Arvind Kumar Singhavi Vs ITO (ITAT Indore)
Summary: The Indore Bench of the Income Tax Appellate Tribunal partly allowed the assessee’s appeal for Assessment Year 2017-18 against the order of the CIT(A) dated 20.01.2025 arising from the assessment order dated 27.03.2023 passed under section 144 read with section 263 of the Income-tax Act, 1961.
The assessee, engaged in retail trading of cloth under the name and style M/s. Navrang Vastralaya, had originally been assessed under section 143(3). In the original assessment order dated 18.12.2019, the total income was assessed at Rs. 4,75,263/- against returned income of Rs. 4,38,550/-, with additions of Rs. 7,867/- towards telephone expenses and Rs. 28,846/- towards other expenses. The original order was subsequently revised by the PCIT under section 263 by order dated 02.03.2022.
Pursuant to the revision proceedings, the Assessing Officer passed a fresh assessment order dated 27.03.2023 under section 144 read with section 263, assessing total income at Rs. 10,78,950/- against returned income of Rs. 4,38,550/-. An addition of Rs. 10,45,394/- was made as estimated profit from business and aggregate disallowances of Rs. 33,557/- were made on various issues.
The principal dispute concerned the fall in the assessee’s gross profit ratio from 17.71% in FY 2015-16 to 12.62% in FY 2016-17. The assessee explained that turnover had increased substantially from Rs. 1,34,00,917/- in FY 2015-16 to Rs. 2,08,53,053/- in FY 2016-17 because of a change in business strategy, purchases from new vendors offering wider variety and attractive prices, and the decision to pursue higher turnover with a lower profit margin. The Assessing Officer rejected the explanation, rejected the books of account under section 145(3), estimated gross profit at 15% and recomputed business profit at Rs. 10,45,394/-.
