Bhavani Iyer Vs ITO (ITAT Mumbai)
ITAT Mumbai Accepts Audited Books, Restores Profit at 68.19% of Professional Receipts & Upholds Deletion of ₹2.5 Cr Investment Addition; Penalty u/s 271(1)(c) Remanded
Assessee, a scriptwriter with regular tax compliance history, faced a reopening u/s 147 on two grounds— (i) alleged unexplained investment of ₹2.50 crore in a Versova flat, & (ii) professional receipts of ₹1.09 crore treated as income without allowing any expenses due to ex-parte assessment.
Before CIT(A), additional evidence was admitted & a remand report obtained. CIT(A) deleted the ₹2.50 crore addition but estimated expenses at 40%, effectively taxing 85.30% of gross receipts. Both parties went in appeal.
1. Professional Income – Assessee Succeeds
ITAT noted that:
- Assessee maintained proper books, audited u/s 44AB.
- Profit as per books was ₹74,33,640 on receipts of ₹1.09 crore – 68.19% margin.
- Assessee had suo-moto disallowed ₹15,44,465 as personal expenses.
- AO’s remand report did not dispute the expenses.
- CIT(A) neither rejected the books nor gave any basis for estimating 40% expenses.
ITAT held that where books are not rejected, profits declared must be accepted. It restored the income at 68.19% of gross receipts & deleted CIT(A)’s arbitrary enhancement.
2. ₹2.50 Crore ‘Unexplained Investment’ – Revenue Fails
