Parvej Sheikh Vs ITO (ITAT Jaipur)
No Expense Claimed, No Expense Can Be Disallowed: ITAT Deletes CBEC Import Difference Where Business Income Was Offered Presumptively u/s 44AD
Summary: The Jaipur Bench of the Income Tax Appellate Tribunal has held that where business income is computed presumptively u/s 44AD by applying the prescribed percentage to turnover, a separate addition cannot be made by disallowing an alleged business expenditure because the assessee has not claimed any actual expenditure while computing taxable income.
The Tribunal accordingly deleted an addition of ₹4,53,222, representing the difference between import data available with CBEC and the figures reflected in the assessee’s presumptive return. The Tribunal also adopted a liberal approach in condoning delays caused by the death of the assessee’s consultant during the COVID-19 period and a subsequent change in professional counsel.
Difference in Import Figures Leads to Addition
The assessee had commenced the business of manufacturing e-rickshaws during AY 2018-19. His case was selected for scrutiny based on information received from CBEC regarding imports of ₹4,53,222.
The assessee had imported machinery from China valued at approximately ₹29.17 lakh and made payments of about ₹28.47 lakh after receiving a discount from the foreign vendor.
The assessee declared his business income on a presumptive basis u/s 44AD by applying the rate of 8% to his gross turnover. He did not prepare the computation by separately claiming deduction of each business expenditure.
Nevertheless, the AO noticed a difference of ₹4,53,222 between the import data available from CBEC and the figures disclosed by the assessee. Treating the difference as unexplained business expenditure, the AO made an addition of ₹4,53,222 while completing the assessment u/s 143(3).
Two Levels of Delay Explained
The litigation involved delay at two stages.
The appeal before the CIT(A) had been filed with a substantial delay of approximately two years. The assessee explained that after receiving the scrutiny notice, he handed over the assessment work and relevant documents to his consultant, Mr. Kanhiyalal Sharma.
During the COVID-19 period, the consultant passed away. The email address registered on the income-tax portal belonged to the consultant and not to the assessee. Consequently, subsequent notices and the assessment order were transmitted to the deceased consultant’s email address.
The assessee claimed that he remained unaware of the assessment order and the outstanding demand until the Department initiated recovery proceedings. Upon learning about the demand, he took steps to file the appeal before the CIT(A).
However, the CIT(A) refused to condone the delay and dismissed the appeal as not maintainable. The CIT(A) also proceeded to reject the assessee’s case on merits.
There was a further delay of 53 days in filing the appeal before the Tribunal. The assessee attributed this delay to a change of counsel and the time taken to obtain proper professional advice. He submitted that he was a layperson unfamiliar with appellate procedures and acted immediately after receiving proper guidance.
Substantial Justice Must Prevail Over Technical Delay
The Department opposed condonation and argued that the reasons furnished reflected laxity in pursuing the appellate remedies.
The Tribunal relied upon the Supreme Court’s decision in Collector, Land Acquisition, Anantnag v. Mst. Katiji, wherein it was held that the expression “sufficient cause” should receive a liberal construction to advance substantial justice. There is no presumption that a litigant deliberately delays filing an appeal, since a litigant ordinarily gains nothing by approaching the Court late.
The Tribunal found no material to suggest that the explanations offered by the assessee were false. The change of counsel constituted sufficient cause for the 53-day delay before the Tribunal.
Regarding the delay before the CIT(A), the Department could not controvert the fact that the registered email address belonged to the deceased consultant. The Tribunal found it reasonable to accept that the assessee remained unaware of the assessment proceedings and the consequential order during the COVID-19 period.
Accordingly, both delays were condoned, and the dispute was examined on merits.
Imports Represented Capital Goods
Before the CIT(A), the assessee had contended that the imports represented machinery or capital goods used for manufacturing e-rickshaws. Therefore, the import value did not constitute a revenue expenditure claimed in the profit & loss account which could be disallowed.
More importantly, the assessee argued that his business income had already been offered presumptively u/s 44AD. Once taxable profit was determined by applying 8% to turnover, individual expenses did not enter the computation.
The Tribunal accepted this contention.
Presumptive Income Leaves No Room for Expense Disallowance
The Tribunal observed that it was an admitted fact, recorded by the AO himself and reflected in the return, that the assessee had declared business profits u/s 44AD at 8% of gross turnover.
Under presumptive taxation, income is not calculated by deducting actual expenses from gross receipts. The statutory percentage itself represents the deemed taxable profit after taking into account the business expenditure ordinarily allowable under Sections 30 to 38.
Therefore, when the assessee had not claimed deduction of any particular import expenditure in computing his taxable income, there was no expenditure capable of being disallowed.
The difference between CBEC data and the figures in the return could not be added merely by describing it as unexplained business expenditure. For this reason alone, the Tribunal held that the addition of ₹4,53,222 was unsustainable and directed its deletion.
The assessee’s appeal was consequently allowed.
Author’s Comments
The ruling correctly distinguishes presumptive computation from regular computation based on books of account. Once profits are offered u/s 44AD by applying the statutory rate to turnover, the AO cannot reopen the assumed expenditure component and make item-wise disallowances as though the income had been computed under Sections 28 to 43C in the ordinary manner.
However, the principle should not be overstretched. Presumptive taxation does not provide immunity against an independent addition for an unexplained cash credit, unexplained investment or unrecorded asset where the statutory conditions of Sections 68 to 69D are independently established. Here, the AO treated the CBEC difference as an expense disallowance, although no such expense had been claimed.
The ruling also offers a humane approach to COVID-era procedural defaults. Death of the consultant, departmental communications being sent to his email address and the assessee’s lack of actual knowledge collectively constituted sufficient cause.
The legal principle is simple: where income is computed u/s 44AD without claiming actual expenditure, the Revenue cannot make a separate addition by disallowing an expenditure which never entered the computation of taxable income.
Cases Discussed
- Collector, Land Acquisition, Anantnag & Anr. v. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, SMC BENCH, JAIPUR
1. The present appeal has been filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “Ld. CIT(A)”), dated 06.08.2025 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2018-19.
2. The assessees appeal is delayed for filing by 53 days. An application for seeking condonation of delay has been filed by the assessee, which reads as under:-
“Subject: Application for Condonation of Delay in Filing Appeal under section 253 of the Income Tax Act, 1961
Ref.no.: In the case of PARVEJ SHEIKH for AY 2018-19
Respected Sir/Madam,
I, ParvejSheikh, respectfully submit this application seeking condonation of delay in filing the appeal before the Hon’ble ITAT, Jaipur against the order passed by the Ld. CIT(A) dated 06.08.2025, confirming the addition made by the Assessing Officer. The said appeal against the order of the CIT(A) should have been filed latest by 30.10.25 and there has been a delay of 53 days in filing this appeal.
In this regard, I most respectfully submit that the delay in filing the appeal was neither willful nor deliberate. The delay occurred due to change in our counsel and further seeking proper professional guidance from our current consultant. I, being a layman not aware about the procedural deadlines, missed the due date of filing the appeal to Hon’ble ITAT Bench, Jaipur.
However, upon receiving proper guidance from our current consultant and becoming aware about the due date of filing appeal has already passed, we immediately filed the appeal.
It ishumbly requested that the said delay was entirely inadvertent as well as unintentional without having any intention to jeopardize the interest of the revenue, hence requesting for condonation of delay and oblige.
I sincerely request the Hon’ble Tribunal to kindly take into consideration these bona fide circumstances and condone the delay in the interest of natural justice.
PRAYER
In the light of the above facts and circumstances, the appellant humbly prays that this Hon’ble Tribunal may kindly:
Condone the delay in filing the appeal.
Admit the appeal and hear it on merits.
Pass any other order as may be deemed just and proper in the interest of justice.”
3. We have heard the submissions of the Learned Authorised Representative of the assessee and have perused the contents of the application for condonation of delay. It has been submitted that the delay occurred due to a change in counsel/professional consultant and the consequent time taken by the assessee in obtaining proper professional advice regarding the appellate proceedings. It has further been submitted that the assessee is a layman and was not conversant with the procedural requirements and limitation for filing an appeal before the Tribunal. Immediately upon obtaining proper professional guidance and coming to know that the prescribed period had expired, the assessee took steps to file the appeal.
4. Ld. DR, on the other hand, vehemently opposed the condonation of delay contending that the reason brought out by the assessee reflected laxity on his part in pursuing the remedy of filing appeal and therefore the delay ought not to be condoned.
5. We have heard both the parties. The law governing condonation of delay is now well settled. The Hon’ble Supreme Court in Collector, Land Acquisition, Anantnag & Anr. v. Mst. Katiji&Ors.(1987) 167 ITR 471 (SC) laid down that the expression “sufficient cause” occurring in the Limitation Act should receive a liberal construction so as to advance substantial justice. The Court held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. The Court further observed that there is no presumption that delay is deliberate or occasioned on account of culpable negligence or mala fides and that ordinarily a litigant does not stand to benefit by lodging an appeal belatedly.
6. Considering the averments made by the assessee before us, we are of the view that the assessee has adduced sufficient cause for the delay in the filing of the present appeal before us. He has sufficiently demonstrated the delay to have occurred due to change of Counsel, which prevented him from acting forthwith to file appeal against the order of the Ld.CIT(A) in time. No infirmity/falsity in the facts have been pointed out by the Revenue. In view of the same we condone the delay of 53 days in the filing of the present appeal before us. Order was pronounced in the Open Court.
7. Taking up now the appeal for adjudication, brief facts are that an addition of Rs. 4,53,222/- was made to the income of the assessee by the Assessing Officer (AO) in the assessment framed u/s 143(3) of the Act on account of difference in the figure of imports as per CBEC data and the data filed by the assessee in his return of income filed on presumptive basis as per section 44AD of the Act.
8. On appeal, Ld. CIT(A) dismissed the appeal of the assessee both as being as not maintainable on account of the delay of about 2 years in filing the appeal before him not being condoned and even on merits of the case.
9. Aggrieved by the same, the assessee has come up before us and has raised the following grounds of appeal:-
“1. Under the facts and circumstances of the case, as well as in law, the Ld. CIT(A) has erred in upholding the addition of Rs.4,53,222/- u/s 37 of the Income Tax Act, 1961 made by AO by treating it as unexplained business expenditure without correctly appreciating the fact that the assessee offered income under section 44AD of the Income Tax Act 1961 and without examining the documentary evidences furnished by the assessee in support of the claim. Such addition being incorrect, invalid and arbitrary in nature hence deserves to be quashed in its entirety.
2. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has also erred in confirming the computation of the assessee’s total income by AO at ₹7,75,170/-. Such computation of total income being erroneous and completely unnatural hence deserves to be annulled.
3. That the appellant reserves the right to add/ alter/ modify/ deleted any or all grounds at any time before the hearing.”
10. We have heard both the parties and perused the material placed on record. Since the Ld. CIT(A)has dismissed the appeal of the assessee as not maintainable because of inordinate delay , besides dismissing it on merits also, it is imperative to first deal with the grounds raised by the assessee challenging the order of the Ld.CIT(A) holding the appeal as non maintainable.
11. Ld. Counsel for the assessee contended that during the course of hearing the assessee had explained the reason for delay before the Ld.CIT(A) and drew our attention to the submissions made to the Ld.CIT(A) placed at page no. 32-33 of the paper book as under:-
Brief facts of the Case:
Notice u/s 143(2) has been served to assessee for scrutiny for AY 2018-19 is on 28.09.2019. The assessee has started the business of manufacturing for E-rickshaw in AY 2018-19. For manufacturing of E-rickshaw. The case was selected for scrutiny for AY 2018-19 based on information received from CBEC data for import of Rs 4,53,222/-.
The assessee has purchased machinery from China worth Rs 29,16,903.66 and made payment to the chine’s vendor for Rs 28,47,227.50 on various dates after getting the discount from vendor.
Department has selected the case for scrutiny and served notice to the assessee on 28.09.2019. The assessees ended the notice to his consultant for compliance and proceedings with department by providing all the required records. On date 21.03.2020 there is lockdown implication by central government due to COVID-19. The assessee was in thought that he has submitted all the papers to the consultant and the same has been submitted with Ld. AO. During Covid lockdown the assessee’s consultant Mr. Kanhiyalal Sharma has passed away due to Covid-19. The e-mail id added in assessee ‘s profile was of MrKanhiya Lal Sharma. The department issued serval notices and passed order and sent copy of the same on assessee’s consultant email id. The assessee was not having any knowledge of the same that demand has been issued for AY 2018-19.
Now at the time of recovery proceedings assessee get to know about the pending demand for AY 2018-19. So we requesting you to kindly accept the appeal and consider the avoidance of the assessee for AY 2018-19.
Ground-wise Submission:
Ground 1: The Consultant of assessee during period of Covind-19 has passed away and assessee was not having any detail regarding scrutiny matter or demand. So kindly accept the delayed appeal.
Submission:
The case was selected for scrutiny for AY 2018-19 and notice has been served to assessee on 28.09.2019. The assessee has handed over all the required details and papers to his consultant CA Kanhiya Lal Sharma. The assessee has on regular basis provide details to him. As on 21.03.2020 there is lockdown has been implemented by central government due to COVID 19. During the lockdown period the assessee’s CA MrKanhiya Lal Sharma has been passed away due to COVID-19. The email id in assessee’s contact details at income tax portal was of MrKanhiyalal Sharma. Due to not having any communication to the assessee he was unable to know about the departments proceedings and various communication issued by Ld. AO.
The Ld AO has passed order based on information available to him as on 15.04.2021 and order has been sent to the CA’s id who has passed away. The income tax department has initiated the recovery proceeding for the demand amount and at that time assessee gets the knowledge about the assessment order and demand.
12. Referring to the above Ld. Counsel for the assessee contended that the delay occurred since the assessee had appointed a consultant to handle the appeal before the Ld.CIT(A) and to whom he regularly handed over all the required details and papers , but the said consultant in the meanwhile passed away and the email address for communication with the Revenue Department not being that of the assessee but of his consultant, he was completely unaware of the passing of the order by the Ld.CIT(A). That it was only when the notices for recovery of demand were issued to him that the assessee became aware of the passing of the order by the Ld.CIT(A). That hence the delay in the filing of appeal before us.
13. Ld. DR was unable to controvert the fact that the email address for communication was not of the assessee but that of his consultant, though he vehemently opposed the condonation of delay stating that the assessee had not adduced sufficient cause for the delay and the reasons given by the assessee demonstrated completely laxity on the part of the assessee in filing appeal.
14. We have heard in the light of the above submission, it is quite reasonable to believe that assessee was unaware of the status of the assessment proceedings since his consultant was died during the Covid period.
15. We find that the explanation furnished by the assessee constituted sufficient for explaining the delay and accordingly, we condone the delay in filing the appeal before the Ld. CIT(A).
16. On merits of the case, addition of Rs. 4,53,222/- was made to the income of the assessee on account of difference in the figure of imports as per CBEC data and the data filed by the assessee reflected in his presumptive business ITR. As per Revenue, no explanation of the same was offered by the assessee to the AO. Before the Ld. CIT(A),we have noted that the assessee contended that the imports made by him were of capital goods and therefore there was no question of making any disallowance of the value of imports. The assessee also pleaded that since admittedly the profits have been rendered to tax on presumptive basis estimating the same on the percentage specified in law @ 8% of the turnover in terms of section 44AD of the Act, there was no question of making any disallowance of expenses claimed by the assessee.
17. We find merit in this contention of the Ld. Counsel for the assessee. It is an admitted fact that assessee had rendered profits from his business to tax u/s. 44AD of the Act @ 8% of the gross turnover of the assessee. The AO noted the said facts in his order and the copy of the return income filed by the assessee also reflects the said facts. In the light of the said fact, when there is no claim of expenses made by the assessee for computing its income liable to tax, there is no question of any disallowance of expenses. The profits returned to tax having admittedly been computed on presumptive basis u/s 44AD of the Act, by applying a net profit rate to the turnover of the assessee and not calculated by deducting actual expenses against the gross turnover of the assessee, there is no occasion for making any disallowance of expenses for computing the income of the assessee, since the assessee has not made any claim of expenses. For this reason alone, the addition made in the hands of the assessee of Rs. 4,53,222/-is held to be not sustainable and is directed to be deleted.
18. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 15-09-2026
