Loading ITAT cases…
2 orders · Page 1 of 1
The Tribunal held that the onus is on the Assessing Officer to establish that a liability has ceased or remitted for Section 41(1) to apply. Since the assessee had not obtained any benefit by way of remission or cessation of liability, and the CIT(A)'s order was factually correct, the appeal was dismissed.
The Income Tax Appellate Tribunal (ITAT) found the AO's estimation of profit at 8% to be arbitrary, as it lacked supporting comparable cases or consideration of the assessee's past profit history. The ITAT emphasized that best judgment assessments under Section 144 must be based on sound reasoning and not be arbitrary. Therefore, the tribunal remitted the matter back to the AO for a fresh estimation of profit, directing the AO to consider the assessee's five-year average past profits or, alternatively, profit ratios of identical businesses in the same locality.