Loading judgment…
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)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH CUTTACK
Before: SHRI GEORGE MATHAN
(ि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.
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 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.
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.
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.