Devendra Kumar Deshmukh Vs PCIT (ITAT Raipur)
No audit, low profit margin- AO’s acceptance of return without verification termed “erroneous & prejudicial” — Revision sustained – O’s Failure to Examine Deemed Erroneous Under Section 263; Low Profit, No Audit: ITAT Upholds PCIT’s Order Setting Aside Mechanical Assessment
Assessee, a liquor contractor & retailer, was awarded licence by the Chhattisgarh Excise Department for Kera Group, Janjgir District. Based on data from the Insight Portal, it was found that he had liquor purchases of ₹2.14 crore, cash deposits of ₹80.92 lakh, commission income of ₹1.15 lakh from Chhattisgarh Distilleries Ltd., & interest income of ₹6,540/-. Reassessment proceedings were initiated u/s 148A(d), & return was filed declaring income of ₹11,17,710. AO accepted the returned income without variation after limited inquiries.
PCIT, invoking revisional jurisdiction u/s 263, found the assessment order both erroneous & prejudicial to Revenue’s interest, citing:
1. Declared profit of ₹11,01,951 was below presumptive rate of 8% u/s 44AD.
2. On estimated 5% NP rate applicable for liquor trade, business income should be ₹21,98,512, causing under-assessment of ₹10,80,802 & tax shortfall of ₹3.33 lakh.
3. Turnover exceeded ₹1 crore; however, AO failed to initiate penalty u/s 271B for non-audit u/s 44AB.
Accordingly, PCIT set aside the assessment with directions to frame a fresh speaking order & to initiate penalty u/s 271B & 271F after proper inquiry.
