KUMAR ENGINEERING WORKS,NADIAD V. THE ASSESSEMENT UNIT- JURISDICTIONAL AO- THE ITO, WARD-1, NADIAD

ITA 1298/AHD/2025

AI Insights

Kumar Engineering Works appealed against the order of the Commissioner of Income Tax (Appeals) which confirmed various additions and disallowances made by the Assessing Officer for the Assessment Year 2018-19. The main issues included the confirmation of additions to the returned income for non-prosecution, disallowance of penalty expenses, rejection of books of account, and incorrect treatment of interest income. The ITAT noted that the assessee had not adequately represented its case at the CIT(A) level due to internal firm issues following the death of a key partner. Consequently, the ITAT remanded the case back to the CIT(A) for a thorough re-examination.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 846513 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Ahmedabad
• Assessment Year: 2018-2019
• Appeal Filed On: 05-06-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND KUMBHARE
• Assessee Lawyers: JIMI PATEL
• Keywords: Business income; Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings
• Section: 37

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.1298/Ahd/2025 (Assessment Year: 2018-19) Kumar Engineering Works Kumar Estate, Opp. Shreyas Cinema, Pij Road, Nadiad, Gujarat 387001 [PAN : AAQFK3938H] Vs. The Assessment Unit - Jurisdictional Assessing Officer, Income Tax Officer, Ward-1, Nadiad - 387002 (Appellant) .. (Respondent) Appellant by : Shri Jimi Patel, A.R. Respondent by: Shri Arvind Kumbhare, Sr. DR Date of Hearing 18.03.2026 Date of Pronouncement 26.03.2026 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER:- This appeal is filed by the Assessee against the appellate order dated 23.08.2024 passed by the Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Delhi, relating to the Assessment Year 2018-19. 2. The assessee has raised the following grounds of appeal: 01. Ld. CIT(A) erred in law and facts in confirming additions of Rs. 45,72,010/- made to the returned income of the appellant for non- prosecution of appeal without appreciating facts and law of the case properly. 02. Ld. CIT(A) erred in law and on facts in confirming disallowance of Rs. 1,71,153/-being alleged penalty expenses u/s 37 of the Act, without appreciating facts and law of the case properly. Printed from counselvise.com ITA No.1298/Ahd/2025 (Assessment Year: 2018-19) Kumar Engineering Works - 2– 03. Ld. CIT(A) erred in law and on facts in confirming rejection of the books of account u/s 145(3) of the Act and thereby erred in confirming Rs.39,79,299/-being estimated net profit alleged to be have been earned by the appellant at rate of 8 percent of Net Profit on Turunover, without appreciating facts and law of the case properly. 04. Ld. CIT(A) erred in law and on facts in confirming the action of the assessing officer to treat interest of income Rs.4,21,560/- as Income From Other Sources as against Income From Business & Profession as declared by the appellant without appreciating facts and law of the case properly. 05. Ld. CIT(A) erred in law and on facts in dismissing ground of initiation of penalty proceedings u/s 271E for alleged violation of Section without 269T by terming it as premature, appreciating the facts and law of the case properly. 06. The appellant craves leave to add, amend or alter the grounds of appeal at the time of hearing, if need arise. 3. Briefly stated, the facts of the case are that the assessee filed the return of income on 23.03.2019 declaring a total income of Rs. 3,24,530/. The case was selected for complete scrutiny on the issues of claim of refund and contract receipts. During the course of the assessment proceedings, the Assessing Officer (AO) noticed that the assessee had claimed penalty expenses of Rs. 1,71,153/- in the Profit & Loss account. The assessee was asked to furnish justification for the same, as such expenses appeared to be non-allowable in nature. However, no response was received from the assessee, and therefore, the AO proceeded to add the said amount to the income of the assessee. Further, the AO observed that the assessee had claimed labour expenses of Rs. 45,46,850/- during the year under consideration. The AO also noted that the gross profit and net profit rates of the assessee had declined considerably as compared to the immediately preceding Printed from counselvise.com ITA No.1298/Ahd/2025 (Assessment Year: 2018-19) Kumar Engineering Works - 3– year. The assessee was asked to furnish justification for the same. Though the assessee furnished a reply, the same was not found satisfactory, as the AO noticed significant fluctuations in the expenses, which raised doubts regarding their correctness. The AO further noticed that during the year, the assessee had shown purchases of Rs. 7,30,03,451/-, against sales of Rs. 2,05,60,261/-, work receipts of Rs. 6,71,26,481/-, and closing stock of Rs. 1,07,650/-, which appeared abnormal and doubtful. In view of these discrepancies, the AO did not accept the net profit rate of 0.37% declared by the assessee as against 0.96% in the immediately preceding year. Accordingly, the AO issued a final show-cause notice dated 12.02.2021, requiring the assessee to furnish its reply by 16.02.2021. However, no reply was received. Therefore, the AO rejected the books of account by invoking the provisions of section 145(3) of the Income-tax Act, 1961, and estimated the net profit at Rs. 43,03,829/-. After allowing the returned income of Rs. 3,24,530/-, the AO made an addition of Rs. 39,79,299/- to the total income of the assessee. Further, the AO observed that the assessee had shown interest income of Rs. 4,21,560/-. As the assessee could not establish that the same constituted business income, the AO treated the same as income from other sources and added it to the total income. Accordingly, the assessment was completed determining the total income at Rs. 48,96,540/-, as against the returned income of Rs. 3,24,530/-. 4. Aggrieved by the Assessment Order, the assessee filed an appeal before the Ld. CIT(A), who dismissed the appeal of the assessee. Printed from counselvise.com ITA No.1298/Ahd/2025 (Assessment Year: 2018-19) Kumar Engineering Works - 4– 5. I observe that there is a delay of 217 days in filing the present appeal before the Tribunal. In the application for condonation of delay, the assessee submitted that the partner of the firm, Shri Mahendrabhai B. Patel, who was handling the income-tax matters at the relevant time, had expired, and no other person in the firm was aware of the status of the proceedings. Consequently, the appeal could not be filed within the prescribed time limit. In view of these reasons, the Ld. AR prayed for condonation of delay. The explanation furnished by the assessee appears to be genuine, and accordingly, the delay is condoned. 6. The Ld. DR relied upon the Assessment Order and the order of the Ld. CIT(A). 7. On perusal of the records, it is observed that the assessee was afforded several opportunities of hearing to furnish details, clarifications, and explanations in support of the grounds of appeal before the Ld. CIT(A). However, the assessee remained non-compliant and failed to furnish the requisite details or explanations before the Ld. CIT(A). Consequently, the Ld. CIT(A), based on the material available on record, upheld the action of the Assessing Officer and dismissed the appeal ex-parte. The Ld. Counsel for the assessee submitted before us that the assessee could not properly represent its case before the Ld. CIT(A) due to the circumstances mentioned earlier and prayed that the matter may be remanded to the file of the Ld. CIT(A) for adjudication on merits. I have considered the submissions and perused the material available on record. It is noted that the Ld. CIT(A) has not adjudicated Printed from counselvise.com ITA No.1298/Ahd/2025 (Assessment Year: 2018-19) Kumar Engineering Works - 5– the issues on merits. Since the matter has not been adjudicated on merits, I deem it appropriate to remand the matter to the file of the Ld. CIT(A) for proper adjudication after verifying all relevant details furnished by the assessee. Needless to say, the assessee shall be afforded due opportunity of being heard in accordance with the principles of natural justice. The assessee shall furnish all relevant documents, evidences, and bank details before the Revenue authorities and to comply with the notices issued by the Ld. CIT(A) without seeking unnecessary adjournments. Accordingly, the appeal of the assessee is allowed for statistical purposes. 8. In the result, the appeal of the assessee is allowed for statistical purposes. The order is pronounced in the open Court on 26.03.2026. Sd/- Sd/- Sd/- (TR SENTHIL KUMAR) ( SUCHITRA KAMBLE) JUDICIAL MEMBER JUDICIAL MEMBER (True Copy) Ahmedabad; Dated 26.03.2026 MV Printed from counselvise.com ITA No.1298/Ahd/2025 (Assessment Year: 2018-19) Kumar Engineering Works - 6– आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "