JAGABANDHU MUDULI,BHUBANESWAR vs. ACIT, CENTRAL CIRCLE-2 BHUBANESWAR, BHUBANESWAR

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ITA 612/CTK/2026Status: DisposedITAT Cuttack07 October 2026AY 2020-214 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal modified the order of the CIT(A). It was held that while comparative rates are normally applied when books of account are rejected, the presence of incriminating materials found during the search made the adoption of comparative net profit rates unfair. Consequently, the Tribunal directed that a flat net profit rate of 5% of the turnover be adopted. Furthermore, no further deductions in respect of depreciation or bank charges would be granted. This 5% rate is subject to the threshold of the return of income disclosed by the assessee. The appeals of the assessee were partly allowed, and the appeal of the revenue was also partly allowed.

What were the facts?

The assessee, M/s. Jagabandhu Enterprises Pvt Ltd., and Mr. Jagabandhu Muduli, filed appeals against orders of the CIT(A), Bhubaneswar. The revenue also filed an appeal. These appeals pertain to assessment years 2020-21, 2021-22, 2022-23, and 2023-24. A search was conducted on the assessee's premises on April 3, 2023, which led to the discovery of incriminating materials. In the assessment proceedings, the Assessing Officer (AO) rejected the assessee's books of account and estimated income at rates ranging from 11% to 31%. The CIT(A) restricted the addition to 11% for some cases and allowed deductions for depreciation, interest, and bank charges, subject to a minimum threshold. The assessee argued that the 11% profit estimation was excessive, proposing a reduction to 3-4% based on net profits declared by other assessees.

What were the issues?

1. Whether the net profit rate estimated by the Assessing Officer and subsequently restricted by the CIT(A) is excessive, and if so, what is the appropriate rate? (Question of law and fact, turning on the estimation of income under the Income Tax Act, 1961). Assessee's contentions: The assessee argued that the estimated net profit rate of 11% was excessive. They contended that the net profit declared by the assessee and confirmed by the AO in other cases was between 1% to 2.1%. Therefore, the profit estimation should be reduced to 3% to 4%. Revenue's contentions: The revenue argued that the fact the AO was able to estimate income at 31% indicated that the 11% adopted by the CIT(A) was already substantially low. They prayed for the orders of the CIT(A) to be upheld.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK

Before: S/SHRI GEORGE MATHAN & G. GURUSAMY

For Appellant: Shri B.Panda, Sr Adv & Shri B.R.Panda, Adv
For Respondent: Shri Ashis Chandra Moanty, ld CIT DR
Hearing: 07/10/2026Pronounced: 07/10/2026

1 M/s. Jagabandhu Enterprises Pvt Ltd. Mr.Jagabandhu Muduli

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI GEORGE MATHAN, JUDICIAL MEMBER AND G. GURUSAMY, ACCOUNTANT MEMBER ITA Nos.607 & 610 /CTC/2026 Assessment Years: 2022-23 & 2023-24 M/s. Jagabandhu Enterprises Pvt Vs. ACIT, Central Circle-2, Ltd., 143, Baramunda Bus Stand Bhubaneswar. Area, Bhubaneswar. PAN/GIR No.AABCJ 3592 Q (Appellant) .. ( Respondent) ITA Nos.612, 613, 614 & 615/CTC/2026 Assessment Years: 2020-21, 2021-22, 2022-23 & 2023-24 Mr.Jagabandhu Muduli., 143, Vs. ACIT, Central Circle-2, Baramunda Bus Stand Area, Bhubaneswar. Bhubaneswar. PAN/GIR No.AERPM 5514 J (Appellant) .. ( Respondent) ITA Nos.676 /CTC/2026 Assessment Year: 2022-23 ACIT, Central Circle-2, Vs. Mr.Jagabandhu Muduli., 143, Bhubaneswar. Baramunda Bus PAN/GIR No. AERPM 5514 J (Appellant) .. ( Respondent)

Assessee by : Shri B.Panda, Sr Adv & Shri B.R.Panda, Adv Revenue by : Shri Ashis Chandra Moanty, ld CIT DR Date of Hearing : 07/10/2026 Date of Pronouncement : 07/10/2026

2 M/s. Jagabandhu Enterprises Pvt Ltd. Mr.Jagabandhu Muduli O R D E R Per Bench

The assessee (M/s. Jagabandhu Enterprises Pvt Ltd.,) has filed appeals against the order dated 1.4.2026 of the ld CIT(A), Bhubaneswar -2 in Appeal No.CIT(A), Bhubaneswar-02/10055/2021-22 and in Appeal No.CIT(A), Bhubaneswar- 02/10058/2022-23 for the assessment years 2022-23 & 2023-24. 2. The assesse (Mr Jagabanhu Muduli) has filed appeals against the separate orders dated 6.4.2026 of the ld CIT(A), Bhubaneswar-2 in Appeal No.CIT(A), Bhubaenswar-2/10547/2019-20, in Appeal No.CIT(A), Bhubaenswar-2/10146/2020- 21, in Appeal No.CIT(A), Bhubaenswar-2/10547/2019-20, in Appeal No.CIT(A), Bhubaenswar-2/10052/2021-22, and in Appeal No.CIT(A), Bhubaenswar- 2/10052/2022-23, respectively, for the assessment years 2020-21, 2021-22, 2022-23 & 2023-24. 3. The revenue has filed the appeal against the order dated 6.4.2026 of ld CIT(A), Bhubaneswar-2 in Appeal No.CIT(A), Bhubaneswar-2/10052/2021-22 for the assessment year 2022-23. 4. Shri B.Panda, ld Sr Adv and shri B.R.Panda, ld AR appeared for the assessee and Shri Ashis Chandra Mohanty, ld CIT DR appeared for the revenue. 5. It was submitted by ld AR that there was a search on the premises of the assessee on 3.4.2023. it was the submission that as a consequence of the search, certain incriminating materials were found. It was the submission that in the course of assessment, the Assessing Officer rejected the assessee’s books of account and estimated the income of the assessee between 11% to 31%. It was the submission

3 M/s. Jagabandhu Enterprises Pvt Ltd. Mr.Jagabandhu Muduli that on appeal, ld CIT(A) on the ground that the Assessing Officer had estimated the income at 11% for some of the case, restricted the addition to 11% and further granted the assessee the benefit of deduction in respect of depreciation, interest to bank and bank charges subject to minimum threshold of the return of income filed by the assessee for the relevant assessment years. It was the submission that estimation of 11% profit was excessive. It was the submission that the percentage is liable to be reduced to 3 to 4% insofar as the net profit declared by the assessee and as also confirmed by the AO in his assessment orders in respect of other assessees was between 1 to 2.1%. 6. In reply, ld CIT DR submitted that the fact that the Assessing Officer has been able to estimate 31% itself shows that 11% adopted by the ld CIT(A) is already substantially low. It was the prayer that the orders of the ld CIT(A) be upheld. 7. We have considered the rival submissions. A perusal of the facts in the present case clearly shows that in comparative cases, the net profit margin 1 to 2.1%. Once the books of account are rejected, then obviously normally comparative rates are to be applied. However, a perusal of the facts shows that there has been some incriminating materials which have been found. This being so, the comparative case, adoption of net profit rate would not be a fair method. This being so, considering the fact that the ld CIT(A) has directed that 11% of net profit is to be adopted and further reduction is to be granted, the orders of ld CIT(A) stands modified and the net profit rate is directed to be adopted at flat rate of 5%. No further deduction in respect of depreciation or bank charges is to be granted. This is subject to the threshold of the return of income as disclosed by the assessee in its return. With these directions, the

4 M/s. Jagabandhu Enterprises Pvt Ltd. Mr.Jagabandhu Muduli order of the ld CIT(A) stands modified and the appeals of the assessee stand partly allowed. 8. As we have already modified the order of the ld CIT(A) and directed the adoption of net profit at a flat rate of 5% of the turnover, the appeal of the revenue stands partly allowed. 3. In the result, appeals of the assessee stand partly allowed as well as the appeal of the revenue stands partly allowed. Order dictated and pronounced in the open court on 07/10/2026. Sd/- Sd/- (G. GURUSAMY) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack ; Dated 07/10/2026 RS Copy of the Order forwarded to : 1. The Appellant:

2.

The Respondent: 3. The CIT(A)- 4. Pr.CIT, 5. DR, ITAT, 6. Guard file. //True Copy//

By order Asst. Registrar. ITAT, Cuttack

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