Shamim Ahmad Vs ITO (ITAT Delhi)
ITAT Delhi allowed the assessee’s appeal for AY 2012-13 in Shamim Ahmad, quashing the entire reassessment u/s 147/148 where reopening was triggered solely on the ground of low net profit.
The AO reopened the case because the assessee, a livestock trader, declared NP @ 0.28% against 2% in comparable cases, and thereafter made an addition by estimating NP @ 2% on turnover of ₹19.53 crore. The Tribunal held that low profitability by itself is not tangible material and cannot constitute “reason to believe”. There was a complete absence of live nexus between any new material and the alleged escapement of income.
The Tribunal also noted that the CIT(A) relied on NP @ 2.75% sustained in AY 2014-15, but that very addition had already been deleted by ITAT in assessee’s own case. This further demolished the basis of reopening.
Holding the reasons to be invalid and unsustainable in law, the Bench quashed the notice u/s 148 and the reassessment order. Once reopening failed, merits became academic.
Result:
– Notice u/s 148 quashed
– Reassessment annulled
– Entire NP estimation deleted
– Appeal allowed in full
Low NP ≠ escapement. Without fresh tangible material, reopening on profit comparison alone is legally untenable.
FULL TEXT OF THE ORDER OF ITAT DELHI
