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Facts
The assessee declared income but debited a substantial amount (78% of turnover) as license fees. The Assessing Officer (AO) disallowed the excess license fees under Section 37(1) by restricting it to 0.49% of turnover, and also estimated presumptive profit. The CIT(A) largely confirmed the assessment but deleted the double addition of estimated presumptive profit.
Held
The Tribunal set aside the impugned order of the CIT(A) and restored the assessment back to the file of the AO for de novo adjudication. The assessee was granted another opportunity of hearing to substantiate its case, recognizing the possibility of communication gaps in the faceless assessment regime.
Key Issues
Whether the disallowance of license fees under Section 37(1) and the estimation of presumptive profit were justified, and whether the assessee should be afforded another opportunity of hearing in a faceless assessment.
Sections Cited
143(3), 37(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH CHANDIGARH.
Before: HON’BLE SHRI RAJPAL YADAV & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा�रणवष� / Assessment Year: 2018-2019) ACIT Circle Suriti Tyagi बनाम/ Shimla Laxmi Niwas, VPO Kirpalpur Vs. Teh. Nalagarh, Solan (HP) – 174101 �थायीलेखासं./जीआइआरसं./PAN/GIR No. ADSPT-4430-E (अपीलाथ�/Appellant) : (��थ� / Respondent) Assessee by : Sh. Rajiv Sood (CA) - Ld. AR Revenue by : Smt. Kusum Bansal (CIT) & Dr. Ranjit Kaur (Addl. CIT) – Ld. Sr. DRs सुनवाईकीतारीख/Date of Hearing : 08-04-2025 घोषणाकीतारीख /Date of Pronouncement : 21-04-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid cross-appeals for Assessment Year (AY) 2018-19 arises out of an order of Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [CIT(A)], dated 16-02-2024 in the matter of an assessment framed by Ld. Assessing Officer (AO) u/s 143(3) of the Act on 03-09-2021. Having heard rival submissions and upon perusal of case records, the appeals are adjudicated as under. The registry has noted delay of 91 days in assessee’s appeal which stand condoned.
The assessee declared income of Rs.31.76 Lacs. The assessee debited license fees of Rs.36.47 Crores against turnover of Rs.46.36 Crores which was almost 78% of turnover. The purchases were Rs.18.63 Crores. In AY 2017-18, the assessee claimed license fee of 0.49% of turnover. The assessee was required to justify the same. The assessee filed ledger extracts and copy of paid challans only. However, the working of license fees was not furnished. Accordingly, Ld. AO restricted the license fees to the extent of 0.49% of the turnover and disallowed the remaining payment of Rs.36.25 Crores u/s 37(1). The Ld. AO also estimated presumptive profit of 5% on turnover which came to Rs.2.31 Crores. The income of the assessee was thus determined at Rs.38.55 Crores. The Ld. CIT(A) substantially confirmed the assessment for want of any representation from the assessee. The Ld. CIT(A) deleted separate addition of estimation of business income since the same would amount to double addition. The said adjudication has led to cross-appeals before us. The Ld. AR filed affidavit of the assessee and pleaded for another opportunity of hearing before lower authorities which has been opposed by revenue.
Keeping in mind the principles of natural justice and considering the possibility of communication gaps during faceless regime, we deem it fit to afford another opportunity of hearing to the assessee to substantiate its case before Ld. AO. Accordingly, the impugned order is set aside and the assessment is restored back to the file of Ld. AO for de novo adjudication after affording reasonable opportunity of hearing to the assessee. The assessee is directed to plead and prove its case forthwith.
Both the appeals stand allowed for statistical purposes. Order pronounced on 21-04-2025.