2022 (2) TMI 380 - AT - Income Tax

Tribunal remands Gross Profit assessment, partly allows appeal

Shri Ranjitsinh K. Rathod Versus The Income Tax Officer, Ward-4 Mehsana

The Tribunal upheld the validity of the notice issued under Section 148, remanded the assessment of Gross Profit back to the Assessing Officer for proper ... Reopening of assessment u/s 147 - G.P. addition after applying G.P. @ 9.5% on a sum being cash deposit in Bank account - HELD THAT:- The reasons recorded on 21.03.2016 has categorically mentioned that R.K. Traders is a proprietary concern of the assessee which has business dealings with M/s. Wonder Packaging Industries as the business premises of M/s. Wonder Packaging Industries is used by the assessee (his proprietary firm). The assessee has filed return of income in the year 23.02.2011 but has not mentioned this particular issue/income in the said return related to the transactions. In fact, in respect of notice under Section 148 of the Act, the assessee opted that the said earlier return filed in February 2011 should be taken as it is. The reopening was done with the prior approval and proper satisfaction and the legal viable reasons. Therefore, the contention of the assessee that the notice issued under Section 148 of the Act itself is bad in law and is not sustainable. Quantification of the actual G.P - Quantification before the AO given by the assessee as well as the calculations done by the Assessing officer both seems to be unclear and the basis of G.P. has to be taken into account. No past historical figures were produced before us. Therefore, it will be appropriate to remand back this matter to the file of Assessing Officer for proper adjudication and quantification of the actual G.P. Needless to say the assessee be given opportunity of hearing by following principles of natural justice - Appeal of the assessee is partly allowed for statistical purposes. Issues:1. Validity of notice issued under Section 148 of the Income Tax Act, 19612. Addition of Gross Profit (G.P.) by the Assessing Officer3. Confirmation of G.P. addition by the CIT(A)Issue 1: Validity of notice issued under Section 148 of the Income Tax Act, 1961:The appeal was filed against the order passed by the CIT(A) for the Assessment Year 2009-10. The assessee challenged the notice issued under Section 148 dated 26th March, 2016, claiming it was bad in law as it was based on suspicion without verifying if the relevant facts were disclosed in the return. The Tribunal noted that the reasons recorded prior to issuing the notice mentioned the business dealings of the assessee's proprietary concern, which were not disclosed in the return filed earlier. The Tribunal held that the notice was issued with proper approval and satisfaction, dismissing the contention that it was bad in law.Issue 2: Addition of Gross Profit (G.P.) by the Assessing Officer:The Assessing Officer made an addition of Rs. 11,23,617 as Gross Profit at 9.5% on a specific sum. The assessee disputed this addition, arguing that the estimation of income was not proper and that the GP calculation by the Assessing Officer was unjust. The Tribunal observed that both the quantification provided by the assessee and the calculations by the Assessing Officer lacked clarity, and historical figures were not presented. Consequently, the Tribunal decided to remand the matter back to the Assessing Officer for proper adjudication and quantification of the actual Gross Profit, ensuring the assessee is given a fair hearing. Thus, the issue was partly allowed for statistical purposes.Issue 3: Confirmation of G.P. addition by the CIT(A):The CIT(A) confirmed the addition of Gross Profit at 9.5% on the cash deposit in the bank account and another sum not specified in the assessment order. The assessee contended that the CIT(A) erred in confirming these additions. The Tribunal, after considering the arguments, found that the basis for the Gross Profit calculation was unclear and required proper assessment. As a result, the Tribunal partly allowed the appeal for statistical purposes, remanding the matter back to the Assessing Officer for a fair determination of the Gross Profit.In conclusion, the Tribunal upheld the validity of the notice issued under Section 148, remanded the assessment of Gross Profit back to the Assessing Officer for proper quantification, and partly allowed the appeal against the confirmation of Gross Profit additions by the CIT(A) for statistical purposes.