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Facts
The assessee filed its return for AY 2022-23 declaring a total income. The AO, after issuing notices for details of purchases and creditors, applied a net profit rate of 8% and made additions for discrepancies. The assessee's appeal to the CIT(A) was dismissed due to failure to furnish details.
Held
The Tribunal noted that there was a lack of proper compliance before the AO and CIT(A). In the interest of justice, the Tribunal set aside the CIT(A)'s order and remitted the matter back to the AO for reassessment, providing the assessee an opportunity to be heard.
Key Issues
Whether the CIT(A) erred in affirming the AO's action of rejecting books and making additions without proper verification and justification, and whether the assessee should be granted another opportunity for proper representation.
Sections Cited
250, 144, 144B, 145(3), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2022-23 dated 26.05.2025, which has been passed against the assessment order u/s 144 r.w.s. 144B of the Act, dated 01.03.2024. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. For that in view of the facts and in the circumstances, the L.d. CIT(A) erred in affirming the action of AO in computing the profit of the appellant @ 8% at Rs. 67,92,367/- (8% of Rs.8,49,04,594/-) and such affirmation by Ld. CIT(A) and the AO's action which itself is arbitrary and absurd and it may be held accordingly. I.T.A. No.: 1616/KOL/2025 Assessment Year: 2022-23 M/s. Midnapur Timber Traders.
Without prejudice to Ground No. 1 above, the AO rejected the books of accounts of the appellant without pointing out any defect in the books of accounts of appellant and as such invocation of sec. 145(3) in such respect is bad in law and Ld. CIT(A) was wholly unjustified in affirming such action of AO and it may be held accordingly.
Without prejudice to Grounds No. 1 & 2 above, the Ld. CIT(A) erred in not appreciating the fact that the appellant had made sufficient compliance before the AO and as such action of the AO in passing the impugned order u/s 144 and invocation of sec. 145(3) is bad in law and it may be held accordingly.
For that in view of the facts and in the circumstances, the Ld. CIT(A) was wholly unjustified in affirming the action of AO in adding Rs. 2,00,49,412/- u/s 68 and such action of the Ld. CIT(A) is bad in law and in view of the facts and in the circumstances it may be held accordingly.
Without prejudice to Grounds No. 1 to 4 above, the Ld. CIT(A) erred in not appreciating the fact that AO had invoked the provisions of sec. 145(3) and had computed the profit by applying percentage on the turnover of the appellant and as such no separate addition u/s 68 could have been made and in view of the facts and in the circumstances it may be held accordingly.
For that your petitioner craves the right to put additional grounds and/or to alter/ amend/modify the present grounds at the time of hearing.”
Brief facts of the case are that the assessee had filed its return of income for the assessment year 2022-23, declaring total income of ₹33,93,130/-. The Assessing Officer (“the Ld. AO”) issued notices calling for the details of purchases and sundry creditors and subsequently also issued show cause notice as to why the net profit rate of 8% should not be applied. On failure of the assessee to furnish the required details, the net profit rate of 8% was applied as against the rate of 6.15% shown by the assessee and a sum of ₹ 15,70,733/- was added to the income of the assessee. Another sum of ₹2,49,412/- was also added under section 68 of the Act as the sundry creditors were not verified. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who vide the impugned order, dismissed the appeal as the assessee had failed to furnish any details before the Ld. AO. Aggrieved I.T.A. No.: 1616/KOL/2025 Assessment Year: 2022-23 M/s. Midnapur Timber Traders. with the order of the Commissioner (Appeals), the assessee has filed the appeal before the Tribunal.
We have heard the rival contentions and perused the material available on record. It is stated in the Statement of Facts filed before the Ld. CIT(A) that the assessee is a partnership firm engaged in the trading of Size Woods, Log Woods and Fire Woods since long. During the scrutiny proceedings, the assessee complied with all the notices received along with all the requisite valid documents which are on record. It is stated that there might be some lapses on the part of the assessee to comply with the notices within the statutory time limit due to the facts of the situation of the assessee’s business expediency and partner’s family problem, due audit of books of account in filing of return of income for the assessment year 2023-24 and it was requested before the Ld. CIT(A) that the late reply may be condoned. The Ld. AR submitted before the Bench that there are only two issues in the appeal, the first being that once the books of accounts were rejected how section 68 of the Act was applicable and the second being that once the assessee’s profit was 6.3% shown in the previous year, how the net profit rate of 8% was applied as no basis has been given by the Ld. AO for adoption of the rate of 8%. It was conveyed to the Ld. AR that in the absence of suitable reply filed by the assessee, the assessment was made under section 144 of the Act and the order was confirmed as no further details were filed before the Ld. CIT(A). The Ld. AR requested that since proper representation was not made, the assessee may be granted another opportunity to furnish the required evidence before the Ld. AO. The Ld. DR relied upon the order of the appellate authority and requested that the same may be confirmed. I.T.A. No.: 1616/KOL/2025 Assessment Year: 2022-23 M/s. Midnapur Timber Traders.
We have considered the rival submissions and have also gone through the facts of the case and the record. Since there was no proper compliance before both the Ld. AO as well as the Ld. CIT(A), in the interest of justice and fair play it was considered by the Bench that the request of the assessee to remand the case before the Ld. AO may be allowed so that a proper opportunity of being heard may be provided. Hence, after examining the facts of the case, we deem it appropriate to set aside the order of the Ld. CIT(A) and remit the matter back to the Ld. AO for making the reassessment de novo. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of its grounds of appeal and shall not seek unnecessary adjournments. Accordingly, the grounds taken by the assessee in his appeal are allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 30th October, 2025. [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 30.10.2025 Bidhan (Sr. P.S.) I.T.A. No.: 1616/KOL/2025 Assessment Year: 2022-23 M/s. Midnapur Timber Traders. Copy of the order forwarded to:
M/s. Midnapur Timber Traders, C/o. M/s. Salarpuria Jajodia & Co., 7, C.R. Avenue, 3rd Floor, Kolkata, West Bengal, 700072. 2. ITO, NFAC, Delhi.
CIT(A)-NFAC, Delhi.
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order