Loading judgment…
Facts
The assessee, engaged in the cattle feed business, filed an income tax return for AY 2019-20, declaring Rs. 4,98,482/- in response to a Section 148 notice. The Assessing Officer, citing a lack of verifiable documents for purchases and sales and a turnover exceeding Rs. 5 crores, rejected the books under Section 145(3) and estimated the net profit at 8% of turnover (Rs. 40,12,655/-), making an addition of Rs. 35,14,175/-. The CIT(A) upheld this assessment, leading to the present appeal.
Held
The ITAT noted that the assessee's representative did not press the grounds related to the validity of reopening under Sections 148A/148 and admitted to lacking supporting evidence for claimed purchases. The Tribunal found no material to demonstrate that the 8% estimation of profit on turnover was excessive or unreasonable. Therefore, the ITAT upheld the rejection of books of account due to insufficient evidence and confirmed the 8% profit estimation, dismissing the appeal.
Key Issues
Whether the estimation of net profit at 8% of turnover was excessive and arbitrary given the rejection of books of account, and whether the reopening of assessment under Section 148A was valid.
Sections Cited
Section 148A(d), Section 148, Section 147, Section 144B, Section 139, Section 142(1), Section 44AD, Section 145(3), Rule 6DD [e] of Income Tax Rules 1962
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH ‘SMC’, LUCKNOW
Before: SHRI ANADEE NATH MISSHRA
2019-20 against impugned appellate order dated 26/08/2025 (DIN & Order No.ITBA/NFAC/S/250/2025- 26/1080023442(1) of Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. In this appeal the assessee has raised the following grounds:
“1. That Notice u/s 148A(d) dated 13.03.2023 and Notice u/s 148 of I.T. Act both dated 17.03.2023 has been issued by Income Assessment Year:2019-20 2 Tax Officer-1, Bahraich, who have no Jurisdiction to issue the same in view of CBDT Circular / Notification dated 29.03.2022 wherein it has been specifically enumerated that the NFAC has exclusive power to issue the Notice u/s 148 of I. T. Act, 1961, hence the present assessment is invalid as per law.
That the reopening is bad in law & liable to be quashed in as much as when no addition has been made on the issue on which reopening is made then the Assessing officer is not empowered to make addition on any other issue not found mentioned in the notice u/s 148, hence the present assessment is without jurisdiction and is invalid.
That the Ld. CIT(A) NFAC erred on facts and in confirming the estimation of Net Profit @ 8% without considering that Assessee is engaged in the business of purchase of Cattle Feed being Bhoosa, Rice Bran, Wheat Bhoosi etc. from the Agriculturist in remote area and selling it mostly through Banking Channel and that the Books of accounts of the Assessee are audited, hence the estimation of Income @ 8% Rs.40,12,655/- against the Net Profit of 0.99% declared by the Assessee is highly excessive, contrary to the facts and nature of the business of the Assessee.
That the Assessee has shown Gross Profit of Rs.14,93,241/- and Net Profit at Rs.4,98,482/- from this business on the basis of audited books of account. However, estimation of Business Income @8% which is Rs.40,12,655/- without bringing out any contrary evidence or justification or comparable cases and without appreciating the nature of Business: where margin of profit is very low, hence the excessive estimate made is contrary to the facts of the case and principle of natural justice.
The present addition made is highly excessive, contrary to the facts, law and principles of natural justice and without allowing sufficient opportunity to have its say on the reasons of estimating the Income at Rs.40,12,655/- by applying 8% Profit and making addition of Rs.35,14,175/- (Rs.40,12,655 - Rs.4,98,482).”
Assessment Year:2019-20 3 (B) In this case assessment order dated 14/03/2024 was passed by the Assessing Officer u/s 147 read with section 144B of the I. T. Act whereby the assessee’s total income was determined at Rs.40,12,655/-, as against nil income shown in the return of income filed u/s 139 of the Act and income of Rs.4,98,482/- declared by the assessee in the return of income filed u/s 148 of the Act. In the aforesaid assessment order, an addition of Rs.35,14,175/- was made by the Assessing Officer by estimating the assessee’s income at Rs.40,12,655/-. The Assessing Officer, in the assessment order, observed as under:
Assessment Year:2019-20 4 (B.1) The assessee filed appeal in the office of the learned CIT(A), which was dismissed by learned CIT(A) vide aforesaid impugned appellate order dated 26/06/2025. The relevant discussion and findings of learned CIT(A) in the aforesaid impugned appellate order are reproduced below:
Assessment Year:2019-20 Assessment Year:2019-20 Assessment Year:2019-20 Assessment Year:2019-20 Assessment Year:2019-20 9 (B.2) The present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 26/08/2025.
(C) In the course of appellate proceedings in Income Tax Appellate Tribunal, a paper book containing the following particulars was filed from the assessee’s side:
Assessment Year:2019-20 10 PAPER INDEX S.No. Particulars 1. Brief facts of the case 2. Copy of tax audit report u/s 44AB for assessment year 2019-20 3. Copy of audited balance sheet and profit & loss account as on 31/03/2019 (C.1) The aforesaid paper book included “Brief facts of the Case”, which are reproduced below for the ease of reference:
Assessment Year:2019-20 Assessment Year:2019-20 Assessment Year:2019-20 13 (D) At the time of hearing, learned Authorized Representative for the assessee submitted that the legal grounds raised in the appeal, vide ground Nos. 1 and 2 of the appeal were not being pressed. Since these grounds are not pressed, ground Nos. 1 and 2 of the appeal are dismissed.
(D.1) Remaining grounds i.e. ground Nos. 3, 4 & 5 relate to estimation of the assessee’s income at Rs.40,12,655/-. For the sake of convenience, these grounds are being disposed of together. At the time of hearing, learned A.R. for the assessee admitted that the assessee did not have supporting evidence for purchases claimed by the assessee. However, he submitted that the estimation of income at 8% of the turnover was excessive and unreasonable which should be scaled down. Learned Departmental Representative submitted multiple deficiencies can be attributed to the assessee. Firstly, he submitted, the assessee did not show any income in the return filed u/s 139 of the I. T. Act; but showed income of Rs.4,98,482/- in the return filed later u/s 148 of the I. T. Act. Thus, he submitted, by assessee’s own admission, income was not reported in return u/s 139 of the I. T. Act. Secondly, auditing of accounts was done by the assessee during assessment proceedings u/s 147 of the I. T. Act; which was beyond the prescribed time. Also, the assessee did not provide evidence for verification of purchases claimed by the assessee, the learned D.R. for Revenue submitted. In his rejoinder, the learned A.R. for the assessee fairly admitted that in view of the deficiencies on the part of the assessee, as pointed out, the present case required estimation of income. However, he once again submitted that Assessment Year:2019-20 14 the profit estimated by the Assessing Officer was excessive, which should be scaled down. Learned D.R. further submitted that the assessee purchased materials directly from the farmers and agriculturists and not through any intermediary, therefore, it is a reasonable conclusion that the assessee must have earned high profit. Therefore, he contended the profit estimated by the Assessing Officer, and upheld by learned CIT(A), cannot be said to be excessive or unreasonably high. He supported the order of the learned CIT(A) and the Assessing Officer and placed reliance on the contents of the order.
(E) Both sides have been heard. Materials on record have been perused. The controversy in the present case that is now required to be resolved is whether the estimation of income at 8% of the turnover is excessive and unreasonably high. Though the learned A.R. for the assessee contended accordingly, no material has been brought for consideration of the Bench to show that the assessed income was excessive or unreasonably high in the facts and circumstances of the present case. The orders passed by the Assessing Officer and the learned CIT(A) are found to be just and fair in the facts and circumstances of the case. As the appellant has failed to bring any material for consideration of the Bench to establish that the income assessed was excessive or unreasonably high, the impugned appellate order of the learned CIT(A) is upheld. Further, no case is made from the side of the appellant that he was not provided reasonable opportunity by the Assessing Officer or by the learned CIT(A). Accordingly, the aforesaid addition of Rs.35,14,175/- made by the Assessing Officer in the aforesaid assessment order is sustained. Thus, grounds 3, 4 and 5 of appeal are dismissed.
(F.1) In the result, the appeal is dismissed for statistical purposes.
(Order pronounced in the open court on 05/02/2025)