Ajaybhai Dineshbhai Bagdai Vs ITO (ITAT Rajkot)
Earlier-Year Treatment Supports 8% Profit Estimate: ITAT Restricts ₹2.87 Lakh Addition to ₹22,987
The Rajkot Bench of the Income Tax Appellate Tribunal (ITAT) restricted an addition of ₹2,87,345 to ₹22,987, representing an estimated profit of 8% of the disputed transactions. The Tribunal followed the Department’s treatment of similar transactions in the assessee’s earlier assessment years and directed taxation of the sustained amount at normal income-tax rates.
The assessee, Ajaybhai Dineshbhai Bagdai, challenged the CIT(A)/NFAC’s order dated 2 December 2025 arising from a reassessment completed under Section 147 of the Income-tax Act, 1961 on 24 September 2021.
The dispute concerned an addition under Section 68 relating to alleged cash transactions with M/s National Shroff & Co. and Ellora & Co.
Assessee sought consistency with earlier assessments
Before the Tribunal, the assessee’s representative relied on the Department’s approach in earlier years, when only the estimated profit element in similar transactions had been added.
He specifically referred to the assessment order for Assessment Year 2012-13, dated 26 November 2019. In that year, the Assessing Officer had examined alleged cash transactions of ₹6,12,850 through M/s National Shroff & Co. and added ₹49,030, computed at 8%, rather than the entire transaction value.
The assessee requested similar treatment for Assessment Year 2013-14.
Revenue agreed to 8% estimation
The Departmental Representative agreed that an estimated addition at 8% could be made, considering the approach adopted by the Assessing Officer in the assessee’s own case.
The Tribunal noted that the Department had accepted estimation of the profit element in Assessment Years 2011-12 and 2012-13. It therefore considered the same approach appropriate for the year under appeal.
Addition reduced to ₹22,987 at normal tax rates
Applying 8% to the disputed amount of ₹2,87,345, the Tribunal directed the Assessing Officer to sustain an addition of ₹22,987.
It expressly directed that the amount be taxed at the normal rate of income tax.
Accordingly, the appeal was partly allowed. The operative relief rested on profit estimation consistent with earlier assessments; the Tribunal did not separately adjudicate the assessee’s other objections concerning reopening, cross-examination or the applicability of Section 68.
FULL TEXT OF THE ITAT RAJKOT JUDGMENT/ORDER
Captioned appeal filed by the assessee, pertaining to Assessment Year 2013- 14, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi, dated 02.12.2025, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 of the Act, on 24.09.2021.
2. The grounds of appeal raised by the assessee are as follows:
1. Ld. CIT(A) erred in law as well as on facts in passing appellate order u/s. 250 of the Income Tax Act, 1961, which is bad in law and invalid.
2. Ld. CIT(A) erred in law as well as on facts in upholding the reopening of assessment under section 147, despite the fact that the reopening was based solely on third-party information without any independent application of mind by the Assessing Officer, rendering the assumption of jurisdiction invalid and bad in law.
3. Ld. CIT(A) failed to appreciate that the Assessing Officer did not dispose of the objections raised by the appellant against reopening by a separate speaking order, thereby vitiating the reassessment proceedings in law.
4. Ld. CIT(A) erred in confirming the assessment despite gross violation of principles of natural justice, inasmuch as the Assessing Officer relied upon alleged statements and material of third parties without supplying copies thereof to the appellant and without affording an effective opportunity of cross-examination.
5. Ld. CIT(A) erred in law in upholding the addition of Rs. 2,87,345/- under section 68 of the Act in respect of alleged cash transaction with M/s. National Shroff & Co. and Ellora & Co, ignoring the fundamental requirement that section 68 can be invoked only in respect of sums found credited in the books of account of the assessee, whereas in the present case no such credit existed in the appellants books.
6. Without prejudice, the learned CIT(A) erred in not restricting the addition to the profit element, despite the appellant is an eligible assessee within the meaning of provision of section 44AD of the Act and despite consistent departmental practice in earlier years.
7. Ld. CIT(A) failed to appreciate that on identical facts in A.Ys. 2011-12 and 2012-13, the Department itself accepted that only the profit element embedded in such transactions could be taxed, and in absence of any distinguishing facts, the impugned addition violates the principle of consistency and ratio laid down by Honorable Supreme Court.
8. Ld. CIT(A) erred in law as well as on facts in making addition on the assumption that the appellant might have filed appeal against the assessment order for the A.Y. 2011- 12 and 2012-13.
9. The impugned order of the learned CIT(A) is arbitrary, non-speaking and perverse, having failed to adjudicate the specific legal submissions raised by the appellant and hence liable to be set aside.
3. At the outset, the Ld. Counsel for the assessee, submitted that issue involved in this appeal, is squarely covered in favour of the assessee by the assessment order framed by the assessing officer, in the assessee’s case, in the previous year and in the subsequent year. The Ld. Counsel for the assessee, took me through the assessment order for assessment year 2012-13 in the assessee’s own case under consideration and submitted that the Assessing Officer made the estimated addition @ 8% vide order passed by the Assessing Officer u/s 143(3) r.w.s. 147 of the Act, vide order dated 26.11.2019. The findings of the assessing officer is reproduced below:
As per information available with this office, the assessee has made cash transaction of Rs.6,12,850/- through M/s. National Shroff & Co. during the under consideration. The assessee has made earlier submission without any supporting evidence regarding transaction made through M/s. National Shroff & Co. So it is presumed that the same was not booked by the assessee in his books of accounts. Thus the amount of Rs.6,12,850/- has been escaped from income. The amount of Rs.49,030/- (estimated 8% G.P. of Rs.6,12,850/- ) added to the total income of the assessee for the year under consideration. Therefore it is clear that the assessee has deliberately concealed particulars of the income, penalty proceedings u/s.271(1)(c) of the I.T. Act, 1961 has been initiated separately for concealment of particulars of income.
4. Therefore, Ld. Counsel for the assessee submitted that during the subsequent assessment proceedings and previous year assessment proceedings, the Assessing Officer made the estimated addition in the hands of the assessee. Therefore, this Tribunal may also make similar estimated addition in the hands of the assessee and accordingly the appeal of the assessee may be partly allowed.
5. On the other hand, learned, DR for the revenue, fairly agreed that an estimated addition at the rate of 8% may be made in the hands of the assessee, as the assessing officer took the view in the assessee’s case to make an estimated addition at the rate of 8%, therefore, estimated addition may be made in the hands of the assessee.
6. I have heard, both the parties and perused the material available on record. I note that Assessing Officer has himself accepted in the previous assessment years, that is, AYs. 2011-12 and in 2012-13, to make an estimated addition in the hands of the assessee and allowed the appeal of the assessee partly. Since, the Department himself has accepted the plea of the assessee and only estimated addition was made in the hands of the assessee. Therefore, considering these facts the estimated addition should be made in the assessee’s case under consideration for assessment year 2013- 14 also. Therefore, I direct the Assessing Officer to make the estimated addition @8% in the hands of the assessee of Rs.2,87,345/-, which comes to Rs.22,987/- (8% of Rs.2,87,345/-). Hence, I direct the Assessing Officer to make the addition in the hands of the assessee to the tune of Rs.22,987/- by following normal rate of income tax.
7. In the result, the appeal of the assessee is partly allowed, in above terms.
Order is pronounced in the open Court on 19/10/2026.
