SUNILKUMAR PURSHOTTAMDAS THAKKAR,AHMEDABAD V. THE INCOME TAX OFFICER, WARD-2(1)(2) (PREVIOUSLY ITO, WARD-2(2)(5), AHMEDABAD

ITA 308/AHD/2024

AI Insights

This case involves an appeal by Sunilkumar Purshottamdas Thakkar against the order of the NFAC, which confirmed the additions made by the Assessing Officer (AO) for the assessment year 2011-12. The AO had reopened the assessment under section 147 and made significant additions to the income of the assessee by estimating the profit at 9.29% of sales, which the assessee contested as excessive. The Tribunal found that while the reopening of the assessment was valid, the estimation of profit should be based on the lower rate of 1.74% as per the audit report, rather than the higher rate applied by the AO.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 398220 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B.P. SRIVASTAVA
• Assessee Lawyers: PARIMALSINH B. PARMAR
• Keywords: Business income; Tax effect; Principle of natural justice
• Section: 147; 148; 142(1); 131; 40A(3)

Judgement Text

"THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before Dr. BRR Kumar, Vice President And Ms. Suchitra Kamble, Judicial Member Sunilkumar Purshottamdas Thakkar, B/403, Devnandan Altezza, Opp. Maruti-3, New C.G. Road, Chandkheda, Ahmedabad-38224 PAN: ABTPT2117K (Appellant) Vs The ITO, Ward-2(1)(2), Ahmedabad (Respondent) Assessee by: Shri Parimalsinh B. Parmar, A.R. Revenue by: Shri B.P. Srivastava, Sr. D.R. Date of hearing : 07-05-2025 Date of pronouncement : 04-06-2025 आदेश/ORDER Per Suchitra Kamble, Judicial Member: This is an appeal filed against the order dated 12-01- 2024 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2011-12. 2. The grounds of appeal are as under:- “1. The Ld. AO has erred in law and on facts of the case reopening the assessment u/s. 147 of the Act. Under the facts and circumstances of the case, the action of reopening is without jurisdiction and in not permissible either in law or on facts. ITA No. 308/Ahd/2024 Assessment Year 2011-12 I.T.A No. 308/Ahd/2024 Sunilkumar Purshottamdas Thakkar, A.Y. 2011-12 2 2. The Ld. CIT(A) has erred in law and on facts of the case in confirming an addition of Rs. 43,19,771/- made by the Ld. AO by estimating profit at the rate of 9.29%. 3. Alternatively and without prejudice, the estimated rate of profit of 9.29% is highly excessive and does not reflect the real income earned by the appellant. 4. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 5. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in levying interest u/s 234A/B/C/D of the Act. 6. The Appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. Total tax effect Rs. 12,95,931/-” 3. Notice u/s. 148 of the Act was issued on 21-03-2018 and served upon the assessee after having prior approval of Pr. CIT u/s. 151(1). In response to notice u/s. 148 of the Act, the assessee filed return of income declaring total income at Rs. 5,00,070/- on 22-02-2012. Notice u/s. 142(1) r.w.s. 129 of the Income Tax Act dated 13-07-2018 along with detailed questionnaire was issued and duly served. Again, notice u/s. 142(1) of the Act dated 09-08- 2018 was issued and served upon the assessee. In response to the notices, the assessee vide letter dated 12- 08-2018 made submissions to the Assessing Officer. The Assessing Officer issued show cause notice u/s. 143(2) dated 27-11-2018 thereby asking the assessee as to why the I.T.A No. 308/Ahd/2024 Sunilkumar Purshottamdas Thakkar, A.Y. 2011-12 3 expenditure of Rs. 04,80,493/- should not be disallowed and added to the income of the assessee in respect of cash payments to the person in a day exceeding Rs. 20,000/-. The daughter of the assessee attended the proceedings and submitted written submissions along with statement of bank account, copy of cash book and copy of audit report for assessment year 2011-12. Subsequently, a summon to the assessee u/s. 131 was issued and served upon to the assessee’s daughter. In response to the summons, the assessee attended on 14-12-2018 and statement u/s. 131 of the Act was recorded. While recording the statement, the assessee replied for question no. 14 regarding sales bills and purchase bills for the year under consideration that sales and purchase bills are flown in river and further reply that he was not aware that books of accounts i.e. sales and purchase bills are to be kept for records. The Assessing Officer observed from the purchase register submitted by the assessee, all the purchase of the assessee was in cash purchase and are more than Rs. 20,000/-. Therefore, the Assessing Officer held that there is contravention to section 40A(3) of the Income Tax Act, 1961 and rejected the reply of the assessee that all the purchase is from villagers. Thus, the Assessing Officer disallowed Rs. 4,58,48,365/- which was claimed to be expenditure for purchase which are more than 20,000/- and added the same to the total income of the assessee. 3.1 The Assessing Officer further noticed that while filing return of income in response to the notice u/s. 148 of the I.T.A No. 308/Ahd/2024 Sunilkumar Purshottamdas Thakkar, A.Y. 2011-12 4 Income Tax Act, the assessee filed sales turnover as Rs.54,99,148/-. Therefore, the books of accounts of the assessee was rejected u/s. 145(3) of the Act as the reply of question no. 17 of the assessee was on sales turnover as per audit report is Rs. 4,64,94,148/-. As the assessee has shown net profit of Rs. 5,10,844/- on sales of Rs. 54,99,148/- i.e. 9.29% of sales turnover, the estimated net profit of the assessee was considered to be Rs. 43,19,771/- i.e. 9.29% of the total sales as per audit report. Since the complete purchase of the assessee was disallowed in contravention to section 40A(3) of the Act, therefore, addition on estimated net profit (NP) of Rs. 43,19,771/- is not made separately to their total income of the assessee. 4. Aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The ld. A.R. submitted that the CIT(A) erred in confirming the addition of Rs. 43,19,771/- made by the assessment order by estimating the profit @ 9.29% as the estimated rate of profit of 9.29% is highly excessive and does not reflect real income earned by the assessee. The Assessing Officer further submitted that lower authorities have passed the orders without properly appreciating the facts and also ignored various submissions, explanations and information given by the assessee from time to time. The ld. A.R. submitted that the estimation of profit should have been @ 1.74 % rather than at a higher rate of 9.29%. I.T.A No. 308/Ahd/2024 Sunilkumar Purshottamdas Thakkar, A.Y. 2011-12 5 The ld. A.R pointed out page 68 of the paper book wherein the sales/gross receipts of business or profession was recorded as 54,99,148/- and page no. 92 where the net profit/turnover is recorded at Rs. 51,09,444/- and the same is coming in rate of 1.10%. 6. The ld. D.R. relied upon the assessment order and the order of the CIT(A). 7. We have heard both the parties and perused all the relevant material available on record. As regards ground no. 1 related to the reopening of the assessment u/s. 147, the reopening was valid and hence ground no. 1 is dismissed. As regards ground nos. 2 and 3 related to the alternate ground that estimation rate of profit of 9.29% being excessive, these submissions in respect of return filed by the assessee in response to notice u/s. 148 as well as the audit report which categorically mentions that gross profit/turnover is coming @ 1.74% and net profit/turnover is coming at 1.10%. These calculations at no point of time were disputed by the Assessing Officer and merely on the ground that turnover as per audit report is Rs. 4,64,99,148/- has been mistakenly taken as sales turnover of Rs. 54,99,148/- and treating the same as total turnover over while rejecting the books of accounts is not justified on the part of the Assessing Officer. The calculation of the assessee at page no. 92 of the paper book through its audit report was categorically mentioned the accounting details with calculations/gross profit/turnover is that of 1.74% and I.T.A No. 308/Ahd/2024 Sunilkumar Purshottamdas Thakkar, A.Y. 2011-12 6 therefore the Assessing Officer should have taken the same into account. Thus, the alternative plea of ground no. 3 of the assessee is allowed. As regards ground no. 2 and the rest of the grounds does not require adjudication and hence the same are dismissed. 8. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 04-06-2025 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 04/06/2025 आदेश क\u0006 \u0007\bत ल प अ\u000fे षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील\u0012य अ\u0013धकरण, अहमदाबाद "