SARDAR IMTIYAZ PASHA,CHIKKABALLAPUR V. INCOME TAX OFFICER, WARD-1, , CHIKKABALLAPUR

ITA 274/BANG/2025

AI Insights

The case involves Sardar Imtiyaz Pasha, an individual engaged in the fish business, who appealed against the reassessment order for the assessment year 2014-15. The reassessment was based on the addition of Rs.20,86,690 as gross profit estimated by the AO, which was confirmed by the CIT(A). The assessee contested the addition and the lack of proper hearing opportunity, as multiple notices were issued in a short span, which he could not respond to. The Tribunal found that the CIT(A) had not provided a fair opportunity for the assessee to present his case and that the AO had incorrectly compared profit ratios across non-comparable years.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705542 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2014-2015
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REVENUE; GANESH R. GHALE; STANDING COUNSEL REVENUE
• Assessee Lawyers: H. GURUSWAMY; ITP; COMPARING NET PROFIT RATIOS OF SEVERAL YEARS. THIS IS NOT CORRECT; LD. AO
• Section: 148; 144

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH: BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT ITA No.274/Bang/2025 Assessment year: 2014-15 Sardar Imtiyaz Pasha, No.184, Chinnasandra, Chintamani, Chikkaballapur – 563 125. PAN: ABRPI 8191E Vs. The Income Tax Officer, Ward 1, Chikkaballapur. APPELLANT RESPONDENT Appellant by : Shri H. Guruswamy, ITP. Respondent by : Shri Ganesh R. Ghale, Standing Counsel for Revenue. Date of hearing : 09.06.2025 Date of Pronouncement : 04.07.2025 O R D E R 1. This appeal is filed by Sardar Imtiyaz Pasha (the assessee/appellant) for the assessment year 2014-15 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 02.1.2025 wherein the reassessment order passed u/s. 144 r.w.s. 147 r.w.s. 144B of the Income-tax Act, 1961 [the Act] by the Assessment Unit dated 18.5.2023 was dismissed. ITA No.274/Bang/2025 Page 2 of 6 2. The assessee is aggrieved and is in appeal before me. The challenge is to the addition confirmed by the ld. CIT(A) of Rs.20,86,690 being gross profit estimated by the ld. AO. The grievance is also that the ld. CIT(A) has not granted proper opportunity of hearing, but issued 3 notices for hearing within 19 days. These notices could not be replied by the assessee. So, assessee did not get proper opportunity of hearing. 3. The brief facts of the case is that assessee is an individual engaged in fish business and filed original return of income on 31.3.2016 declaring total income of Rs.8,19,530. It was found that assessee has deposited cash of Rs.5,59,00,000 in various bank accounts. As per information and enquiry it was found that assessee is in the business of trading of live fish. He purchases fishes in smaller quantity from fishermen and then transport to different places. From these different places, cash is deposited in the bank account of assessee of sale proceeds. This sale proceeds is Rs.5.59 crores. Therefore, an order u/s. 148A(d) was passed on 4.7.2022 and notice u/s. 148 was issued. The assessee also furnished reply to the various notices issued. The assessee also submitted copy of the bank account and cash book along with audit report. 4. The ld. AO found that the purchase register and sale register are without any details of the PAN of buyers and sellers. The total turnover of the assessee is Rs.11.79 crores, whereas the net profit is only Rs.8.84 lakhs. However, for AY 2022-23 the net profit shown by the assessee is 2.52%. Therefore the AO issued a show-cause notice ITA No.274/Bang/2025 Page 3 of 6 that why for this year also the gross profit of the assessee should not be taken at 2.52% of the turnover. Subsequently, addition of Rs.20,86,690 was made to the total income of the assessee on account of suppressed gross profit. The turnover of the assessee was found to be Rs.11.79 crores on which profit @ 2.52% was estimated amounting to Rs.29,70,880 and as assessee had already shown Net Profit of Rs.8,84,190, a sum of Rs.20,86,690 was added to the total income of the assessee and assessment order was passed on 18.5.2023. 5. The assessee aggrieved with the above assessment order preferred appeal before the ld. CIT(A), who issued 3 notices on 4.12.2024, 12.12.2024 & 23.12.2024 which were not complied with by the assessee and therefore the ld. CIT(A) proceeded to dispose of the appeal on merits of the case as per information available on record. Ultimately the ld. CIT(A) confirmed the action of the AO based on findings of the assessment order. 6. The assessee is aggrieved with the same and is in appeal before me. 7. The ld. AR submitted that 3 notice were issued by the ld. CIT(A) during one month through e-mail, which were not responded to by the assessee and therefore the order of the ld. CIT(A) confirming the addition is without providing proper opportunity of hearing. On the merits, it was submitted that the percentage of Net Profit in the business of the assessee for AY 2013-14 to 2021-22 was tabulated wherein the Net Profit was found to be 0.75% to 1.24%. The assessee during the course of hearing also stated that from AY 2020-21 onwards ITA No.274/Bang/2025 Page 4 of 6 the assessee has stopped the business of fishing. For AY 2020-21 & 2021-22 the Net Profit of the assessee is of 2.52%. Same was compared by the ld. AO and CIT(A) to confirm the addition. He also referred to the table wherein the turnover of fishing was comparatively huge whereas turnover of AY 2020-21 was very less. He referred to such table reproduced at page 4 of the appellate order of the ld. CIT(A). He submits if the earlier and subsequent assessment years profit is taken, then they are comparable. Therefore, the addition is wrongly made. 8. The ld. DR vehemently supported the order of the ld. CIT(A). 9. I have carefully considered the rival contentions and perused the orders of the ld. lower authorities. On appeal before the ld. CIT(A), admittedly, the ld. CIT(A) has issued notices to the assessee on 3 occasions in one month. Notices were issued on 4.12.2024, 12.12.2024 & 23.12.2024, all were issued in one month’s time giving very less time to respond. The ld. CIT(A) on each of the occasion gave only 7 days’ time. Therefore, naturally the assessee did not get proper opportunity of hearing. This too, when the appeal was filed on 10.6.2023, the first notice was issued on 4.12.2024 and last notice issued on 22.12.2024 and the appellate order was passed on 2.1.2025. Thus, effective appellate proceedings started on 4.12.2024 culminating into an appellate order on 2.1.2025. Further, on the merits, the ld. CIT(A) did not consider the chart submitted by the assessee which is as under:- ITA No.274/Bang/2025 Page 5 of 6 F.Y. Turnover G.P. Percentage of GP Net Profit Percentage of Net Profit 2013-14 11,78,92,062/- 1,88,39150/- 15.98 8,84,190/- 0.75 2014-15 8,04,29,665/- 1,23,37,950/- 15.34 7,64,081/- 0.95 2015-16 16,1561,416/- 3,21,10,253/- 19.87 12,34,263/- 0.76 2016-17 13,67,87,8911 2,69,16209/- 19.68 14,36,273/- 1.05 2017-18 7,51,23,148/- 1,50,21,556/- 20 8,90,222/- 1.05 2018-19 12,34,20,810/- 2,46,45850/- 19.97 15,29,149/- 1.24 2019-20 13,88,38,215/- 2,57,20,265/- 18.53 13,75,481/- 0.99 2020-21 2,98,69,803/- 80,36,253/- 26.9 6,52,585/- 2.18 2021-22 1,78,31,161/- 4,48,729/- NA 4,48,729/- 2.52 10. From the above chart it appears that for AY 2014-15 the profit ratio of the business of the assessee is 0.95 % , in earlier year i.e. AY 2013-14 it is 0.75 %, in subsequent year i.e. AY 2015-16 it is 0.76 %. Profit shown for all these three years shows comparable profit ratio. Therefore, when assessee shows that there is change in business of the assessee in 2021-22 and not of trading in fish, ld. AO should not have taken that year i.e. AY 2021-22 as comparable results. Even otherwise the case was selected for verifying deposit of cash in the bank account of the assessee and ld. AO determined the profits of the assessee by comparing net profit ratios of several years. This is not correct, ld. AO should have examined the sources of cash deposit and then decide the issue on merits. Thus the appeal needs to restored back to the file of the ld. AO and not ld. CIT (A). 11. In view of above facts, I restore whole appeal of the assessee back to the file of the ld. AO to examine the sources of cash deposit of Rs 5.59 crores in the bank account of the assessee, and thereafter after giving an ITA No.274/Bang/2025 Page 6 of 6 opportunity of hearing to the assessee, decide the issue on merits of the case. 12. In the result, the appeal by the assessee is allowed for statistical purposes. Pronounced in the open court on this 04th day of July, 2025. Sd/- (PRASHANT MAHARISHI) VICE PRESIDENT Bangalore, Dated, the 04th July 2025. . esai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. "