GURUSWAMY DEVARAJ,SULTHAPET COIMBATORE vs. INCOME TAX OFFICER, WARD TWO ONE TIRUPUR

ITA 2299/CHNY/2026Status: DisposedITAT Chennai07 October 2026AY 2017-184 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while the assessee was a non-filer and had compliance issues, the AO's application of an 8% profit rate on total deposits of Rs. 1,22,80,265 was not justified. The Tribunal emphasized that income tax is chargeable only on real income, not notional income, and that the nature of the assessee's business (distribution of milk and curd) is inherently low-margin. The Tribunal found that the figures of gross turnover and the existence of the business were not under challenge. Therefore, the Tribunal directed the AO to recompute the business income based on a profit rate of 4% on the total deposits of Rs. 1,22,80,265, and also considered Rs. 44,730 as interest income. The orders of the AO and CIT(A) were set aside to this extent. The Tribunal condoned the 203-day delay in filing the appeal due to the medical reasons provided by the assessee. The appeal was partly allowed.

What were the facts?

The assessee, Guruswamy Devaraj, filed an appeal against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2017-18. The Assessing Officer (AO) initiated reassessment proceedings under Section 147 as the assessee was a non-filer but had deposited cash of Rs. 1.09 Cr and Rs. 13.80 Lacs in bank accounts. The AO made an addition of Rs. 9,82,421 (8% of total bank credits of Rs. 1,22,80,265) as business income and Rs. 44,730 as income from other sources. The CIT(A) dismissed the assessee's appeal. The assessee's appeal before the ITAT was filed with a delay of 203 days, which was condoned. The assessee was an authorized dealer for Hatsun Agro Products Limited.

What were the issues?

1. Whether the order passed by the Assessing Officer under Section 147 is erroneous on facts, merits, and law, and thus liable to be quashed. The assessee argued that the AO's order was erroneous and that the CIT(A) failed to appreciate this. 2. Whether the Commissioner of Appeals erred in disregarding the assessee's books of accounts, bank statements, and Profit & Loss Account without valid reasons. The assessee contended that these documents were disregarded without proper justification. 3. Whether the failure to audit accounts under Section 44AB renders the books of accounts invalid. The assessee argued that non-audit under Section 44AB does not invalidate the books of accounts. 4. Whether non-audit under Section 44AB can be a ground to reject financial statements. The assessee argued that non-audit might attract separate penalties but not outright rejection of financial statements. 5. Whether the estimation of net profit at 8% on total turnover of Rs. 1,22,80,265 by the AO and confirmed by the CIT(A) was arbitrary and excessive, considering the assessee's business of milk and curd distribution is inherently low-margin. The assessee argued that the 8% estimation was arbitrary and contrary to the low-margin nature of their business, and that their P&L showed a net profit of 1.97%. 6. Whether penalty under Sections 270A, 271A, and 271B can be simultaneously imposed. The assessee argued that if penalty under Section 271A is imposed for non-maintenance of books, penalty under Section 271B for failure to furnish audit report cannot be imposed, as books are a prerequisite for audit. 7. Whether penalty proceedings for non-filing of audit report and return of income can be initiated without appreciating reasonable cause under Section 273B. The assessee claimed medical circumstances (Head and Neck Cancer, hemodialysis) as a reasonable cause for non-compliance.

Which sections of the Income-tax Act were involved?

Section 147,Section 44AB,Section 270A,Section 271A,Section 271B,Section 273B,Section 139,Section 148,Section 194H

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: HONOURABLE GEORGE GEORGE K & SHRI GAGAN GOYAL

Hearing: 27.08.2026Pronounced: 07.10.2026

PER GAGAN GOYAL, AM: This is an appeal preferred by the assessee against the order of Ld.

Commissioner of Income Tax (A) / NFAC, (hereinafter referred as the ‘Ld. CIT(A)’), Delhi dated 15.07.2025, for the Assessment Year (hereinafter referred as the ‘AY’) 2017-18. GROUDS OF APPEAL A.

On the facts and in the circumstances of the case and in law the Ld. Comm

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →