SRI THENU SILKS,PULIAMPATTI vs. ACIT, CENTRAL CIRCLE-2,, COIMBATORE

आयकर अपीलीय अिधकरण‘ए’ ायपीठ, चेई।
IN THE INCOME TAX APPELLATE TRIBUNAL
‘A’ BENCH: CHENNAI
माननीयीमनुकुमारिग र, ाियकसद! एवं
माननीय अिमताभ शु'ा, लेखा सद! के सम)
BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI HON’BLE AMITABH SHUKLA, ACCOUNTANT MEMBER

आयकर अपीलसं./ ITA Nos.1372 & 1373/Chny/2025
िनधा=रण वष= /Assessment Years: 2017-18 & 2018-19
&
S.A Nos.61 & 62/Chny/2025
(Arising in ITA Nos.1372 & 1373/Chny/2025)

Sri Thenu Silks,
214, Sathy Main Road,
P.Puliampatti – 638 459,
Central Circle-2,
Coimbatore.
[PAN: ABAFS 2142Q]

(अपीलाथ/Appellant)

( यथ/Respondent)

आयकर अपीलसं./ ITA No.1660/Chny/2025
िनधा=रण वष= /Assessment Year: 2018-19
&
C.O No.56/Chny/2025
(arising in ITA No.1660/Chny/2025)
The Asst. Commissioner of Income
Tax,
Central Circle-2,
P.Puliampatti – 638 459,
Sathy Taluk.

[PAN: ABAFS 2142Q]
(अपीलाथ/Appellant)

( यथ/Respondent /
Cross Objector)

आयकर अपीलसं./ ITA Nos.1366 & 1367/Chny/2025
िनधा=रण वष= /Assessment Years: 2017-18 & 2018-19
&
S.A Nos.64 & 63/Chny/2025
(Arising in ITA Nos.1366 & 1367/Chny/2025)
Ramasamy Moorthy,
454, Sri Thenu Sarees,
Sathy Main Road, P.Puliampatti,
Sathy Taluk – 638 459. Vs.
The Asst. Commissioner of Income
Tax,
Central Circle-2,
Coimbatore.

ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 2 -:

[PAN: AGSPM 7875R]
(अपीलाथ/Appellant)

( यथ/Respondent)

आयकर अपीलसं./ ITA No.1659/Chny/2025
िनधा=रण वष= /Assessment Year: 2018-19
&
C.O No.58/Chny/2025
(arising in ITA No.1659/Chny/2025)
The Asst. Commissioner of Income
Tax,
Central Circle-2,
Sathy Taluk – 638 459. [PAN: AGSPM 7875R]
(अपीलाथ/Appellant)

( यथ/Respondent/
Cross Objector)

आयकर अपीलसं./ ITA Nos.1376 & 1377/Chny/2025
िनधा=रण वष= /Assessment Years: 2017-18 & 2018-19
&
S.A Nos.65 & 66/Chny/2025
(Arising in ITA Nos.1376 & 1377/Chny/2025)
Dharuman Vanisuganya,
15/24, Sri Thenu Silks,
Kaithe Milleth Street,
P.Puliampatti,
Sathy Taluk – 638 459. [PAN: ALUPV 3096J]

Vs.
The Asst. Commissioner of Income
Tax,
Central Circle-2,
Coimbatore.
(अपीलाथ/Appellant)

( यथ/Respondent)

आयकर अपीलसं./ ITA No.1739/Chny/2025
िनधा=रण वष= /Assessment Year: 2018-19
&
C.O No.57/Chny/2025
(arising in ITA No.1739/Chny/2025)
The Asst. Commissioner of Income
Tax,

Dharuman Vanisuganya,
15/24, Sri Thenu Silks,

ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 3 -:

Central Circle-2,
Sathy Taluk – 638 459. [PAN: ALUPV 3096J]
(अपीलाथ/Appellant)

( यथ/Respondent/
Cross Objector)

आयकर अपीलसं./ ITA Nos.1368 & 1369/Chny/2025
िनधा=रण वष= /Assessment Years: 2017-18 & 2018-19

Ramasamy Murugesan,
216, Vinayaga Adavar Adayagam,
Sathy Main Road,
P.Puliampatti,
Sathy Taluk – 638 459. [PAN: AKKPM 7054J]

Vs.
The Asst. Commissioner of Income
Tax,
Central Circle-2,
Coimbatore.
(अपीलाथ/Appellant)

( यथ/Respondent)

आयकर अपीलसं./ ITA Nos.1370 & 1371/Chny/2025
िनधा=रण वष= /Assessment Years: 2017-18 & 2018-19
Arumugum Kamatchi,
15/372, Suba Garments,
Sathy Main Road,
P.Puliampatti,
Sathy Taluk – 638 459. [PAN: BDOPK 1329Q]

Vs.
The Asst. Commissioner of Income
Tax,
Central Circle-2,
Coimbatore.
(अपीलाथ/Appellant)

( यथ/Respondent)

आयकर अपीलसं./ ITA Nos.1374 & 1375/Chny/2025
िनधा=रण वष= /Assessment Years: 2017-18 & 2018-19
Ramasamy Dharuman,
394, Sri Thenu Textiles,
Sathy Main Road,
P.Puliampatti,
Sathy Taluk – 638 459. [PAN: AFSPD 5712P]

Vs.
The Asst. Commissioner of Income
Tax,
Central Circle-2,
Coimbatore.
(अपीलाथ/Appellant)

( यथ/Respondent)

ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 4 -:

अपीलाथR की ओर से/ Appellant by :
Shri S.Sridhar & Shri S.Senthil
Kumar, Advocates (Erode)
TUथR की ओर से /Respondent by :
P. Krishna Kumar, JCIT

सुनवाई की तारीख/Date of Hearing
:
11.08.2025
घोषणा की तारीख /Date of Pronouncement
:
04.09.2025

आदेश / O R D E R

PER MANU KUMAR GIRI (Judicial Member): The captioned eighteen (18) appeals/cross objections filed by the different assessees’ and revenue are directed against separate orders of the Ld.Commissioner of Income Tax (Appeals), Chennai- 20 [CIT(A)] all are dated 18.03.2025 for Assessment Years 2017-18 & 2018-19. The details are as under: Assessee AYs

ITA Number / C.O Number
SRI THENU SILKS
2017-18
SRI THENU SILKS
2018-19
SRI THENU SILKS
2018-19
ITA. No.1660/Chny/2025 (Revenue)
SRI THENU SILKS
2018-19
CO. No.56/Chny/2025 (Assessee)

RAMASAMY MOORTHY
2017-18
RAMASAMY MOORTHY
2018-19
RAMASAMY MOORTHY
2018-19
RAMASAMY MOORTHY
2018-19
CO. No.58/Chny/2025 (Assessee)

DHARUMAN VANISUGANYA
2017-18
DHARUMAN VANISUGANYA
2018-19
DHARUMAN VANISUGANYA
2018-19
DHARUMAN VANISUGANYA
2018-19
CO. No.57/Chny/2025 (Assessee)

RAMASAMY MURUGESAN
2017-18
ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 5 -:

RAMASAMY MURUGESAN
2018-19
ARUMUGAM KAMATCHI
2017-18
ARUMUGAM KAMATCHI
2018-19
RAMASAMY DHARUMAN
2017-18
RAMASAMY DHARUMAN
2018-19
2. As the issues involved in all the captioned appeals are substantially identical, they are being disposed of by this common order for the sake of convenience and brevity. First, we will take first appeals of Sri Thenu Silks ITA Nos.1372/Chny/2025 for A.Y.2017-18
and ITA
Nos.1373/Chny/2025
for A.Y.2018-19,
ITA
No.1660/Chny/2025 (Revenue) and CO No.56/Chny/2025 (Assessee) our findings in these cases will apply mutatis mutandis to other appeals also.

ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 6 -:

And for other reasons that may be adduced at the time of hearing, your appellant prays that the appeal be admitted, considered and justice be rendered.”

For A.Y 2018-19:
1. The order of the learned CIT(A) is bad and erroneous in law and against the principles of natural justice.

And for other reasons that may be adduced at the time of hearing, your appellant prays that the appeal be admitted, considered and justice be rendered.

ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 7 -:

iv) M/s. Thenu Textiles, Thiruppur (Prop: Shri. R. Dharuman,
PAN: AFSPD5712P) v) M/s. Vinayaga Advar Adayagam, Puliampatti (Prop: Shri.
R.Murugesan, PAN:AKKPM7054J) vi) M/s. Suba Garments (Prop: Smt. A. Kamatchi, PAN:
BDOPK1329Q)

The above concerns are mainly involved in the business of retail trading of textiles goods. The assessee, M/s. Sri Thenu Silks, had filed its return of income for AY 2017-18 on 29.10.2017 admitting a total income of Rs.10,86,281/-. The Return of Income filed by the assessee was selected for the compulsory scrutiny and assessment was completed u/s.143(3) of the Act on 30.12.2019, accepting the income returned. Thereafter, an order u/s.263 of the Act dated 04.03.2022 was passed by the ld. PCIT, Central-2, Chennai in this case wherein the ld.
PCIT had directed the AO to redo the assessment after verifying documents/evidence submitted by the assessee and keeping in mind the findings of survey. On the basis of the findings of the survey, the AO had adopted the same Trading and Profit and Loss account worked out by the survey team on the basis of Tally data recorded in the said pen drive and arrived at net profit percentage of 26.58% and 24.80% for the F.Y.2016-17 and 2017-18 respectively for the above

ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 8 -:

concerns of the group. Thereafter, the AO had reallocated the net profit on the basis of share of their sales proportionate to the total sales of the group and worked out the suppressed net profit for each entity by reducing the income already admitted by them in their ROI and taxed the same as unaccounted business income u/s.28 of the Act for A.Y.2017-18 and 2018-19. In addition, the AO had also worked out the excess stock for the A.Y.2018-19 and reallocated on the same basis for the above six concerns and added u/s.69 of the Act as a separate addition for the A.Y.2018-19. In addition to the above, the AO had also disallowed the delayed remittances of EPF/ESI payments u/s.36(1)(va) of the Act.

The assessment was completed u/s.143(3) r.w.s. 263 of the Act on 29.03.2023 at an assessed income of Rs.1,73,09,547/- as under:
Returned income
Rs. 10,86,281/-
Undisclosed additional business profit u/s 28
of the Act
Rs. 1,72,79,484/-
Add: Disallowance on account of late remittance of EPF & ESI payment u/s.
36(1)(va) of the Act
Rs.30,063/-
Assessed income
Rs. 1,73,09,547/-

Similar additions were made in the assessment orders passed for A.Y.2017-18 u/s.143(3) r.w.s. 263 of the Act on 29.03.2023 in other five group concerns also as listed in para 4 above.

ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 9 -:

Being aggrieved with the above assessment order(s), the assessee(s) have filed this appeal. On appeal, the ld.CIT(A) agreed to delete the opening stock, closing stock, purchases and sales and bank deposits, as per the detailed findings in para 7.3.3 to 7.10 and recast the Profit & Loss account, as is shown in page 19 of the impugned order. Further, the Ld.CIT(A) after perusal of the records and after due consideration of the submissions of the assessee’s was that the sales of Rs.11,51,58,705/-, mentioned above, is only for the period from 19/11/2016 to 31/03/2017 and that this sale has already been disclosed by all the assessees and he went on to hold that the total turnover of all the assessees of Rs.34,93,24,869/- is alone to be considered. Furthermore, the ld.CIT(A) worked out profit at 25.71
percent on total sales of Rs.34,93,24,869/-, allocated among all the assessees in the proportion of their gross receipts from business, as found in page 22 of the order and partly allowed the appeal.
Now assessees are in further appeal before us.
5. For A.Y.2017-18, the ld. counsel for the assessee submitted that the books of account of the assessees have been audited u/s.44AB of the Act. Further, he submitted that no defects have been pointed out or ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 10 -:

found in the books of account maintained by the assessees. The ld.
Counsel stated that neither the AO nor the Ld. CIT(A) rejected the books of account. Past history of all the assessees has not been considered. The ld. Counsel stated that adoption of net profit at 25.71
percent for all the assessees is not correct, as the sales of Rs.11,51,58,705/- itself has been removed, since included in the total sales, as mentioned above. Basis of arriving at net profit rate at 25.71
percent itself is not correct, since the same is based on Trading and Profit & Loss account, taken out from the pen drive, is not for the whole year but for a limit period from 19/11/2016 to 31/03/2017. It is further substantiated by the fact of inclusion of opening stock as on 01/04/2016 and exclusion of other transactions from 01/04/2016 to 18/11/2016. As has been held by the Hon’ble Madras High Court in the decision reported in 396 ITR 580, profits cannot be estimated without rejecting the books of account, which decision has also been followed by the Tribunal in ITA No.1010/Chny/2025 dated 02/07/2025. In view of the above, the assessee submits that the estimation of profit by the Ld. CIT(A) at 25.71 percent is very high and the same deserves deletion, more particularly when the books of account are not rejected and that the addition sustained by the Ld.CIT(A) deserves deletion. He

ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 11 -:

further submitted that the income admitted by the assessees with the disallowances made under ESI and EPF be retained.
6. Per contra, the ld. DR relied upon the order of the AO and pleaded for the dismissal of appeal of the assessee.
Our adjudication for AY 2017–18:

Rs.11.51 crore, indicating that the AO’s base for profit estimation was flawed. No material discrepancy has been brought on record to suggest that the audited figures of the assessees were unreliable.
Therefore, we set aside the estimation of net profit at 25.71% made by the AO. Since the books of accounts are audited and not rejected by the authorities, and the sales figure of Rs.11.51 crore is already considered by the assessee, which has been accepted and made as a basis for making an estimation of profit and hence no estimation is warranted. Therefore, the additions made on this account are deleted.
However, disallowances made under EPF and ESI, which were not contested, are sustained.

para 3.3 of the Assessment Order. The AO determined the additional profit by taking the profit rate at 24.80 percent, which is as per the Trading and Profit & Loss account for the period ending 23.01.2018
(incomplete data), a data taken from the pen drive. After arriving at the profit on the total sales mentioned supra, the additional profits have been proportionately allocated to the respective assessees, after due consideration of the income admitted from business. Similarly, the stock difference arrived at Rs.5,76,26,387/- has been allocated to the respective assessees in proportion to the total sales admitted of Rs.52,46,42,253/-.
Aggrieved, the assessees carried the matter to the ld.CIT(A).
9. After due consideration of the submissions of the assessees, the Ld.CIT(A), in respect of additional profit, held that the adoption of uniform net profit rate of 24.80 percent for all the assessees is not correct. Further, he held that the inclusion of opening stock and closing stock of ‘Sri Thenu Sarees’ and ‘Sri Thenu Metal Stores’ (Nature of business is different) in the consolidated Trading and Profit & Loss account for the period ended 23.01.2018 is not correct. Further, he observes as under:

ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 14 -:

i.
The Trading and Profit & Loss account was re-worked and the same is reproduced in para 7.3.11 (ii) of the order, wherein the sales was arrived at Rs.40,95,33,156/- and the net profit was at Rs.8,55,78,151/-, the rate of profit being 20.90 percent.

ii. The extrapolation done by the Assessing Officer was found to be not correct, as the opening balance of Rs.11,51,58,705/- has been included in the total sales of Rs.53,38,62,801/- and what is to be reckoned as sales for the period from 01.04.2017 to 22.01.2018 is only
Rs.40,95,33,156/-.

iii. The Ld.CIT(A) worked out the estimated sales from 24.01.2018 to 31.03.2018 at Rs.9,20,76,246/- by extrapolation and worked out the total sales at Rs.50,16,09,402/-.

iv. On such sales of Rs.50,16,09,402/-, profit rate at 20.90 is worked out at Rs.10,48,36,345/-, and the same was allocated proportionately.

ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 15 -:

profit at 20.90 percent for all the assessees is not correct. He furthermore, submitted that basis of arriving at net profit rate at 20.90
percent itself is not correct, since the same is based on Trading and Profit & Loss account, taken out from the pen drive, is not for the whole year but for a limit period from 01.04.2017 to 23.01.2018. The above point is further substantiated by the fact of inclusion of opening balance as on 01/04/2017 of Rs.11,51,58,705/-. In view of the above, the assessees submits that the estimation of profit by the Ld. CIT(A) at 20.90 percent is very high and the same deserves modification to cover the income admitted and the stock difference of Rs.5,76,26,387/-
12. Per contra, the ld. DR submitted that without any opportunity given under Rule 46A of the Income Tax Rules, 1962 has given relief to the assessee. He further argued that the ld.CIT(A) erred in deleting the additions by not taking cognizance of section 292C(1) of the Act.
Our adjudication for AY 2018–19:

ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 16 -:

find that there is similar Bookkeeping position as observed in AY 2017-
18 (supra).
It is admitted fact that the assessees’ books of accounts were audited u/s.44AB of the Act, and no defects were pointed out either by the AO or ld.CIT(A). There is no rejection of books of account u/s.145(3) of the Act has been made. Further, we find that estimation is based on Incomplete Period and books. The net profit ratio was derived based on data from 01.04.2017 to 23.01.2018 and extrapolated till 31.03.2018. This partial period does not represent the full year's operation and inherently includes distortions e.g., inclusion of opening balance Rs.11.51 crore, which may lead to overstatement of profits. The addition on account of stock difference was sustained by the ld.CIT(A), and the assessees have not contested this on appeal beyond reiterating their earlier submissions. Given the failure to reconcile or explain the stock discrepancy satisfactorily, the addition of Rs.5,76,26,387/- which has been accepted by the assessee is justified and sustained. We also find that a significant portion of the alleged excess profits is already embedded within the stock discrepancy addition. Therefore, any further estimation of profit becomes excessive and leads to double addition. Therefore, we hold that the estimation of ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 17 -:

net profit at 20.90% is not sustainable, particularly in the absence of rejection of books and given reliance on incomplete data. In the present facts and circumstances of the case the additions made on account of estimated net profit is not warranted and hence deleted. We also find that there is no violation of section 292C or Rule 46A of the Income Tax Rules, 1962. 14. In result, both the appeals filed by the assessee are partly allowed.
15. Our findings in above appeals being ITA Nos.1372/Chny/ 2025
for AY 2017-18 and ITA Nos.1373/Chny/ 2025 for AY 2018-19 and ITA
No.1660/Chny/2025 (Revenue) and CO No.56/Chny/2025 (Assessee) will apply mutatis mutandis to the following assessees for their respective appeal also.

S.
No.
Assessee
AYs
ITA Number/ C.O Number

ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 18 -:

Order pronounced on 04th day of September, 2025 at Chennai. (अिमताभ शु'ा)
(Amitabh Shukla)
लेखा
लेखा
लेखा
लेखा सदय
सदय
सदय
सदय /Accountant Member
(मनु कुमार िग र)
(Manu Kumar Giri)
ाियक सद! / Judicial Member
चेनई/Chennai, दनांक/Dated: 04th September, 2025. ITA Nos.1372, 1373, 1660, 1366, 1367,1659,
1376, 1377, 1739, 1368, 1369, 1370, 1371,1374 & 1375/Chny/2025
CO NOs.56, 58, 57/Chny/2025
SA Nos.61 to 66/Chny/2025
:- 19 -:

आदेश क ितिल प अ े षत/Copy to:
1. अपीलाथ/Appellant
2.  थ/Respondent
3. आयकर आयु/CIT, Coimbatore
4. िवभागीय ितिनिध/DR
5. गाड फाईल/GF