Headstrong Ventures Vs ITO (ITAT Delhi)
The assessee, a partnership firm, filed an appeal before the Income Tax Appellate Tribunal (ITAT) against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, dated 07.06.2024, for Assessment Year 2017–18. The case originated from information received through the NMS portal indicating that the assessee had received a total of ₹1,18,05,785 from various parties under commission, brokerage, professional or technical service fees, and contractual receipts, but had not filed a return of income. The Assessing Officer (AO) issued a notice under Section 148 on 30.03.2021, after which the assessee filed a return on 15.03.2022 declaring income of ₹24,110. Subsequent notices under Section 142(1) were issued, but the assessee did not respond, prompting the AO to issue a show-cause notice. The assessee replied but failed to furnish essential documents, including the tax audit report and profit and loss account. As a result, the AO made an ad-hoc disallowance of 25% of aggregate expenses, adding back ₹30,45,150.
Before the CIT(A), the assessee claimed that bank statements, income computation, financial statements, audited balance sheet, and Form 26AS had been submitted. The CIT(A), after considering the submissions, restricted the disallowance to 15% of turnover, resulting in an addition of ₹18,27,088. The assessee appealed further, arguing lack of proper opportunity, but the Tribunal found that the CIT(A) had issued notice and received a reply, and thus due process was followed. On the substantive grounds, the Tribunal held that the assessee failed to provide documentary evidence to support expenses, leaving the authorities to estimate expenditure. However, it considered the earlier disallowances excessive and held that restricting the disallowance to 10% of turnover would be fair and reasonable. The appeal was partly allowed on this basis. The order was pronounced on 12 February 2025.
