DESTINY PRIVATE LIMITED,KOLKATA vs. ITO, WARD 6(1),, KOLKATA

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ITA 1245/KOL/2025Status: DisposedITAT Kolkata13 August 2025AY 2016-20175 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that while the assessee did file ledger accounts for domestic sales, the AO required more details like PAN and addresses. For export sales, a ledger account with party names and amounts was filed. Regarding the limited scrutiny argument, the Tribunal noted that the AO's reasons for scrutiny were broad and generic, encompassing the issues before the Tribunal, thus rejecting this argument. However, the Tribunal accepted the assessee's argument that books of accounts were not rejected and some details were indeed filed. Considering the totality of facts, the Tribunal set aside the impugned order and remanded the matter back to the AO for fresh assessment. The AO is to examine the books of accounts to his satisfaction and seek any further details deemed necessary for a correct assessment, with the assessee directed to cooperate.

What were the facts?

The appeal is by Destiny Private Limited against the order of the Addl./Joint Commissioner of Income Tax (Appeals), Panaji, dated 09.04.2025. The Assessing Officer (AO) made an addition of Rs.19,02,147/- by estimating business revenue at 8% of turnover. This was based on the finding that the assessee failed to submit party-wise details, including complete addresses and PAN, for domestic and export sales. The assessee appealed to the first appellate authority, arguing that sufficient details were provided and that the AO had enlarged the scope of limited scrutiny. The first appellate authority upheld the AO's order, stating that the assessee failed to provide clinching documentary evidence despite multiple opportunities. The assessee is now before the Income Tax Appellate Tribunal (ITAT) for the assessment year 2016-2017.

What were the issues?

1. Whether the AO, in a limited scrutiny case, travelled beyond the scope of such scrutiny by making the impugned addition (mixed law and fact, concerning Section 143(2) of the Income Tax Act, 1961). 2. Whether the AO estimated income without rejecting the books of accounts (mixed law and fact, concerning the principles of assessment). Assessee's arguments: - The case was selected for limited scrutiny as per the notice under Section 143(2), and the AO exceeded this scope. - Details of domestic and export sales were filed before the AO and disregarded. - Income was estimated without rejecting the books of accounts. Revenue's arguments: - Details of parties for domestic and export sales were not provided with addresses and PAN, compelling the AO to resort to estimation.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, KOLKATA

order

: 13.08.2025 O R D E R

PER SANJAY AWASTHI, ACCOUNTANT MEMBER

1.

The present appeal arises from order u/s 250 of the Income Tax Act, 1961 (hereafter “the Act”), passed by Ld. Addl./Joint Commissioner of Income Tax (Appeals), [hereinafter “the Addl/JCIT(A)], Panaji, vide order dated 09.04.2025.

1.1 In this case, the Ld. AO has passed a cryptic and brief order through which an addition of Rs. 19,02,147/- has been made by estimating revenue from operations at 8% of the turnover of business. This action has been done on the basis of a finding that no party-wise details (with complete address and PAN) of domestic and export sales were submitted by the 1.2 The assessee carried this matter in appeal where he could not succeed on the basis of the following findings:

“Further, multiple notices u/s.142(1) of IT Act and show cause notice issued to the appellant and in compliance to the above notices the appellant company filed necessary details before the AO time to time. Upon careful perusal of the written submissions filed by the appellant the AO observed that the appellant company has furnished insufficient details as no party wise details with complete PAN and address of entities involved in business transaction with the appellant was furnished In view of the above fact, the AO was unable to verify the genuine value of the exports and imports transactions declared by the appellant in its return of income during the year under consideration and in absence of the clinching documentary evidences in support of genuineness of the turnover/profit declared by the appellant could not be proved in the return of income filed. Onus was on the appellant to proov that value of export and imports has been correctly shown in ITR and also sales turnover and receipt are correctly offered to tax. For proving the same appellant was required to submit all the related documentary evidences to proov the genuineness of the transactions related to issues of scrutiny. However, during the course of appellate proceedings as well as assessment proceedings, the appellant utterly failed to adduce the clinching documentary evidences in support of import/exports/turnover and profit etc., for the year under consideration in spite of the fact that multiple opportunities have been provided to the appellant in this regard. In view of the foregoing facts it is held that, the AO has correctly passed the assessment order by assessing profit at the rate of 8% of the total turnover which come to Rs. 19,02,147/- and added the same in the business income of the appellant as such the assessment order passed by the AO has no infirmity and need not to be interfered with.” 1.3 Against this order of the first appellate authority, the assessee is in appeal with the following grounds:

“1. The Ld. CIT (A) erred in law as well as on facts to affirm the validity of assessment order made by AO without jurisdiction by enlarging the scope of limited scrutiny case.

2. The Ld. CIT(A) erred in law by not considering the facts that the assessment is passed on the ground which was never put to notice or sought during the assessment proceeding, thus the order is arbitrary based on such grounds which is extraneous and unlawful.

3. The order of the Ld. CIT (A) is not reasoned and speaking order as Ld. CIT (A) erred in law as well as on facts to upheld the addition of Rs.19, 02,147made by estimating the income @ 8% of the turnover, without rejecting the books of accounts.

Destiny Private Limited 4. The order is devoid of facts by ignoring the books, submission, evidences produced. The appellant had demonstrated their true income and there is no finding to contradict the submission of the appellant.

5.

The appellant crave leave to add, alter, modify or omit any grounds during the course of hearing.

6.

The appellant also crave leave to submit before the Hon'ble Tribunal the evidences which were not filed earlier, adhering to the applicable rules and regulations of ITAT.”

2.

Before us, the Ld. AR argued with the help of short paper book. It was stated that as per the notice under section 143(2) of the Act dated 18.09.2017, it is clearly indicated that the case was picked up for “limited scrutiny”. It was argued that the Ld. AO travelled beyond the scope of such limited scrutiny and made the impugned addition. It was further argued that the assessee had filed details of domestic and export sales before the Ld. AO, which were totally disregarded. In support of this argument, the Ld. AR pointed out that such details are given in the paper book filed by him. It was also argued that the Ld. AO estimated income without rejecting the books of accounts.

2.1 Per contra, the Ld. DR pointed out that the details of parties to whom exports and domestic sales had been made were not provided with respect to addresses and PAN (wherever applicable). Accordingly, the Ld. AO was left with no option but to resort to an estimation.

3.

We have carefully considered the rival submissions and have gone through the records before us. We find that the assessee did file ledger accounts of domestic sales but apparently the Ld.AO required more details in terms of PAN and addresses etc. Regarding export sales a ledger account was apparently filed in which the names of three parties, along with amounts of exports, have been mentioned. Regarding the argument that this was a case of limited scrutiny, we find that the reasons given by the Ld. AO for scrutiny are broad based and fairly generic, as under:

Destiny Private Limited “1. Whether value of exports and imports has been correctly shown in the return of income. 2. Whether sales turnover/receipts has been correctly offered for tax.” As mentioned earlier, these reasons are broad based and generic and thus would include the kind of additions that are before us for adjudication. Accordingly, this argument of the Ld. AR cannot be accepted.

3.1 However, regarding the argument that of books of accounts have not been rejected and some details actually being filed before the Ld. AO, deserves to be accepted in principle. Considering the totality of facts and circumstances, we deem it fit to set aside the impugned order and remand this matter back to the file of Ld. AO for fresh assessment, whereby he will examine the books of accounts of the assessee to his satisfaction and ask for any details that he may deem fit for arriving at a correct assessment of the income of the assessee. Needless to say, the assessee would do well to cooperate with the proceedings before the Ld. AO.

4.

In result, appeal of the assessee is allowed for statistical purposes.

Order pronounced on 13.08.2025

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