RAJASHREE KHUNTIA,CUTTACK vs. INCOME TAX OFFICER, WARD-1, CUTTACK
Facts
The assessee, a retail trader of medicines, shifted residence and subsequently filed a return of income in response to a notice u/s. 142(1) of the Act. The Assessing Officer (AO) rejected the return, treating opening capital as undisclosed income and estimating income at 8% of turnover.
Held
The Tribunal held that once the assessee's books were rejected by the AO, no further addition could be made. The balance sheet prepared from the bank account was also considered part of the rejected books. Since the AO had already estimated the income at 8%, no further addition was warranted.
Key Issues
Whether the AO was justified in rejecting the assessee's return and making additions when the assessee had already declared income at 8% of turnover, and if the rejected books precluded further additions.
Sections Cited
142(1)
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Income Tax Appellate Tribunal, “SMC” BENCH CUTTACK
Before: SHRI GEORGE MATHAN
आयकर अपीलीय अिधकरण, “एस.एम.सी” �यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH CUTTACK (THROUGH VIRTUAL HEARING) �ी जाज� माथन, �याियक सद�य के सम� । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER आयकर अपील सं/ITA No.434 /CTK/2025 (िनधा�रण वष� / Assessment Year : 2017-2018) Rajashree Khuntia Vs ITO, Ward-1, Cuttack, C/O:- Health Line Kalyani Nagar, 753008 Madhupatna, Cuttack, 753012 PAN No. : BBHHPK 1435 Q (अपीलाथ� /Appellant) (��यथ� / Respondent) .. िनधा�रती क� ओर से /Assessee by : Shri, Ambika Prasad Mohanty, AR राज�व क� ओर से /Revenue by : Shri Vijay Singh, Sr. D.R. सुनवाई क� तारीख / Date of Hearing : 25/09/2025 घोषणा क� तारीख/Date of Pronouncement : 25/09/2025 आदेश / O R D E R This is an appeal filed by the assessee against the order of the Ld.CIT(A), National Faceless Appeal Centre(NFAC), Delhi order dated 10/07/2025 passed in Appeal No. CIT(A), Cuttack/10781/2019-20 for the assessment year 2017-2018. 2. It was submitted by the Ld. AR that the assesee is a retail trader of medicines. It was the submission that the assesee was earlier staying at Sambalpur. Subsequently, the assesee shifted her residence to Cuttack. It was the submission that when the assesee came to know about the notices having been issued, the assesee had filed a return of income for the impugned assessment year in responses to the notice issued u/s.142(1) of the Act. The AO rejected the return on the ground that the
2 ITA No.434/CTK/2025 return was not filed within time and proceeded with the assessment. The AO treated the opening capital for the impugned assessment year as the undisclosed income of the assesee and also estimated the income of the assesee at 8% of the turnover of Rs.75,90,000/-. It was the submission that the books having been rejected, no addition could be made in respect of the opening capital account, insofar as the assessee was not having any taxable income which called for the assesee to maintain its books of accounts. 3. In reply the Ld. Sr. DR vehemently supported the orders of the AO and CIT(A). It was the submission that the assessee could show the balance sheet for the earlier assessment year to show the closing capital account. It was the submission that even this has not been shown. 4. I have considered the rival submission. It is an admitted fact that the assesee is not maintaining its books of accounts. When the notice has been issued the accounts have been prepared from the bank account of the assessee and it is the turnover which has been obtained from the bank account of the assesee. The AO has rejected all the books, therefore, once the books were rejected, there is no scope for making any further addition. The balance sheet has also been prepared out of the same set of the books representing the bank account of the assessee. The AO having rejected the books so also return of the assessee and having estimated the income of the assessee @ 8%, no further addition is called for. Consequently, the addition made by the AO of Rs.31,68,328/- is unsustainable and the same stands deleted.
3 ITA No.434/CTK/2025 5. In regard to the estimation of the income, it is noticed that in the return filed by the assessee in response to the notice issued u/s. 142(1) of the Act, being the return, which have been rejected by the Assessing Officer, wherein the assessee herself has shown @ 8% income. Therefore, the estimation of the income by the AO @ 8% would remain as if the same is deleted or reduced, the assessed income would go below the returned income. However, the return filed by the assessee before completion of assessment cannot be treated as invalid. In these circumstances, the appeal of the assesee is partly allowed for statistical purposes. 6. In the result, appeal of the assessee is partly allowed for statistical purposes. Order dictated and pronounced in the open court on 25/09/2025. Sd/- (जाज� माथन) (GEORGE MATHAN) �याियक सद�य / JUDICIAL MEMBER �दनांक Dated 25/09/2025 Prakash Kumar Mishra, Sr.P.S आदेश क� �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant- Rajashree Khuntia C/O:- Health Line Kalyani Nagar, Madhupatna, Cuttack, 753012 2. ��थ� / The Respondent- ITO, Ward-1, Cuttack, 753008 3. आयकर आयु�(अपील) / The CIT(A), आदेशानुसार/ BY ORDER, 4. आयकर आयु� / CIT 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, कटक / DR, ITAT, (Assistant Registrar) Cuttack आयकर अपीलीय अिधकरण, गाड� फाईल / Guard file. 6. कटक/ITAT, Cuttack स�यािपत �ित //True Copy//
