Amarlal Thakurdas Bathija Vs ACIT (ITAT Kolkata)
Income Tax Appellate Tribunal (ITAT) Kolkata partly allowed the appeal of Amarlal Thakurdas Bathija against an order of the Commissioner of Income Tax (Appeals) [CIT(A)]. Bathija’s appeal challenged additions made by the Assessing Officer (AO) for Assessment Year 2017-18, specifically ₹1.7 crore deemed unexplained credit and ₹49.52 lakh disallowed business expenses. The AO had passed an assessment order under Section 144 (best judgment assessment) due to Bathija’s alleged non-participation in the assessment proceedings.
Regarding the ₹1.7 crore addition, the AO stated it was deposited into Bathija’s bank account during the demonetization period and, as no explanation was provided, was being added to his income under Section 69A. Bathija’s counsel argued this amount was already declared under the Income Declaration Scheme (IDS) and presented documentation, including Form No. 1. The ITAT, noting the AO’s brief findings, remanded this issue back to the AO for verification against the IDS declaration and re-assessment of the bank account to determine if any unexplained funds remained.
Concerning the ₹49.52 lakh disallowance, the AO had compared the Profit & Loss accounts for the financial years ending March 31, 2016, and March 31, 2017. Observing an 8.63% increase in turnover for AY 2017-18, the AO applied this same percentage to allowable expenses, disallowing any expenditure exceeding this growth rate. The ITAT deemed this methodology improper. It emphasized that expenses cannot be arbitrarily restricted based on a fixed percentage increase in turnover without considering the actual business needs justifying the higher expenditure. The tribunal illustrated this with an example of Business Promotion Expenses, where a 29.64% increase was restricted to 8.63% by the AO. The ITAT ruled that the AO should have rejected the book results and estimated profits under Section 144 instead of selectively disallowing individual expense items. This disallowance was thus deemed unsustainable and deleted.
The ITAT also addressed a ₹27,072 addition, noting Bathija’s submission that he had already added back this expenditure, making the AO’s addition redundant. This matter was also remanded to the AO for verification and correction if a double addition had occurred. In conclusion, the ITAT partly allowed Bathija’s appeal, remanding the unexplained credit issue for re-assessment and deleting the disallowance of business expenses. The decision underscores the need for reasoned assessments based on evidence rather than arbitrary application of percentage increases and highlights the importance of considering explanations provided by the assessee.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
