Estimation of business profit from bank deposits challenged where commission agreement showed lower rate; remand ordered for fresh adjudication.

Dispute concerns estimation of business income by treating total bank credits as turnover and applying a 3% profit rate despite an agreement showing commission around 1% and admitted gross commission of 23%. The AOs adoption of a 3% profit rate without accounting for allowable business expenditures and while equating bank credits to turnover was found arbitrary. The appellate authority disposed ex parte for non-prosecution without addressing the core contention. Reliance on agreement and bank statements was accepted for determining source and nature of deposits, and the matter was remanded to the AO for fresh adjudication.

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Issues: (i) Whether the delay of 674 days in filing the appeal before the Tribunal should be condoned. (ii) Whether the addition made by the Assessing Officer by treating total bank deposits as turnover and applying 3% commission, upheld by the CIT(A) ex parte, was justified and requires interference.

Issue (i): Condonation of delay of 674 days in filing appeal before the Tribunal.

Analysis: The assessee, a retired CRPF personnel, submitted affidavit explaining loss of contact with previous tax consultant during COVID-19 period, non-representation before CIT(A) resulting in ex parte dismissal, change of tax consultant, and discovery of the CIT(A) order only later. The Tribunal weighed the explanation against the length of delay and the merits of the substantive dispute, including alleged arbitrary assessment by the Assessing Officer.

Conclusion: Delay of 674 days is condoned and the appeal is admitted, subject to a cost of Rs.10,000 to Prime Minister's National Relief Fund.

Issue (ii): Validity of addition by Assessing Officer estimating profit @3% on total bank deposits and upholding of that addition by CIT(A) ex parte.

Analysis: The Assessing Officer treated total bank deposits as turnover and applied an estimated profit rate of 3% without enquiry, despite the assessee showing commission-based income (1%) under agreement and being entitled to deductions for business expenses. The CIT(A) dismissed the appeal ex parte for non-prosecution without considering substantive evidence subsequently produced by the assessee, including the agreement and bank statements. The Tribunal found the assessment approach arbitrary and that the merits were not examined by the CIT(A).

Conclusion: The impugned order of the CIT(A) is set aside and the matter is remanded to the Assessing Officer for fresh adjudication after considering the assessee's evidence and providing opportunity of hearing.

Final Conclusion: The appeal is admitted (delay condoned) and allowed for statistical purposes by setting aside the CIT(A) order and remanding the case for fresh adjudication; consequential reliefs to follow the fresh adjudication.

Ratio Decidendi: Where an assessment is based on arbitrary estimation without inquiry and the appellate order is passed ex parte without adjudicating substantive evidence, the appellate tribunal may condone delay in the interest of justice, set aside the appellate order, and remand the matter for fresh adjudication after providing hearing.

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