LATE MR. SHANKERLAL DOULATRAM RAMANI THROUGH LEGAL HEIR MR. RAJESH SHANKARLAL RAMANI,NAVI MUMBAI V. THE ASST. COMMISSIONER OF INCOME TAX,CIRCLE-1, KALYAN, KALYAN

ITA 5757/MUM/2024

AI Insights

The case involves an appeal by the legal heir of Late Mr. Shankerlal Doulatram Ramani against the order of the CIT(A), which confirmed the addition of Rs.19,99,860 to the income of the assessee for the assessment year 2017-18. The addition was initially made by the Assessing Officer (AO) due to non-response to notices and subsequent rejection of the book results under section 145(3) of the Income Tax Act, 1961. The assessee, a dealer in liquor under the name M/S Vintage Wines, provided audited accounts and other documents during the appellate proceedings, which were examined by the AO. Despite this, the CIT(A) upheld the addition based on estimated profits. The Tribunal found this estimation unjustifiable as it was not based on any material but on assumptions, leading to the quashing of the CIT(A)'s order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714528 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRABHADRA S. MAHAJAN
• Assessee Lawyers: SATYAPRAKASH SINGH

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, (JUDICIAL MEMBER) AND SHRI PRABHASH SHANKAR, (ACCOUNTANT MEMBER) I.T.A. No.5757/Mum/2024 Assessment Year: 2017-18 Late Mr. Shankerlal Doulatram Ramani (Through legal heir Mr. Rajesh Shankerlal Ramani) 1402, Progressive Highness CHS, Sector 16A, Sanpada, Navi Mumbai 400703 PAN: AEEPR1744Q Vs Assistant Commissioner of Income Tax, Circle 1, Kalyan 1st Floor, Mohan Plaza, Wayale Nagar, Khadakpada, Kalyan West 421301 (Appellant) (Respondent) Appellant by Shri. Satyaprakash Singh Respondent by Mr. Virabhadra S. Mahajan Sr. DR Date of Hearing 07.07.2025 Date of Pronouncement 04.08.2025 ORDER Per: SHRI. SANDEEP GOSAIN, J.M.: The present appeal filed by the assessee arises out of final assessment order passed by National Faceless Appeal Centre (NFAC), Delhi dated 16/10/2024 for assessment year 2017-18 on following grounds of appeal: “Grounds: 1. The order dated 16/10/2024 bearing No. ITBA/NFAC/S/250/2024- 25/1069704382[1] passed by the Hon'ble CIT[A], NFAC, Delhi, is excessive, unreasonable, arbitrary, against the provisions of Income Tax Act, 1961 and therefore liable to be quashed. Printed from counselvise.com 2 ITA No. 5757/Mum/2024 AY: 2017-18 Late Mr. Shankerlal Doulatram Ramani 2. On facts and circumstances of the case and in law, the Honourable C.I.T.(A) has erred in confirming the addition of Rs.19,99,860/- made by the Assessing Officer on account of estimation of net profit @3% of the turnover of the Appellant. 3. The appellant craves to alter, add, delete, substitute, or modify and other grounds of appeal.” 2. The only effective Ground raised by the assessee relates to challenging the order of Ld. CIT(A) in confirming the additions made by the AO on account of estimation of net profit, at the rate of 3% of the turnover of the assessee. 3. We have heard the counsel for both the parties. Perused the material placed on record and orders passed by the revenue authority’s. 4. From the records, we noticed that assessee is a dealer of liquor and running his business under the name and style of M/S. Vintage Wines and during the year under consideration the assessee has shown gross profit @ 10.11% of total turnover and after claiming various expenses, the assessee has shown net profit @ 1.72% of the total turnover. Since the assessee could not respond to several notices served upon him by the AO therefore, book result of the assessee u/s.145(3) of the Act, was rejected and net profit estimating @ 3% of the turnover was added to the income of the assessee. 5. However, during the appellate proceedings before Ld. CIT, assessee filed required documents and submissions which were forwarded to the AO for seeking remand report and consequently, Printed from counselvise.com 3 ITA No. 5757/Mum/2024 AY: 2017-18 Late Mr. Shankerlal Doulatram Ramani the AO submitted his remand report and the relevant portion of the same is reproduced here in below: “During the remand proceedings, the assessee has submitted that the accounts are audited and filed audit report in form no 3CB & 3CD and financial P& L Account and balance sheet The assessee has also filed details of month wise sales & purchases, sales register, purchase register, ledger related to expenses and details of cash deposits. The assessee was engaged in the business of retail selling of liquor under the proprietary concern M/s Vintage Wines and M/s Bharat Wines during the year under consideration i e. for A. Y. 2017-18. During remand proceedings, books of accounts are examined. Purchase and expenditure vouchers are examined on test check basis, wherein, it is noticed that the major expenses incurred by the assessee was towards Local Body Taxes, License fee & remaining expenses are towards operational expenses like transport, salary etc. The challans paid towards local body taxes, licence fees were produced before this office for verification. The remaining operational expenses were also examined on test check basis wherein the same is found to be in order. Hence, as the books of accounts are audited u/s 44AB, the estimation of the profit by rejecting the books of accounts is not justifiable as the same could not be examined as there was no response from the assessee The assessee has also submitted the audited report of VAT and VAT returns in support of sales and purchases. Comparative figures of the gross profit and net profit for the A.Y. 2017- 18, 2016-17, 2015-16 and 2014-15 in r/o Vintage Wines & Bharat Wines are as under: - Printed from counselvise.com 4 ITA No. 5757/Mum/2024 AY: 2017-18 Late Mr. Shankerlal Doulatram Ramani Hence, the CIT(A) is requested to decide the same on merits of the case. 6. After having gone through the entire remand report, we found that during the appellate proceedings, the assessee had placed on Printed from counselvise.com 5 ITA No. 5757/Mum/2024 AY: 2017-18 Late Mr. Shankerlal Doulatram Ramani record all the required documents in the shape of books of accounts which were examined. Apart from this purchase and expenditure vouchers filed by the assessee were also examine and it was noticed by the AO that the major expenses incurred by the assessee were towards local body taxes, licence fee and are towards operational expenses like transport, salary etc. In order to, substantiate the said expenses the assessee had placed on record the challan paid towards local body, taxes, license fees and the same were duly verified and examined by the AO and it was found that the documents filed by the assessee and the accounts maintained are in order. It was also observed by the AO that the books of accounts of the assessee are audited u/s. 44AB of the Act and estimation of profit by rejecting the books of account while passing the order of assessment was found to be not justifiable. Apart from this assessee had also submitted audited report of VAT and VAT returns in support of sales and purchases therefore, during the remand proceedings, the AO after examining the comparative figures of the gross profit and the net profit in respect of assessee’s business had rightly concluded that the same are in order. 7. However, in spite of the entire exercise of examining and verification of the required documents by the AO, Still Ld. CIT(A), sustained addition by estimating net profit in absence of sales bills. In our view when once entire documents placed on record along with books of accounts and VAT records in the shape of audited report of VAT and VAT returns in support of sales and purchases and other documents which were duly examined and Printed from counselvise.com 6 ITA No. 5757/Mum/2024 AY: 2017-18 Late Mr. Shankerlal Doulatram Ramani verified by the AO and the AO was satisfied with the said Documents then in that eventuality, there was no occasion before the Ld. CIT(A) to make estimation. Thus, in our considered view the addition @ 3% is not based on any material and is only on the basis of assumptions and presumptions. Once the documents have already been placed on record by the assessee, therefore the question of making estimation by assumptions and presumptions has no place in law. Therefore, the additions sustained by Ld. CIT(A) stands quashed and the ground raised by the assessee is allowed. 8. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 04/08/2025 Sd/- Sd/- (PRABHASH SHANKAR) (SANDEEP GOSAIN) (ACCOUNTAMT MEMBER) (JUDICIAL MEMBER) Mumbai: Dated: 04/08/2025 Divya R. Nandgaonkar Stenographer Copy of the order forwarded to: (1) The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order (Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "