Court orders CIT to reassess income & profit rate under Income Tax Act, AY 2020-2021

The court directed the CIT to reevaluate the assessed income and gross profit rate in a case challenging an order under Section 220(6) of the Income Tax Act for AY 2020-2021. The court instructed no coercive action against the petitioner pending the CIT's decision, allowing legal remedies if adverse. The petitioner's contentions on historical profit rates were to be considered, with the court emphasizing a fair assessment without bias. The writ petition was disposed of with instructions for parties to act on the court's order after digital signing.

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Issues:
Challenge to order under Section 220(6) of the Income Tax Act, 1961 for AY 2020-2021.

Analysis:
The writ petition challenges an order passed by the Assessing Officer (AO) under Section 220(6) of the Income Tax Act, 1961 for Assessment Year (AY) 2020-2021. The petitioner sought a stay of demand amounting to Rs.7,43,46,066/- and waiver of 20% of the demand. The AO scaled down the demand to 20% pending appeal with the CIT(A), requiring the petitioner to deposit Rs.1,48,69,213/- by a specified date. The demand arose from an assessment order dated 24.09.2022, where substantial purchases were questioned, leading to an increase in assessed income to Rs.7,46,03,080/- from the declared Rs.47,63,940/-. The AO disallowed purchases amounting to Rs.6,98,39,136/- under Section 69C as unexplained, based on alleged purchases from bogus entities and non-filers of tax returns.

The petitioner contended that the assessed income was inflated due to a high-pitched assessment and the gross profit rate applied (12.5%) was not consistent with historical figures. The petitioner argued that the historical gross profit rate of 1.06% should be considered. The court suggested the CIT to examine these aspects during the pending application, emphasizing the need to determine the correct gross profit rate for the petitioner. The court refrained from expressing a definitive opinion but directed the CIT to consider these factors without being influenced by previous observations.

The petitioner relied on various judgments to support their case. The court ordered that no coercive measures should be taken against the petitioner until the CIT disposes of the application within two weeks of receiving a copy of the judgment. If the CIT's decision is adverse, the petitioner has the liberty to seek appropriate legal remedies. Any adverse order will not be enforced for an additional two weeks to allow the petitioner to pursue further legal recourse. The writ petition was disposed of accordingly, with parties instructed to act based on the digitally signed copy of the order.

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