Tribunal overturns CIT(A) order, deems additions based on estimated profits unlawful. Proper evidence essential.

The Tribunal allowed the appeal filed by the assessee, overturning the order of the ld. CIT(A). It was held that additions based on estimated profits without rejecting audited accounts are unlawful. The assessing officer's addition was deemed improper as there was no evidence of undisclosed profit, leading to the deletion of the added amount. The Tribunal emphasized the necessity of proper evidence and adherence to legal principles in such cases.

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Issues involved:
The appeal filed by the assessee against the order of ld. CIT(A), NFAC dated 28.10.2021 passed u/s 250 of the I.T. Act relating to assessment year 2017-18.

Grounds of Appeal:
i. The ld. CIT(A) confirmed the addition of Rs. 10,13,922/- based on comparative loss with profit of last years without evidence.
ii. The ld. CIT(A) did not consider that the Assessing Officer never rejected the book result u/s 145(3) or detected any defects in the accounts.
iii. The ld. CIT(A) confirmed the addition without investigating the impact of opening a new shop on profit.
iv. The ld. CIT(A) held the explanation of low profit submitted by the appellant as unsatisfactory without proper evidence.
v. The appellant sought to file additional grounds of appeal.

Facts of the Case:
The assessee, a partnership firm, filed its return of income for the assessment year 2017-18 with disclosed income of Rs. 1,35,400. The case was selected for scrutiny, and the ld. AO calculated the book profit ratio based on previous years' data. The assessee's disclosed ratio was lower than the average turnover ratio of the preceding years.

Judgment:
The assessing officer made the addition without rejecting the books of accounts, which were duly audited. The Calcutta High Court precedent stated that gross profit cannot be estimated when books of accounts are not rejected. As there was no evidence of undisclosed profit and the addition was based on surmises, the Tribunal found the addition to be unlawful. The appeal was allowed, and the addition made by the assessing officer was deleted.

Conclusion:
The Tribunal set aside the order of ld. CIT(A) and allowed the appeal filed by the assessee, emphasizing the importance of proper evidence and adherence to legal principles in making additions based on estimated profits without rejecting audited accounts.

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