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Facts
The assessee's case was reopened under section 147 of the Income Tax Act, 1961, due to a deposit in a special saving account. The assessee failed to file replies to notices, leading the Assessing Officer to apply a 15% profit rate on a specific amount, making an addition. The assessee had initially shown a lower profit rate in a revised return.
Held
The Tribunal accepted the contention that the amount was already shown by the assessee. However, if an addition was to be sustained, it should be at a profit rate of 8%, considering previous and subsequent profit averages. The Tribunal inclined to apply a net profit rate of 8% over the gross profit rate.
Key Issues
Whether the addition made by the Assessing Officer based on a higher profit rate is sustainable, or if a reduced profit rate should be applied.
Sections Cited
147, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, NAGPUR
Before: SHRI NARENDER KUMAR CHOUDHRY
The present appeal has been filed by the assessee challenging the impugned order dated 03/04/2025, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”] for the assessment year 2016–17.
The case of the assessee was re–opened under section 147 of the Income Tax Act, 1961 (for short "the Act") mainly for the reason that the assessee had deposited Rs.89,11,269, in special saving account
2 Shaikh Mukhtar Shaikh Noor Attar ITA no.367/Nag./2025 maintained with Renukamata Multi–State Urban Credit Co–operative Society, Ahmednagar, Jalgaon, during the year under consideration. Though, various statutory notices were issued to the assessee, however, the assessee failed to file any reply / submissions and/or documents. Thus in the constrained circumstances, as the assessee during the year under consideration, had shown gross receipt of Rs.17,85,230, and net profit of Rs.2,69,732, declaring net profit @ 15.10%, however, in the revised return of income filed under section 148 of the Act, has shown gross receipt of Rs.50,40,265, and net profit @8% i.e., Rs.4,03,222 and therefore the Assessing Officer ultimately applied the profit rate @ 15% on the amount of Rs.89,11,273, which remained unsubstantiated and consequently, made the addition of Rs.16,89,509.
The learned Amicus Curiae though submitted that this particular amount of Rs.89,11,273, was already shown by the assessee and, therefore, no addition is sustainable, however, if the addition is to be sustained, the same can be reduced to the profit rate of 8%, which can be reasonable, by considering the previous and subsequent profit shown by the assessee and/or considering the average of the profit in the previous and subsequent three years. In order to cut–short the 3 Shaikh Mukhtar Shaikh Noor Attar ITA no.367/Nag./2025 litigation and to settle the issue, this Court is inclined to accept the contention of the learned Amicus Curiae, to apply net profit rate @ 8% over and above the gross profit rate, if already shown. Thus, the appeal filed by the assessee stands partly allowed in the aforesaid terms.
This Court really appreciate and endorse the sincere efforts and able assistance provided by ld. Amicus Curiae in coming to the right conclusion and for passing the order in its right perspective and proper manner and for substantial justice.
In the result, assessee’s appeal is partly allowed.
Order pronounced in the open Court on 27.06.20225