DCIT Vs S. H. Mumtazuddin Times Pvt. Ltd. (ITAT Kolkata)
The ITAT Kolkata considered the Revenue’s appeal against the order of the CIT(A), which had reduced an addition made by the Assessing Officer (AO) from ₹3,41,61,192 to ₹64,05,223 by estimating the assessee’s net profit at 1.50% of turnover. The Revenue also challenged the admission of additional evidence under Rule 46A of the Income-tax Rules, 1962. The assessee filed an application under Rule 27 of the ITAT Rules, 1963, contending that even the reduced addition was unsustainable since the AO had estimated income without rejecting the books of account.
The Tribunal first held that the Rule 27 application was maintainable, as the assessee had raised a legal issue decided against it by the CIT(A), despite not filing a separate appeal.
The assessee had filed its original and revised returns for AY 2017-18, and the case was selected for scrutiny. During assessment proceedings, there was part compliance with notices issued under Sections 143(2) and 142(1). The AO completed the assessment under Section 143(3) by estimating the income at 8% of the total turnover, resulting in an addition of ₹3,41,61,192.
In appeal, the CIT(A) examined the average net profit rate for AYs 2014-15 to 2020-21, computed it at 1.06%, and applied a rate of 1.50%, thereby sustaining an addition of ₹64,05,223 instead of the addition made by the AO.
