ANANDBABU ARUMUGHAM NAINAR,MUMBAI vs. DCIT, MUMBAI

With reference to Ground No. 3 to 12 of the impugned order of the Ld. CIT (A), Mumbai - 48, the appellant states that without considering the declared turnover of the appellant and returned filed by the appellant, the Ld. A.O. arrived at a notional conclusion that the appellant has earned a sum of Rs. 70,000/- per day and multiplied in to 365 days and also come to the conclusion that daily profit @ 25% of the turn over which is incorrect as the same is an imaginary / notional as the Ld. A.O. arrived at the figure of Rs.2,55,00,000/- (Rupees Two Crore Fifty Five Lakhs Only). This was agitated before the Ld. CIT (A) - 48 who has failed to considered the fact and observed that' in these grounds the appellant has agitated against the additions of Rs. 1,75,69,280/- on account of Notional expenses disallowed u/s.40A(3) of the Act and Rs. 79,30,720/- u/s. 69A as un explained money which is taxed as per the provisions of sec.115BBE of the I.T. Act.

That the imposition the tax liability of Rs. 1,60,77,283/- (Rupees One Crore Sixty Lakh Seventy Seven Thousand Two Hundred Eighty Three Only) is not justified which bad in law. These issues were raised before the Ld. Commissioner of Income Tax (Appeals) who also failed to take in to consideration of the issues raised by the appellant.

That on the facts and circumstances of the present case, the Ld. Assessing officer is erred by disregarding the "original income tax return filed by the Assessee declaring net profit margin 25% of sales (though IT Act prescribes only 8% on total turnover u/s.44AD for small Assessee) which was totally ignored by the Ld. A.O. as well as the Ld. CIT (Appeals)

That the Ld. Assessing Officer has erred in invoking the section 40A(3) of the Act as the same is not Justified. According to the Profit and Loss aIc. submitted by the Assessee, The total expenditure is of Rs. 62,04,298/- only. However, disregarding the real fact, the Ld. A.O. has calculated on his own that too for 365 days and has arrived at the figure of Rs.2,55,00,000/- which is also not considered by the Ld. CIT (Appeals)

That the Ld. A.O. has erred to arrive for the profit of Rs.21,728/- (Rupees Twenty one Thousand Seven Hundred Twenty Eight Only) per day which is arbitrary and incorrect and not justified as the same is notional profit without any substance.

The alleged documents relied upon by the A.O. to arrive at conclusion is under dispute as no documents is handed over by the assessee and the expenditure incurred to arrive at the sale is not considered or disregarded by invoking section 40A(3) of the Act which is arbitrary and unjustified.

That the Ld. A.O. has erred in calculating the working days for the whole year of 365 days which is hypothetical and imaginary and illogical and it is almost

On the facts and circumstances of the case that the Ld. AO has erred by invoking section 69A of the income tax Act. Which is devoid of any legal sanctity and arbitrary and not justified.

On the facts and circumstances of the case the Ld. AO as well as the Ld. CIT (Appeals) is not justified in estimating the turnover of Rs.255 lakhs. Which is arbitrary and any basis and also devoid of any facts and material evidence to prove the same.

That all the issues were raised before the CIT (Appeals) through online submissions, however, disregarding all the issues the Ld. CIT (Appeals) simply confirms the previous order of the Ld. A.O.”

At the outset, it is noted that there is a delay of 526 days in filing the present appeal before the Tribunal for which petition for condonation of delay along with affidavit and other corroborative documentary evidences are placed on record. In the affidavit, it is submitted by the assessee that the Chartered Accountant to whom work was entrusted for filing of the appeal had to under go certain medical exigency. An affidavit from the Chartered Accountant is also placed on record along with medical records to support the assertion so made. In addition to this reason, it was also submitted that the delay pertained to lapse on the part of the tax consultant who could not take appropriate measure on account of certain email miscommunication. We have perused the material placed on record and given our thoughtful consideration to the same. Taking into account medical exigency, we find it appropriate to condone the delay and take up the matter for adjudication.

Brief facts of the case are that assessee filed his return of income on 25.09.2019 reporting total income at Rs. 25,02,310/-. Assessee is into the business of street food stall and runs a shop by the name of ‘Anand Stall’ in front of Mithibhai College, Vile Parle (West), Mumbai. A 4 Anandbabu Arumugham Nainar AY 2019-20

1 In the course of assessment proceeding, Ld. AO arrived at calculation of estimated profit earned by the assessee per day which was based on impounded material and statement recorded of the assessee in the course of survey action. Working for this calculation is tabulated below: Sr. No. Month No. of days Net profit (Rs.) 1 June, 2018 (From 20.06.2018) 10 1,80,000 2 July 27 6,06,205 3 August 27 6,48,000 4 September 21 4,80,000 5 October 22 4,10,000 6 Total 107 days 23,24,975

2. Based on the above working, Ld. Assessing Officer extrapolated to arrive at yearly profit of Rs. 79,30,720/- (Rs. 21,728 X 365 days). Ld. Assessing Officer also estimated the total turnover for the year at Rs. 2,55,00,000/- (Rs. 70,000 X 365 days) by considering daily sales of Rs. 70,000/- in reference to the statement given by the assessee during survey proceedings. Explanations were called for by the ld. Assessing Officer from the assessee by issuing statutory notices u/s 142(1). Ld. Assessing Officer also required the assessee to explain about the estimate expense amounting o Rs. 1,75,69,280/- (Rs. 2,55,00,000 – Rs. 79,30,720) as to why these should not be disallowed u/s. 40A(3). The period during which notices u/s. 142(1) were issued was the period of pandemic of Covid 2019 which prevented the assessee in complying the 5 Anandbabu Arumugham Nainar AY 2019-20

3. Before the Ld. CIT(A), submissions were made. Assessee submitted that his actual sales were Rs. 82,96,123/- on which net profit was reported at Rs. 21,13,585/- which is much more than 8% as provided in Section 44AD of the Act. According to him, he has shown profit margin of approximate 25% which is much more than 8% for street vendors like him without need for keeping books of accounts. Ld. CIT(A) observed that assessee could not contradict the factual aspect in regard to computation of turnover, average profit, yearly turnover and yearly profit and establish the genuineness of the same. The appeal was thus, dismissed sustaining the addition so made.

Before us, Ld. Counsel for the assessee asserted that on account of pandemic of Covid 2019 during the course of assessment proceedings, required details and submissions could not be furnished to explain the case. Also, in respect of submissions made before Ld. CIT(A), adequate opportunities were not afforded. Ld. Counsel prayed for restoring the matter back to the file of Ld. Assessing Officer for de- novo adjudication on the additions made in the course of assessment. He assured that due compliance shall be made to furnish all the details and documentary evidence to support the grounds raised by the assessee. According to him, restoring the matter to the file of Ld. CIT(A) would again require calling remand report from the Ld. Assessing Officer on the submissions of the assessee. Hence it will be more appropriate to remit the matter before the Ld. Assessing Officer to avoid multiplicity of the proceedings.

Ld. Sr. DR objected on the prayer so made by the Ld. Counsel so as to uphold the orders of the authorities below.

We have heard both the parties and perused the material on record. It is a fact on record that assessment was completed ex-parte u/s. 144, during the period of pandemic of Covid of 2019 which prevented the assessee from making the required compliances. Also, it is noted that the additions are based on extrapolation of certain material impounded during the course of survey which needs proper justification from the assessee to negate the additions so made. Accordingly, in the interest of justice and fair play, we find it appropriate to accept the prayer made by the Ld. Counsel and remit the matter back to the file of Ld. Assessing Officer for de-novo meritorious adjudication of the additions originally made, by taking into consideration explanations of the assessee along with relevant documentary evidences. Needless to say, assessee be given reasonable opportunity of being heard to make further submissions, if so required. Accordingly, grounds raised by the assessee are allowed for statistical purposes.

In the result, appeal of the assessee is allowed for statistical purposes. Order is pronounced in the open court on 31 July, 2025 (Amit Shukla) Accountant Member Dated: 31 July, 2025 MP, Sr.P.S. Copy to :