Veeranam Thirumalai Vs ITO (ITAT Chennai)
In this case, the AO reopened the assessment due to cash deposits and estimated income at 8% of turnover, resulting in an addition of ₹22.98 lakh. The CIT(A) confirmed the addition ex-parte.
Before the ITAT, the assessee demonstrated that:
- A return was filed in response to notice u/s 148,
- Detailed records such as cash book, bank book, purchase and sales registers were submitted, and
- The AO wrongly ignored these records, treating them as pertaining to another year.
Crucially, the Tribunal referred to the profit trend table showing:
- Profit margins consistently in the range of 1% to 2% (average 1.55%),
- Typical business margin between 2% to 5%.
ITAT held:
- AO cannot arbitrarily estimate profit without considering books and evidence,
- Estimation at 8% was excessive and unrealistic, and
- Industry/business realities must be considered.
Accordingly, the Tribunal:
- Rejected 8% estimation,
- Directed AO to restrict profit estimation to 3%, and
- Partly allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short “CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) dated 09.10.2025 for Assessment Year (AY) 2019-20.
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