Loading judgment…
Facts
The assessee filed an appeal against an order of the CIT(A) which confirmed an addition made through a Rectification Order under Section 154. The AO had initially estimated the total income at Rs. 1,99,65,892/-. A rectification order subsequently revised the total income to Rs. 2,88,52,653/-, by adding Rs. 88,86,761/-, which was claimed as a loss by the assessee.
Held
The Tribunal held that the estimation of gross profit by the Assessing Officer was not legally tenable, especially considering that a Coordinate Bench had deleted a similar estimation in the assessee's own case for earlier assessment years. The Tribunal further noted that the fall in GP was adequately explained by the assessee.
Key Issues
Whether the addition made by the Assessing Officer through a Rectification Order under Section 154 was justified, especially when a similar estimation was deleted for earlier years in the assessee's own case.
Sections Cited
154, 143(3), 145(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI T.R. SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA
Assessment Year: 2017-18 Advance Lifespaces Pvt. Ltd., Assistant Commissioner of S-202/B/4/205, City Centre, Income Tax, Vs Nr. Idgah Gate, Asarwa, Circle-1(1)(1), Ahmedabad-380016 Ahmedabad [PAN No.:AAJCA2338M] अपीलाथ�/ (Appellant) �� यथ�/ (Respondent) Appellant by : Shri P. D. Shah, AR & Shri Saiyam Shah, AR Respondent by : Shri B.P. Srivastava, Sr. DR सुनवाई की तारीख/Date of Hearing: 22.07.2025 घोषणा की तारीख /Date of Pronouncement: 28.07.2025 आदेश/O R D E R
PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER:
This appeal is filed by the assessee against the appellate order dated 03.07.2024 passed by Ld. Commissioner of Income Tax (Appeals) (hereinafter referred to as “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi arising out of the Rectification Order passed under Section 154 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) relating to the Assessment Year 2017-18.
The Registry has noted that there is a delay of 145 days in filing the present appeal. The assessee explained vide Notarized Affidavit stated originally the appeal was filed by the assessee by paying appropriate fees on 30.08.2024 by e-filing. However, there is some mistakes in Form No. 36 which was required to be rectified, the same was rectified and filed on 21.02.2025 thereby the Registry has noted that there is a delay of 145 days. In view
The brief facts of the case is for the Assessment Year 2017- 18 the assessee filed its Return of Income claiming a loss of Rs. 88,83,761/-. The Return was selected for scrutiny assessment and the Assessing Officer noted the gross profit declared by the assessee was much on lower side thereby rejected the books of accounts and estimated the total income at Rs. 1,99,65,892/- under the normal provisions of the Act. However, while doing so the claim of loss of Rs. 88,86,761/- which ought to have been disallowed but not disallowed, which is a mistake apparent on record. Therefore, Rectification Order was passed rectifying the total income to Rs. 2,88,52,653/-.
Aggrieved against the revision order, assessee filed appeal before CIT(A) claiming that it is a debatable issue which cannot be rectified under Rectification Order. The Ld. CIT(A) considered the submissions and dismissed the assessee appeal, that the rectification made by the Assessing Officer is well within the scope of Section 154 of the Income Tax Act.
Aggrieved against the appellate order the asessee is in appeal before us raising the following grounds of appeal:
“1. That the Ld. CIT(A)/National Faceless Appeal Centre (NFAC), has erred by confirming the addition of Rs.88,86,761/- made in the proceedings u/s. 154 of the Act by the learned AO and therefore the learned AO be directed to delete the said addition while computing the total income.
2. Without prejudice to above Ground 1, that the Ld. CIT(A)/National Faceless Appeal Centre has erred in law and facts, by not allowing the amount of finance cost and other expense out of the amount of gross profit A.Y. 2017-18. 3 determined by the ld.AO, while estimating gross profit on adopting section 145(3) of the Act, as the same has not been considered to determine the gross profit.
3. That your appellant craves leave to add, alter or amend any grounds at or before the time of hearing.”
At the outset, Ld. Counsel Shri P. D. Shah submitted that the regular assessment order passed under Section 143(3) was travelled before this Tribunal and the estimation of 9.94% arrived by the Assessing Officer was deleted by this Tribunal observing that no such disallowance made in assessee’s own case for the earlier Assessment Years 2015-16 and 2016-17. Consequentially the Rectification Order passed by the Assessing Officer become infructuous and therefore Ld. Counsel requested to set-aside the orders passed by the Lower Authorities.
Per contra, Ld. Sr. DR appearing for the Revenue supported the orders passed by the Lower Authorities.
We have given our thoughtful consideration and perused the material available on record. As against the assessment order passed under Section143(3) of the Act, Coordinate Bench of this Tribunal deleted the estimation made by the Assessing Officer observing as follows:
“9. Next issue is Estimation of Gross Profit. The Ld AO adopted an average GP rate of 9.94% based on earlier years’ data. However for the Asst. Year 2016–17, the GP of 4.49% was accepted by the department in the scrutiny assessment u/s.143(3) of the Act for the very same project. Further the fall in GP was adequately explained by the assessee namely delayed project sales, fixed sale prices due to early bookings and increased interest burden capitalized into cost of land. The valuation working of closing stock (₹61.44 crore) was submitted by the assessee and includes proportionate interest cost based on sold verses unsold unit ratio. The Ld AO could not find any discrepancy in the above reports and information furnished by the assessee.
A.Y. 2017-18. 4 9.1. There is no comparable industry data or market survey to justify the arbitrary estimation at 9.94% arrived by the Ld AO. Hence, such estimation, in the absence of any suppression of income or defects in accounting, is unwarranted and such addition is liable to be deleted. 9.2. Further perusal of the scrutiny assessment orders passed by the department in assessee’s own case for the Assessment Year 2015-16 dated 22-12-2017 and for Asst. Year 2016-17 dated 24-12-2018 wherein no discrepancy in GP ratio was found by the Assessing Officer and the returned income were accepted by making some small addition on other disallowances. More particularly, when the same commercial project of shops and offices were sold by the assessee. Thus gross profit estimation made by the Assessing Officer is not legally tenable and the additions made thereon are liable to be deleted. Thus the Ground Nos. 2 & 3 raised by the assessee are hereby allowed.”
Thus, while giving effect to this order the Assessing Officer is required to consider the loss return filed by the Assessee. Thus, the addition made in the Rectification Order passed by the Assessing Officer is hereby to be deleted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Court on 28.07.2025 at Ahmedabad.
Sd/- Sd/- (NARENDRA P. SINHA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad, dated 28/07/2025 TRUE COPY Tanmay, Sr. P.S. आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��थ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु� अपील ( ) / The CIT(A)- 5. िवभागीय �ितिनिध आयकर अपीलीय अिधकरण राजोकट/DR,ITAT, Ahmedabad, , , 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,