RANGANATHAN PAVADAI NATTAR NAGARAJAN,CUDDALORE vs. ITO,WARD-1, CUDDALORE
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the AO's estimation of profit at 4% was one of the possible views and not contrary to law. The Pr.CIT's revision was considered a substitution of the AO's judgment, as the presumptive rate under Section 44AD was not applicable due to turnover exceeding the threshold.
What were the facts?
The assessee offered income on a presumptive basis under Section 44AD. The Assessing Officer (AO) rejected the offered income due to large bank credits and estimated income at 4% of gross receipts. The Principal Commissioner (Pr.CIT) invoked Section 263, holding the AO's order erroneous and prejudicial to revenue, directing income estimation at 8% without expenses.
What were the issues?
Whether the Pr.CIT correctly invoked revisional jurisdiction under Section 263 when the AO's assessment order was based on a possible view and not erroneous or prejudicial to revenue. Whether the presumptive rate under Section 44AD was applicable in the given circumstances.
Which sections of the Income-tax Act were involved?
Section 263,Section 143(3),Section 44AD,Section 44AA,Section 44AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: HON’BLE SHRI MAHAVIR SINGH & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee challenges the revisional jurisdiction u/s. 263 as exercised by learned Principal Commissioner of Income Tax, Chennai 3 [Pr.CIT] vide order dated 11-03-2022. The assessment for this year has been framed by Ld. AO u/s 143(3) on 31.12.2019. 2. The Ld. AR advanced arguments supporting the assessment order which has been controverted by Ld. CIT-DR. Having heard rival submissions, the appeal is disposed off as under:
Upon perusal of the assessment order, it could be seen that Ld. AO was not satisfied with the Business Receipts of Rs.57.27 Lacs as reflected by the assessee. The receipts arose out of sale of iced fish trade. The income was offered on presumptive basis u/s 44AD @8%. The assessee also reflected commission income of Rs.6.95 Lacs as Income from other sources. However, noticing that there was huge credit of Rs.934.26 Lacs in the bank accounts, Ld. AO rejected the income offered by the assessee. Considering the factual matrix, Ld. AO estimated income of 4% against gross receipts of Rs.934.26 Lacs and allowed depreciation and expenses against the same. Finally, the returned income of Rs.9.99 Lacs was assessed at Rs.17.63 Lacs.
Subsequently, upon perusal of case records, Ld. Pr.CIT invoking the provisions of Sec.263, held the order to be erroneous and prejudicial to the interests of revenue. The assessee was show caused wherein it was stated that the income should have been computed by adopting profit rate of 8% of gross receipts. No deduction was to be allowed against the same u/s 30 to 38. Though the assessee opposed the said estimation, Ld. Pr. CIT set aside the assessment order and directed Ld. AO to estimate the income @8% on entire turnover without allowance of any expenses. This was in view of the fact that the assessee did not maintain books of account u/s 44AA and did not get it audited as per Sec.44AB. Aggrieved, the assessee is in further appeal before us. 5. Upon perusal of assessment order, it could be seen that Ld. AO rejected the income offered by the assessee and treated the entire bank credit of Rs.934.26 Lacs as business receipts. The profit element 3 - on turnover was estimated @4% and deduction of expenditure was allowed. It could be seen that the provisions of presumptive rate u/s 44AD would not apply in such a case since the business receipts far exceed the threshold limit of Rs.2 Crores. The Ld. AO, in its own wisdom, made an estimation of the profit and arrived at assessed income of Rs.17.63 Lacs. We are of the opinion that the estimation made by Ld. AO was one of the possible views.
The Ld. CIT(A) invoked revisional jurisdiction on the ground that the profit should have been estimated @8% without any allowance of expenditure. This rate is nothing but presumptive rate as prescribed u/s 44AD. However, as noted by us in para-5, this presumptive rate would not apply since the turnover far exceeds the threshold limit of Rs.2 Crores. Alternatively, assuming that Pr. CIT held an independent opinion that the profit rate should have been estimated @8% as reflected by the assessee, we find that the said rate is also without any basis. The estimation remains an estimation. The Ld. AO estimate the rate of 4% which in the opinion of Ld. CIT(A) should have been 8%. In such a case, the revision is nothing but substitution of judgment of Ld. AO. The view of Ld. AO was one of the possible views and the same was not contrary to any law. Therefore, the order could not be held to be erroneous merely on this account. In the result, the prime condition to invoke the revisional jurisdiction u/s 263 remains unsatisfied. Therefore, we quash the impugned order passed by Ld. Pr. CIT u/s 263. We order so.
The appeal stands allowed.
Order pronounced on 08th September, 2022.
More judgments on Section 263
- Gillette India Limited, Mumbai vs Principal Commissioner of Income Tax, JaipurITA 1316/JPR/2026[2018-19]Status: Disposed16 Oct 2026AY 2018-19
- Neo Structo Construction P. Ltd., Ahmedabad vs The Pr. CIT- 3, AhmedabadITA 1216/AHD/2026[2015-2016]Status: Disposed16 Oct 2026AY 2015-2016
- Vimal Harilal Baldania, Gandhidham vs The ITO Ward 2, GandhidhamITA 770/RJT/2025[2017-18]Status: Disposed15 Oct 2026AY 2017-18
- J.D. Marketing, Kolkata vs ITO, Ward 37(1), KolkataITA 1493/KOL/2026[2015-2016]Status: Disposed15 Oct 2026AY 2015-2016
- J.D. Marketing, Kolkata vs ITO, Ward 37(1), KolkataITA 1492/KOL/2026[2013-2014]Status: Disposed15 Oct 2026AY 2013-2014
Recent GST High Court judgments
Search GST case law →- M/S.Sri Satya Sai Constructions vs. The State Of Andhra PradeshAndhra Pradesh · 27 Oct 2026
- Anisha Busa vs. Sibar Institute Of Dental SciencesAndhra Pradesh · 27 Oct 2026
- M/S.Sri Satya Sai Constructions vs. The State Of Andhra PradeshAndhra Pradesh · 27 Oct 2026
- M/S. Sikka Motors PVT LTD vs. Union Of INDIA & Anr.Delhi · 27 Oct 2026
- Shri Yaras Suresh Babu Prabhu Kumar vs. The Union Of INDIATelangana · 27 Oct 2026