VELLUSAMY KAVITHA,TIRUPUR vs. ITO, WARD-2, TIRUPPUR

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ITA 979/CHNY/2025Status: DisposedITAT Chennai01 July 2025AY 2020-21Bench: SHRI GEORGE GEORGE K (Vice President)1 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal condoned a 3-day delay in filing the appeal. Upon reviewing the grounds, it was found that grounds 1 and 7 were general and dismissed, and ground 6 was not pressed. The Tribunal directed the AO to adopt a net profit rate of 4.75% instead of the initially assessed 7% or the FAA's 6%.

What were the facts?

The assessee filed an appeal against an order related to the assessment year 2020-21. The Assessing Officer (AO) made an addition by adopting a net profit rate of 7% on turnover, citing that the declared profit of 3.75% was lower than in preceding and subsequent years. The First Appellate Authority (FAA) reduced this rate to 6%.

What were the issues?

Whether the AO was justified in rejecting the assessee's books of accounts and estimating net profit at a higher rate, and if the FAA correctly reduced the estimated profit rate.

Which sections of the Income-tax Act were involved?

Section 250,Section 145(3),Section 44AB,Section 143(3),Section 142(1),Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ (SMC

Before: SHRI GEORGE GEORGE K

Hearing: 26.06.2025Pronounced: 01.07.2025

आदेश/ O R D E R

1.

This appeal filed at the instance of the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 31.01.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2020-21.

2 -: 2. There is a delay of 3 days in filing the appeal. The assessee has filed petition for condonation of delay along with affidavit stating therein the reason for delay. On perusal of the same, I find there is sufficient reason for delay in filing this appeal before the Tribunal. Hence, I condone the delay in filing the appeal and proceed to dispose off the appeal on merits.

3.

The grounds raised

by the assessee read as follows:

1. On the facts and circumstances of the case the order of first appellate authority dated 31.01.2025 on partially allowing the appeal of the appellant is bad in law and is not legally justified.

2. On the facts and circumstances of the case the first appellate authority is not justified in sustaining the addition in respect of percentage of net profit adopted by the AO at 7% and reducing the same to 6% and giving a partial relief.

3. On the facts and circumstances of the case the lower authorities are not justified in not accepting the book results wherein a net profit of 3.75% has been shown by the assessee.

4. On the facts and circumstances of the case the first appellate authority is not justified in sustaining the action of the AO in rejecting the books of accounts by invoking the provisions of section 145(3) of the Act without giving any valid reasons for such rejection.

5. On the facts and circumstances of the case when the books of accounts of the appellant are subject to audit u/s 44AB of the Act, rejection of such books of accounts without giving any valid reason is not sustainable in the eyes of law.

6. On the facts and circumstances of the case the first appellate authority is not justified in sustaining the action of the AO in taking the interest income from Pallavan Grama Bank at an figure of Rs.5,98,440/- as against the interest income of Rs.3,15,028/- admitted by the assessee.

7. In view of the above grounds and other submissions to be made at the time of Appeal hearing, the order U/S 250 passed by Commissioner of Income Tax (Appeals), NFAC may be cancelled and justice rendered.

3 -: 4. The Ground Nos.1 and 7 are general in nature and no specific adjudication is called and hence, the same are dismissed. As regards Ground No.6 (regarding the difference of interest income) is concerned, the Ld.AR did not press the same and hence, dismissed as not-pressed. The only surviving ground for adjudication is Ground Nos.2 to 5 regarding percentage of net profit.

5.

Brief facts of the case are as follows: The assessee is an individual. For the assessment year 2020-21, the return of income was filed on 28.02.2021, declaring total income of Rs.15,31,000/-. The assessment was selected for scrutiny and notice u/s.143(3) of the Act was issued on 29.06.2021. The AO issued multiple notices u/s.142(1) of the Act to furnish information / documents. After the assessee furnished the information / documents called for, the AO completed assessment u/s.143(3) r.w.s.144B of the Act vide order dated 20.09.2022. In the said assessment order, the AO made addition of Rs.14,52,800/- by adopting the net profit at 7% of the total turnover by stating the net profit declared for the relevant assessment year at 3.75% is lower than the net profit declared in the preceding years and the subsequent year.

4 -: 6. Aggrieved by the order of the assessment completed u/s.143(3) r.w.s. 144B of the Act, the assessee preferred appeal before the First Appellate Authority (FAA). The FAA partly- allowed the appeal of the assessee. The FAA reduced the estimate from 7% made by the AO to 6%.

7.

Aggrieved by the order of the FAA, the assessee has filed the present appeal before the Tribunal. The Ld.AR reiterated the submissions made before the Income-tax Authorities.

8.

The Ld.DR supported the orders of the AO and the FAA.

9.

I have heard rival submissions and perused the material on record. The AO added Rs.14,52,800/- by adopting 7% of the turnover as against the net profit of 3.75% declared by the assessee. The AO at para 9 and 10 of the assessment order had given the details of turnover, the gross profit and the net profit margin for the assessment years 2017-18 to 2021-22. From the above table mentioned in the assessment order, it is clear that for the relevant assessment year 2020-21, the gross profit is on the higher side as compared to the preceding and the subsequent years. The turnover for the relevant assessment year and for the 5 -: immediately preceding assessment year namely AY 2019-20 is in parity. For the previous year, the net profit rate shown and accepted by the Income-tax Department is 4.72%. The turnover for the other years 2017-18, 2018-19 and 2021-22 is only half of the turnover for the relevant assessment year. Taking into consideration all these aspects, I’m of the considered view that the estimation of net profit rate at 4.75% would suffice the ends of justice. Therefore, the AO is directed to adopt 4.75% as net profit on the turnover for the relevant assessment year namely 2020-21. It is ordered accordingly. Therefore, the ground raised by the assessee in Ground Nos.2 to 5 are partly-allowed.

10.

In the result, the appeal filed by the assessee is partly-allowed.

Order pronounced in the open court on 1st July, 2025 at Chennai.

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