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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM
O R D E R Per Shamim Yahya, A. M.: This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-1, Thane (‘CIT(A)’ for short) dated 28.02.2018 and pertains to the assessment year (A.Y.) 2013-14.
The grounds of appeal
read as under :
1. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in dismissing the appeal.
2. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in dismissing the appeal without giving full and proper opportunity of being heard.
3. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in dismissing the appeal without appreciating fully and properly the facts of the case.
Shanti Odaya Nathan 4. On the facts and in the circumstances of the case and in law, the learned C.I.T(A) erred in approving the action of the learned A.O. in estimating the income at Rs. 23,79,232/- as against declared income Rs.4,75,250/-.
Brief facts of the case that in the course of assessment the Assessing Officer (A.O.) asked the assessee to explain a reduction in the profit as compared to the previous year. In absence of explanation, the A.O. made an adhoc addition @ 1% of the profit at Rs.4,75,250/-.
Upon assessee's appeal, the ld. CIT(A) noted that assessee's submission that proper explanation was given to the assessing officer for the reduction in profit. However, the ld. CIT(A) proceeded to confirm the addition by referring to and other firm profited year.
Against the above order, the assessee is in appeal before the ITAT.
I have heard the ld. Departmental Representative (‘ld. DR' for short). None appeared on behalf of the assessee despite notice.
Upon careful consideration I find that assessing officer has made the addition on ad hoc basis. He has noted that since there is a reduction in the rate of profit as compared to previous year, profit needs to be estimated on an ad hoc basis. Despite the assessee furnishing some explanation, the A.O. has conveniently overlooked it. As held by Hon’ble Punjab & Haryana High Court in the case of Pandit Bros. vs. CIT [1954] 26 ITR 159 (P & H) a reduction in profit rate can give rise to further investigation, it cannot be the sole reason for addition. In the background of aforesaid discussion and precedent, I set aside the orders of the authorities below and delete the addition.
Shanti Odaya Nathan 8. In the result, this appeal by the assessee stands allowed.