NALSONS INDIA,NOIDA vs. ITO WARD 5(2)(3), NOIDA
What did the Tribunal hold?
The Tribunal found that the CIT(A) had not adjudicated the appeal on its merits. Since the assessee claimed the benefit of Section 44AD in its return, the Tribunal set aside the CIT(A)'s order and restored the matter to the CIT(A) for a decision on merits after providing a proper opportunity of hearing.
What were the facts?
The assessee claimed the benefit of Section 44AD of the Income Tax Act, declaring a net profit of 8% on sales. The Assessing Officer (AO) disallowed this claim, computing net profit at 20% of sales, leading to a significant addition to the total income. The CIT(A) dismissed the assessee's appeal without considering the merits.
What were the issues?
Whether the assessee was eligible for the presumptive taxation scheme under Section 44AD, and whether the CIT(A) erred by dismissing the appeal without a decision on merits.
Which sections of the Income-tax Act were involved?
Section 44AD,Section 143(3),Section 40(b),Section 234B,Section 234C,Section 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH : SMC : DELHI
Before: SHRI KUL BHARAT
ORDER This appeal by the assessee pertaining to Assessment Year 2016-17 is filed against the order of the ld.CIT(A), National Faceless Appeal Centre, Delhi, dated 02nd June, 2023. The assessee has raised the following grounds of appeal:-
“1. That on the facts and circumstances of the case and in law, the Ld. Commissioner (Appeals) has erred in affirming the order of the Learned Assessing Officer (the “Ld. AO”) of assessing the total income of the Appellant under section 143(3) of the Act, for the subject assessment year at INR 9,39,530 as against the returned income of INR 54,160.
That on the facts and circumstances of the case and in law, the Ld. Commissioner (Appeals) has failed to appreciate that the Ld. AO has CBDT instruction number 20/205 dated 29 December 2015 for assessment of cases selected for Limited Scrutiny.
3. That on the facts and circumstances of the case and in law, the Ld. Commissioner (Appeals) has erred in affirming the act of the Ld. AO to deny the benefit of section 44AD of the Act and computing the net profit at 20% of sales as against the net profit of 8% on sales declared by the Appellant. 3.1. That on the facts and circumstances of the case and in law, the Ld. Commissioner (Appeals) and Ld. AO have failed to appreciate that conditions laid down to avail the benefit of section 44AD of the Act have been duly satisfied by the Appellant in the captioned assessment year. 3.2. That on the facts and circumstances of the case and in law, the Ld. AO has failed to appreciate that the Appellant had duly submitted the import details for the financial year 2015-16, however, the name of the Appellant in the software (Tally) of the consultant hired by the Appellant has been mentioned as ‘Nalsons India (Noida - 2014-15)'.
4. Without prejudice to above, that on the facts and circumstances of the case and in law, the Ld. AO has erred in making double addition to the extent of INR 54,160, firstly, income disclosed by the Appellant and again, while computing the 20% of net profit on sales by the Ld. AO.
5. Without prejudice to above, that on the facts and circumstances of the case and in law, the Ld. AO has erred in not allowing the deduction of remuneration of INR 3,00,000 payable to the partners under section 40(b) of the Act.
6. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying / charging interest under sections 234B and 234C of the Act.
That, on the facts and circumstances of the case, the Ld. AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act mechanically and without recording any adequate satisfaction for such initiation. Each of the above grounds are independent and without prejudice to the other grounds of appeal preferred by the Appellant. The Appellant prays for leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before, or at, the time of hearing of the appeal.”
2. The facts giving rise to the present appeal are that the assessee has filed its return of income declaring income at Rs.54,160/-. The case was taken up for scrutiny assessment and the AO made addition of Rs.8,85,370/- by disallowing the claim of the assessee regarding application of provisions of section 44AD of the Act. Aggrieved by this, the assessee preferred appeal before the CIT(A) who dismissed the appeal ex parte qua the assessee without adverting to the merits of the case.
Apropos the grounds of appeal, the ld. Counsel submitted that the assessee has claimed the benefit of section 44AD and it had duly reflected in the return of income. However, the AO rejected the claim purely on the basis that the assessee failed to claim the benefit in its return of income.
On the other hand, the ld. DR opposed the submissions of the assessee and supported the orders of the lower authorities.
I have heard the rival contentions and perused the material available on record. I find that the ld.CIT(A) has not given any finding on merit of the case. The case of the assessee is that it had claimed in the return of income the benefit of section 44AD. As per computation of income also the assessee has claimed income u/s 44AD. Therefore, looking to the totality of the facts, I set aside the impugned order and restore the matter to the file of the ld. CIT(A) to decide the same on merit, after providing adequate opportunity of hearing to the assessee. The grounds raised in this appeal are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes only.
More judgments on Section 44AD
- Mohammed Javed Bhati, Sikar vs Income Tax Officer, Ward 1, SikarITA 994/JPR/2025[2018-19]Status: Disposed21 Oct 2026AY 2018-19
- Rangoli Hotel, Mehsana vs DCIT, Circle, Gandhinagar, GandhiangarITA 2286/AHD/2026[2020-21]Status: Disposed21 Oct 2026AY 2020-21
- Ajaybhai Dineshbhai Bagdai, Near Central… vs The Income Tax Officer, Ward-1(2)(1), New…ITA 74/RJT/2026[2013-14]Status: Disposed19 Oct 2026AY 2013-14
- Sonu Jain, Agra vs ITO WD(1)(1)(2), AgraITA 671/AGR/2026[2024-25]Status: Disposed16 Oct 2026AY 2024-25
- Sarvjeet Singh Through Legal Heir Manjit… vs ITO Ward 1(1), AlwarITA 355/JPR/2025[2013-14]Status: Disposed16 Oct 2026AY 2013-14
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