LAXMA REDDY VANGETI,HYDERABAD vs. INCOME TAX OFFICER, WARD-9(1), HYDERABAD

ITA 2061/HYD/2026Status: DisposedITAT Hyderabad09 October 2026AY 2017-1814 pages
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What did the Tribunal hold?

The Tribunal held that the CIT(A) had correctly upheld the rejection of the assessee's books of account under Section 145(3) of the Act. The CIT(A) found that the assessee had not maintained proper books of account, the audit report was inordinately delayed and prepared after the notice under Section 148, and crucial supporting documents like bills and vouchers were not furnished. The Tribunal noted that the CIT(A) had concluded that the audited accounts and profits returned by the assessee were unreliable due to the lack of evidence for substantial expenses claimed. However, the Tribunal found that the CIT(A) had not provided any specific finding on the justification for the AO's estimation of income at 30%. The Tribunal observed that the AO had applied the 30% rate arbitrarily without any basis, comparable case, or consideration of prevailing profit rates. While Section 44AD was not directly applicable, its presumptive rate of 8% was considered as a guidance. To bring the litigation to an end and in the interest of justice, the Tribunal directed the AO to estimate the net profit at 10% of the total turnover. The addition, if any, was to be made accordingly for the respective assessment years.

What were the facts?

The assessee, Laxma Reddy Vangeti, is an individual engaged in the business of purchasing, developing, and selling plots. The appeals concern assessment years 2013-14 to 2017-18. The assessee initially did not file returns but did so in response to notices under Section 148, declaring income between 8.5% and 10% of turnover. The Assessing Officer (AO) rejected the assessee's books of account and reassessed income by estimating profit at 30% of the turnover. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's order, confirming the rejection of books and the estimation of income. The assessee appealed these orders to the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the CIT(A) erred in confirming the reopening of assessment under Section 147/148 of the Income-tax Act, 1961, on the grounds that the notice was invalid, barred by limitation, and lacked independent application of mind by the AO, particularly when based solely on information regarding property sale. - Assessee's contention: The reopening was invalid, notice was not in accordance with law, and the AO did not validly assume jurisdiction without proper sanction. - Revenue's contention: Not recorded in the provided text. 2. Whether the CIT(A) erred in confirming the rejection of the assessee's books of account under Section 145 of the Act without pointing out specific defects, suppression of receipts, inflation of expenses, or unverifiable entries, especially when audited accounts and relevant details were submitted. - Assessee's contention: Rejection was unjustified as audited accounts were submitted, and the AO failed to point out specific defects. Belated audit was due to lack of technical knowledge. - Revenue's contention: Not recorded in the provided text. 3. Whether the CIT(A) erred in confirming the estimation of business income at 30% of the turnover, which the assessee argued was excessive, arbitrary, unreasonable, and contrary to the nature of the business, especially when the assessee had voluntarily offered income at 8.44% to 10% and Section 44AD prescribes 8%. - Assessee's contention: The estimation of 30% is arbitrary; the declared profit rate is reasonable and in line with industry practice and Section 44AD. The AO failed to provide comparable cases or justification for the high rate. - Revenue's contention: Not recorded in the provided text.

Which sections of the Income-tax Act were involved?

Section 145,Section 145(3),Section 147,Section 148,Section 44AD,Section 250,Section 254,Section 144B,Section 234A,Section 234B,Section 234C

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Income Tax Appellate Tribunal, HYDERABAD

Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G.

For Respondent: DR Seema Meena
Pronounced: 09.10.2026

PER VIJAY PAL RAO, V.P. : These five appeals by the Assessee are directed against five separate Orders all dated 25.05.2026 of the learned CIT(A) for the assessment years 2013-2014 to 2017- 2018 respectively.

2.

The Assessee has raised common grounds in these appeals. The grounds raised for the assessment year 2013- 2014 in ITA.No.2057/Hyd./2026 are repr

The order continues below.

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