Hindustan Construction Vs ITO (ITAT Ranchi)
An 8% Profit Estimate Needs Reasons, Even When the Assessee Is Absent
Non-Compliance Did Not Cure an Unexplained Estimate
The Ranchi Bench of the Income Tax Appellate Tribunal restored an assessment to the AO after finding that a profit rate of 8% had been applied without explaining its rationale.
The disputed receipts amounted to ₹11,85,86,475, and the AO assessed income at ₹94,86,918. However, the Tribunal noticed contradictions concerning the assessee’s business activity and the description of the receipts. It also found that the AO had not independently investigated the source of those receipts.
Although the assessee had failed to participate effectively before the lower authorities and remained absent before the Tribunal, the Bench did not sustain the assessment merely on that account. It directed the AO to pass a fresh order, allowing the appeal for statistical purposes.
Information About Receipts Triggered Reopening
The assessee had not filed a return for AY 2014–15. The order describes its business as that of an exporter, importer and general order supplier.
Information available through AIR/CIB and NMS data indicated receipts of ₹11,85,86,475 during the relevant year.
The AO reopened the assessment under section 147 and issued a notice under section 148 on 26 March 2021, after recording reasons and obtaining the requisite approval. The order records that the notice was duly served.
Further statutory notices sought information, including particulars of fuel and lubricant charges, carriage and hire charges, and loading and unloading expenses.
The assessee made only partial compliance and did not furnish sufficient material to substantiate the expenditure recorded in its books.
Income Assessed at ₹94.87 Lakh
The AO completed the assessment under section 147 read with section 144B, determining total income at ₹94,86,918.
The assessment was defended on the ground that, despite several opportunities, the assessee had not produced adequate details establishing the genuineness of the expenses.
However, the Tribunal subsequently identified that the AO had adopted an 8% profit rate on the receipts without giving a reasoned basis for selecting that percentage.
The assessee appealed to the CIT(A), but the first appeal was dismissed by an order dated 21 January 2025, again because the assessee failed to provide the necessary explanation and supporting material concerning the entries in its books.
Delay Condoned Despite Revenue’s Objection
The Tribunal appeal was filed late. The assessee explained that delay in obtaining documents and financial hardship had prevented timely filing.
It also referred to payment of 20% of the disputed demand in March, presenting that payment as evidence of its bona fide intention to pursue the proceedings.
The Revenue opposed condonation. Nevertheless, the Tribunal found sufficient reasons and admitted the appeal.
The order contains differing references to the delay—98 days in its opening description and 109 days in the explanation reproduced thereafter. The Tribunal condoned the delay without resolving that discrepancy.
The reference to the demand payment was part of the assessee’s explanation. The Tribunal did not pronounce any general ruling that such payment was a statutory prerequisite for filing or hearing an appeal.
Assessee Remained Absent Before the Tribunal
No representative appeared for the assessee at the hearing. The Tribunal also recorded that notices issued on various dates had not resulted in participation.
The Revenue argued that both lower authorities had passed their orders ex parte because the assessee neither appeared nor furnished the required documents. It therefore requested dismissal of the appeal.
The Tribunal acknowledged the non-compliance but proceeded to examine the assessment record. That examination disclosed deficiencies in the basis of the estimate itself.
Business Description, Receipt Source and Profit Rate Needed Examination
The Tribunal found contradictions between the nature of the business and the contract receipts attributed to the assessee.
It further observed that the AO had not made an independent enquiry into where the ₹11.85 crore of receipts came from. Nor had he explained why an 8% profit rate was appropriate.
These shortcomings persuaded the Bench to restore the matter to the AO for a fresh order.
The Tribunal did not prescribe an alternative profit percentage, determine the correct business classification or accept the claimed expenses. Those matters remained for examination in the restored proceedings.
Author’s Comments
The useful principle emerging from this order is that the taxpayer’s non-compliance does not, by itself, supply the reasoning missing from an assessment.
Where income is estimated, the factual foundation still matters. The business activity, nature and source of receipts, and basis for the selected profit rate require examination. Here, the Tribunal found those elements insufficiently addressed.
At the same time, this decision should not be described as holding that 8% was inherently excessive or legally impermissible. The objection was to adopting that rate without an explained rationale on the facts before the Bench.
Nor does the remand establish that the expenses were genuine. The assessee must now produce the documents that were missing earlier and explain the receipt stream and business operations coherently.
The order offers an opportunity to obtain a properly examined assessment. It provides relief against an unsupported estimate, while leaving the correct taxable income to be determined afresh.
FULL TEXT OF THE ORDER OF ITAT RANCHI
1. This appeal by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi, [in short, the ld. CIT(A)] dated 21/01/2025 for the Assessment Year (AY) 2014-15.
2. The appeal of the assessee is delayed by 98 days for which the assessee has filed application for condonation of delay mentioning the facts that the said order was received by the appellant on 21/01/2025. The appeal before the Hon’ble ITAT ought to have been filed on or before 22/03/2025. However, due to delay in obtaining documents & financial hardship the appeal could not be filed within the prescribed time limit. The delay in filing the appeal is 109 days. The said delay is neither intentional nor deliberate but was caused due to bona fide reasons beyond the control of the appellant. The assessee has deposited the mandatory 20% of the disputed tax demand as a precondition for the hearing of the stay application in the month of March itself, thereby demonstrating compliance with the statutory requirements and the bona fide intent to pursue the appeal in good faith. The delay is neither intentional nor deliberate. The delay is not an inordinate delay and prayed to condone the delay and admit the same for hearing.
3. On the other hand, the ld. Sr.DR has objected to condone the delay.
4. After giving due consideration to the contention raised by the assessee in the application for condonation of delay, we find sufficient reasons for the delay caused in filing the appeal before the Tribunal. Accordingly, we condone the delay in filing the appeal before the Tribunal and the appeal of the assessee is admitted for hearing.
5. Facts of the case, in brief, are that the assessee is a non0filer and has not filed return of income for the A.Y. 2014-15. The assessee is an exporter, importer and general order suppliers. On the basis of AIR/CIB (NMS data) information, it appears that the assessee has received an amount of ₹ 11,85,86,475/- during the year under consideration. The case of the assessee was reopened under Section 147 of the Income Tax Act, 1961 (in short, the Act) and notice under Section 148 of the Act was issued to the assessee on 26/03/2021 after recording the reasons and obtaining necessary approval/satisfaction from the competent authority. The notice was duly served to the assessee. Various other statutory notices were issued to the assessee requesting to submit various details including details with regard to fuel and lubricant charges, carriage and hire charges and loading and unloading expenses. In response of which, the assessee made part compliance of the notices issued by the Assessing Officer.
Finally, the Assessing Officer passed the assessment order under Section 147 read with section 144B of the Act by assessing total income of the assessee at ₹94,86,918/- on the ground that despite given several opportunities of being heard, the assessee did not provide the sufficient details to substantiate the genuineness of the expenses claimed in the books of account.
6. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the ld. CIT(A), who vide the impugned order dated 21/01/2025 dismissed the appeal of the assessee on the ground that the assessee did not make necessary compliance before him to explain the genuineness of entries made in the books of account.
7. Further aggrieved by the order of the ld. CIT(A), the assessee is in appeal before this Tribunal.
8. None appeared on behalf of the assessee but the ld. Sr.DR appeared and submitted that the both the lower authorities have passed their orders ex-parte because the assessee neither appeared nor filed the requisite documents and evidences as required by the revenue authorities and therefore, the appeal of the assessee may be dismissed.
9. We have considered the rival submissions. During the appellate proceedings before us, the assessee was given sufficient opportunity of being heard but none appeared in response to the notices issued by this Tribunal on various dates. However, we find that there is some contradictions in the nature of business of the assessee and the actual contract receipt shown by the assessee. The Assessing Officer has also not made independent inquiry to find out from where this contract receipt of ₹ 11,85,86,475/- was received and how profit rate of 8% was adopted by the Assessing Officer without given any rational behind that. Thus, the matter is restored back to the file of the Assessing Officer to pass fresh order on the basis of direction of the Bench.
10. In the result, this appeal of the assessee is allowed for statistical purpose.
Order pronounced in open court on 30/09/2026.
