GURMEET TIMBER STORE,LUCKNOW V. ITO-4(3), LUCKNOW-NEW, LUCKNOW

ITA 24/LKW/2025

AI Insights

The case involves Gurmeet Timber Store, a firm engaged in the wholesale timber business, which appealed against the orders of the Assessing Officer (AO) and the National Faceless Appeal Centre (NFAC). The AO had rejected the books of account under section 145(3) of the Income Tax Act, 1961, and determined the net profit as per section 44AD at 8% of the total credits in the bank accounts, treating it as income for the assessment year 2022-23. The NFAC upheld the AO's decision. The Tribunal found that the assessee was not given a proper opportunity to present its case and thus restored the matter to the AO for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 313052 (ITAT-LUCKNOW)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2022-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR RAJWANSHI; SUNIL KUMAR RAJWANSHI
• Assessee Lawyers: GURMEET SINGH WALIA; GURMEET SINGH WALIA
• Section: 44AD; 139

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, LUCKNOW BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.24/LKW/2025 Assessment Year: 2022-23 Gurmeet Timber Store 12A, Aishbagh Road Rajendra Nagar Lucknow v. The ITO-4(3) Lucknow - New TAN/PAN:AALFG7277L (Appellant) (Respondent) Appellant by: Shri Gurmeet Singh Walia, FCA Respondent by: Shri Sunil Kumar Rajwanshi, D.R. Date of hearing: 24 04 2025 Date of pronouncement: 28 04 2025 O R D E R This appeal has been preferred by the assessee against order dated 25.11.2024, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2022-23. 2. The brief facts of the case are that the assessee-firm is engaged in the business of wholesale of Timber. The assessee- firm filed its return of income for the year under consideration on 21.10.2022, declaring a total income of Rs.9,28,250/-. The case of the assessee was selected for scrutiny under Computer Assisted Selection System (CASS). The AO noticed from the bank account details submitted by the assessee that the assessee had total credits of Rs.4,11,55,965/- in his bank accounts maintained with Bank of India and Kotak Mahindra. The AO ITA No.24/LKW/2025 Page 2 of 7 also noticed that as per books of account submitted by the assessee, there were sales to the tune of Rs.3,73,78,579/-. As per AO, the sales of Rs.3,73,78,579/- shown by the assessee in the books of account did not commensurate with the total credit of Rs.4,11,55,965/- in the bank accounts and thus there was a difference of Rs.37,77,386/-. Since the assessee had not furnished the details of expenditure as sought for, he issued a show cause notice as to why 10% of the expenses should not be disallowed. However, the assessee did not file any reply. The AO accordingly rejected the books of account under section 145(3) of the Income Tax Act, 1961 (hereinafter called “the Act’) and the net profit of the assessee was determined as per provisions of section 44AD of the Act @ 8% of the total credit of Rs.4,11,55,965/-, which came to Rs.32,92,477/- and the same was treated as income of the assessee for the year under consideration. The AO, after reducing the income of Rs.9,28,250/- as declared by the assessee from Rs.32,92,477/-, (which came to Rs.23,64,227/-), added the same to the total income of the assessee. The AO completed the assessment under section 143 read with section 144B of the Act, computing the income of the assessee as under: Income as per return u/s. 139 of the Act : Rs.9,28,250/- Addition u/s. 44AD of the Act : Rs.23,64,227/- ITA No.24/LKW/2025 Page 3 of 7 Total income : Rs.32,92,477/- 2.1 The AO also initiated penalty proceedings under sections 270A, 271A and 272A(1)(d) of the Act, separately. 3. Aggrieved, the assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee. 4. Now, the assessee has approached this Tribunal challenging the orders of the AO as well as the NFAC by raising the following grounds of appeal: 1. The Commissioner of Income Tax (Appeals) has not passed a speaking order in the case of the appellant. 2. The Commissioner of Income Tax (Appeals) hasn't considered any of the submissions made by the appellant during the course of the appeal. 3. The Commissioner of Income Tax (Appeals) has wrongly confirmed the assessing officer's view of putting the onus of TCS on the assessee firm and has wrongly held that as a reason for rejecting the books of accounts. 4. The Commissioner of Income Tax (Appeals) has erred in law in confirming the assessing officer's wrong interpretation of the accounts shared by the parties from whom the appellant makes its purchases. 5. The Commissioner of Income Tax (Appeals) has erred in law in confirming the assessing officer's wrong interpretation that all the credits in the bank account relate to sales. ITA No.24/LKW/2025 Page 4 of 7 6. The Commissioner of Income Tax (Appeals) has erred in law in confirming the assessing officer's act of rejection of the books of accounts of the appellant. 7. The Commissioner of Income Tax (Appeals) has erred in law in confirming the assessing officer's wrong invocation of the provisions of sec 44AB without considering the fact that the same is not applicable in the appellant's case. 8. The Commissioner of Income Tax (Appeals) has erred in law in confirming the assessing officer's act of imposing a net profit rate of 8% without citing any other comparable case before imposing the rate. 9. Any other ground that may be taken up during the course of the appeal. 5. During the course of hearing before me, the Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the ld. CIT(A) had not considered the various submissions made by the assessee before him. Inviting my attention to paragraph 4.3 of the order of the ld. CIT(A), the Ld. A.R. submitted that the assessee had filed detailed written submissions dated 26.06.2024, 08.06.2024, 10.07.2024 and 12.07.2024 before the ld. CIT(A). However, the ld. CIT(A), without considering these detailed written submissions filed by the assessee, confirmed the order of the AO rejecting the books of account of the assessee under section 145(3) of the Act, invoking the provisions of section 44AB of the Act and making the addition ITA No.24/LKW/2025 Page 5 of 7 of Rs.23,64,227/- under section 44AD of the Act. The Ld. A.R. further submitted that the estimation of profit @8% by applying the provisions of section 44AD of the Act was applicable on the turnover below Rs.2 crores, whereas the assessee had a turnover of Rs.3,73,78,579/- in the year under consideration and hence provisions of section 44AD of the Act would not be applicable in the case of the assessee. He also submitted that the AO had not cited any comparable case while estimating and applying the net profit rate in the assessee’s case. The Ld. A.R. also invited my attention to the assessment orders passed by the AO for assessment years 2017-18 and 2018-19, which are placed at pages 10 to 14 of the paper book filed by the assessee. The Ld. A.R. submitted that in assessment year 2018-19, the returned income as declared by the assessee was accepted by the Department and in assessment year 2017-18, wherein the total turnover declared was Rs.2,00,76,822/-, minor disallowances on account of salary & wages, electricity expenses, travelling & conveyance expenses and provision for tax, were made and in these two assessment years, profits as declared by the assessee were accepted. The Ld. A.R. prayed that in view of these facts, the matter may be restored back to the file of the AO for deciding the matter afresh after providing reasonable opportunity of hearing to the assessee. ITA No.24/LKW/2025 Page 6 of 7 6. The Ld. Senior D.R. had no objection to the restoration of appeal to the file of the Assessing Officer. 7. I have heard both the parties and have also perused the material on record. Looking into the facts of this case, I am of the considered view that the Assessee deserves one more opportunity to present its case and, therefore, I restore this file to the Office of the Assessing Officer with the direction to provide one more opportunity to the Assessee to present its case and produce the necessary evidences, if any, in support of the transactions entered into by the Assessee. I also caution the Assessee to fully comply with the directions of the Assessing Officer in the set- aside proceedings when called upon to do so, failing which, the Assessing Officer would be at complete liberty to pass the order in accordance with law, based on the material available on record even if it is ex-parte qua the assessee. 8. In the result, the appeal of the assessee stands allowed for statistical purposes. Order pronounced in the open Court on 28/04/2025. Sd/- [SUDHANSHU SRIVASTAVA] JUDICIAL MEMBER DATED:28/04/2025 JJ: ITA No.24/LKW/2025 Page 7 of 7 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Assistant Registrar IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, LUCKNOW BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.24/LKW/2025 Assessment Year: 2022-23 Gurmeet Timber Store 12A, Aishbagh Road Rajendra Nagar Lucknow v. The ITO-4(3) Lucknow - New TAN/PAN:AALFG7277L (Appellant) (Respondent) Appellant by: Shri Gurmeet Singh Walia, FCA Respondent by: Shri Sunil Kumar Rajwanshi, D.R. Date of hearing: 24 04 2025 Date of pronouncement: 28 04 2025 O R D E R This appeal has been preferred by the assessee against order dated 25.11.2024, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2022-23. 2. The brief facts of the case are that the assessee-firm is engaged in the business of wholesale of Timber. The assessee- firm filed its return of income for the year under consideration on 21.10.2022, declaring a total income of Rs.9,28,250/-. The case of the assessee was selected for scrutiny under Computer Assisted Selection System (CASS). The AO noticed from the bank account details submitted by the assessee that the assessee had total credits of Rs.4,11,55,965/- in his bank accounts maintained with Bank of India and Kotak Mahindra. The AO ITA No.24/LKW/2025 Page 2 of 7 also noticed that as per books of account submitted by the assessee, there were sales to the tune of Rs.3,73,78,579/-. As per AO, the sales of Rs.3,73,78,579/- shown by the assessee in the books of account did not commensurate with the total credit of Rs.4,11,55,965/- in the bank accounts and thus there was a difference of Rs.37,77,386/-. Since the assessee had not furnished the details of expenditure as sought for, he issued a show cause notice as to why 10% of the expenses should not be disallowed. However, the assessee did not file any reply. The AO accordingly rejected the books of account under section 145(3) of the Income Tax Act, 1961 (hereinafter called “the Act’) and the net profit of the assessee was determined as per provisions of section 44AD of the Act @ 8% of the total credit of Rs.4,11,55,965/-, which came to Rs.32,92,477/- and the same was treated as income of the assessee for the year under consideration. The AO, after reducing the income of Rs.9,28,250/- as declared by the assessee from Rs.32,92,477/-, (which came to Rs.23,64,227/-), added the same to the total income of the assessee. The AO completed the assessment under section 143 read with section 144B of the Act, computing the income of the assessee as under: Income as per return u/s. 139 of the Act : Rs.9,28,250/- Addition u/s. 44AD of the Act : Rs.23,64,227/- ITA No.24/LKW/2025 Page 3 of 7 Total income : Rs.32,92,477/- 2.1 The AO also initiated penalty proceedings under sections 270A, 271A and 272A(1)(d) of the Act, separately. 3. Aggrieved, the assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee. 4. Now, the assessee has approached this Tribunal challenging the orders of the AO as well as the NFAC by raising the following grounds of appeal: 1. The Commissioner of Income Tax (Appeals) has not passed a speaking order in the case of the appellant. 2. The Commissioner of Income Tax (Appeals) hasn't considered any of the submissions made by the appellant during the course of the appeal. 3. The Commissioner of Income Tax (Appeals) has wrongly confirmed the assessing officer's view of putting the onus of TCS on the assessee firm and has wrongly held that as a reason for rejecting the books of accounts. 4. The Commissioner of Income Tax (Appeals) has erred in law in confirming the assessing officer's wrong interpretation of the accounts shared by the parties from whom the appellant makes its purchases. 5. The Commissioner of Income Tax (Appeals) has erred in law in confirming the assessing officer's wrong interpretation that all the credits in the bank account relate to sales. ITA No.24/LKW/2025 Page 4 of 7 6. The Commissioner of Income Tax (Appeals) has erred in law in confirming the assessing officer's act of rejection of the books of accounts of the appellant. 7. The Commissioner of Income Tax (Appeals) has erred in law in confirming the assessing officer's wrong invocation of the provisions of sec 44AB without considering the fact that the same is not applicable in the appellant's case. 8. The Commissioner of Income Tax (Appeals) has erred in law in confirming the assessing officer's act of imposing a net profit rate of 8% without citing any other comparable case before imposing the rate. 9. Any other ground that may be taken up during the course of the appeal. 5. During the course of hearing before me, the Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the ld. CIT(A) had not considered the various submissions made by the assessee before him. Inviting my attention to paragraph 4.3 of the order of the ld. CIT(A), the Ld. A.R. submitted that the assessee had filed detailed written submissions dated 26.06.2024, 08.06.2024, 10.07.2024 and 12.07.2024 before the ld. CIT(A). However, the ld. CIT(A), without considering these detailed written submissions filed by the assessee, confirmed the order of the AO rejecting the books of account of the assessee under section 145(3) of the Act, invoking the provisions of section 44AB of the Act and making the addition ITA No.24/LKW/2025 Page 5 of 7 of Rs.23,64,227/- under section 44AD of the Act. The Ld. A.R. further submitted that the estimation of profit @8% by applying the provisions of section 44AD of the Act was applicable on the turnover below Rs.2 crores, whereas the assessee had a turnover of Rs.3,73,78,579/- in the year under consideration and hence provisions of section 44AD of the Act would not be applicable in the case of the assessee. He also submitted that the AO had not cited any comparable case while estimating and applying the net profit rate in the assessee’s case. The Ld. A.R. also invited my attention to the assessment orders passed by the AO for assessment years 2017-18 and 2018-19, which are placed at pages 10 to 14 of the paper book filed by the assessee. The Ld. A.R. submitted that in assessment year 2018-19, the returned income as declared by the assessee was accepted by the Department and in assessment year 2017-18, wherein the total turnover declared was Rs.2,00,76,822/-, minor disallowances on account of salary & wages, electricity expenses, travelling & conveyance expenses and provision for tax, were made and in these two assessment years, profits as declared by the assessee were accepted. The Ld. A.R. prayed that in view of these facts, the matter may be restored back to the file of the AO for deciding the matter afresh after providing reasonable opportunity of hearing to the assessee. ITA No.24/LKW/2025 Page 6 of 7 6. The Ld. Senior D.R. had no objection to the restoration of appeal to the file of the Assessing Officer. 7. I have heard both the parties and have also perused the material on record. Looking into the facts of this case, I am of the considered view that the Assessee deserves one more opportunity to present its case and, therefore, I restore this file to the Office of the Assessing Officer with the direction to provide one more opportunity to the Assessee to present its case and produce the necessary evidences, if any, in support of the transactions entered into by the Assessee. I also caution the Assessee to fully comply with the directions of the Assessing Officer in the set- aside proceedings when called upon to do so, failing which, the Assessing Officer would be at complete liberty to pass the order in accordance with law, based on the material available on record even if it is ex-parte qua the assessee. 8. In the result, the appeal of the assessee stands allowed for statistical purposes. Order pronounced in the open Court on 28/04/2025. Sd/- [SUDHANSHU SRIVASTAVA] JUDICIAL MEMBER DATED:28/04/2025 JJ: ITA No.24/LKW/2025 Page 7 of 7 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Assistant Registrar "