Rs. 74,72,345/- made by the AO on account of disallowance of salary expenses, without appreciating the facts of the case? Assessee's contentions: The AO was incorrect in rejecting the books of accounts, estimating income using an average GP rate, and disallowing salary expenses simultaneously. Revenue's contentions: The assessee failed to explain the reason for the loss, provide details for purchases, sales, expenses, loans, and advances despite specific requisitions. The AO rightly rejected the books and estimated profit. The sharp increase in salary expenses despite declining turnover was also unexplained. The CIT(A) erred in deleting the additions. The assessee did not submit any explanation even before the CIT(A).

Which sections of the Income-tax Act were involved?

Section 145(3),Section 144,Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

Before: SHRI NARENDRA PRASAD SINHA & SHRI SANJAY KUMAR

For Appellant: Shri M S Chhajed, AR
For Respondent: Shri Amit Pratap Singh, SR-DR
Hearing: 03.09.2026Pronounced: 06.10.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal has been filed by the Revenue against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 30.01.2025 for the Assessment Years (A.Y.) 2018-19 in the proceeding u/s 144 r.w.s 144B of the Income Tax Act [hereinafter referred as “the Act”].

2.

The brief facts of the case are that the assessee had filed his return of income for A.Y. 2018-19 on 30.01.2018 declaring Nil income. The case was selected for scrutiny under CASS. The assessee is proprietor of Shri Ghantakarna Enterprise and carrying on manufacturing activity of BOPP ITO Vs. Ankitkumar Pravinkumar Shah, AY- 2018-19 2 b

The order continues below.

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