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Facts
The assessee did not file a return of income for AY 2018-19. Based on cash deposits of Rs. 2.30 crore, reassessment proceedings were initiated under Section 148. The Assessing Officer completed the assessment by estimating turnover and applying a 7% net profit rate, determining total income at Rs. 8,21,178/-, which the CIT(A) upheld while dismissing the assessee's appeal due to a 101-day delay.
Held
The Tribunal condoned the delay in filing the appeal, emphasizing that technicalities should not hinder substantial justice. It modified the net profit rate applied by the Assessing Officer from 7% to 4.5%, consequently revising the total taxable income from Rs. 8,21,178/- to Rs. 5,27,900/-.
Key Issues
Condonation of delay in appeal filing; validity of reassessment proceedings under Section 148/148A(d) regarding time limits and procedure; and correctness of net profit rate applied on estimated turnover.
Sections Cited
250, 148, 148A(d), 151, 144B, 147, 156
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
This appeal has been filed by the Assessee against the order dated 17.01.2025 passed by the Ld. Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (‘Ld. CIT(A)’ in short), under Section 250 of the Income-tax Act, 1961 (‘the Act’ in short), relating to the Assessment Year 2018-19.
2. The assessee has raised the following grounds :
1. Ld. CIT(A) erred in law and on facts in not condoning delay of 101 days in filing of an appeal and thereby confirming addition of Rs.5,28,098/- without appreciating facts and law of the case properly.
Notice issued u/s 148 dated 26.05.2022 being issued beyond the period of three years from the end of the assessment year on the sanction granted by the commissioner u/s 151 within the period of three years from the end of the assessment year and on the basis of order passed u/s 148A(d) dated 31.03.2022 passed within the period of three year from the end of the assessment year is bad in law and consequently re- assessment order passed u/s 144B r.w.s. 147 dated 20.09.2023 along with the demand notice issued u/s 156 dated 20.09.2023 are equally bad in law.
3. Order passed u/s 148A(d) dated 31.03.2022 is bad in law for want of sanction from the competent authority u/s 151(ii) in view of issuance of notice us 148 beyond the period of three year from the end of the assessment and year consequently Notice issued u/s 148 dated 26.05.2022 and re-assessment order passed u/s 144B r.w.s 147 dated.20.09.2023 along with the demand notice issued u/s 156 dated.20.09.2023 are equally bad in law.
Notice issued u/s 148 dated.26.05.2022 is bad in law as the same was issued in contravention to Notification No.18 of 2022 dated 29.03.2022 which mandates the issuance of notice u/s 148 through automated allocation in faceless manner and after 29.03.2022 consequently re- assessment order passed u/s 144B r.w.s 147 dated.20.09.2023 along with the demand notice issued u/s 156 dated.20.09.2023 are equally bad in law.
5. Ld. CIT (A) erred in law and on facts in confirming addition of Rs.5,28,098/- made by assessing officer by considering bank credits as Turnover of the appellant and thereafter applying net profit of 7% on said Turnover without appreciating fact that appellant was engaged in the business of retails sales of Milk purchased from Banas Dairy which cannot yield Net Profit at rate of 7 percent on Turn Over.”
In this case, the assessee did not file return of income for the assessment year under consideration. The Assessing Officer observed that the assessee had cash deposits aggregating to Rs.2,30,20,760/- in The Dhanera Mercantile Co. Op. Bank Limited. The case of the assessee was therefore reopened by issuing notice u/s 148 of the Act on 26.05.2022. In response to the notice u/s 148, the assessee filed return on 21.06.2022, declaring total income at Rs.2,93,080/-. Thereafter, the assessment was completed u/s 147 r.w.s. 144B of the Act on 20.09.2023, wherein the Assessing Officer estimated turnover at Rs. 1,17,31,120/- and applied a net profit rate of 7%, thereby determining total income at Rs. 8,21,178/-.
4. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee in-limine citing a delay of 101 days in filing the appeal, and not finding the cause for delay as reasonable.
Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.
Before us, the Ld. AR reiterated the grounds raised and submitted an affidavit explaining the reasons for delay in filing the appeal before the Ld. CIT(A). The Ld. AR also placed reliance on the documents such as the notice u/s 148, order passed u/s 148A(d), relevant bank statements and audited accounts, in support of his contentions on legal and factual grounds. It was argued that the reassessment proceedings initiated u/s 148 are void ab initio, being initiated beyond the prescribed time limits and in violation of the mandatory faceless procedure under Notification No. 18/2022. It was also contended that the estimation of turnover and profit is arbitrary as the business involves retail sales of milk, which operates on a very low profit margin and not the presumed 7% adopted by the Assessing Officer. The Ld. AR also submitted that the Ld. CIT(A) ought to have condoned the delay, given that the assessee had explained genuine reasons.
The Ld. DR, on the other hand, relied upon the orders of the authorities below.
The assessee has filed an affidavit and provided explanations for the said delay, citing genuine and reasonable causes before the Ld. CIT(A). It is settled law that technicalities should not come in the way of rendering substantial justice. In this case, the Assessing Officer treated 7% estimated profit and determined an income of Rs.8,21,178/-. The assessee filed return of income at Rs.2,93,080/-; hence, the net addition made by the Assessing Officer was Rs.5,28,098/-. It was prayed that in commission business earning of 7% profit is abstemiously unreasonable. Having considered the ground realities specific to the cases, we determine the commission @ 4.5%, which amounts to earning of profit at Rs.5,27,900/- instead of Rs.8,21,178/-. In the result, the total taxable income stands modified from Rs.8,21,178/- to Rs.5,27,900/-.
In the result, the appeal of the assessee is partly allowed.