TaxTMI 
TaxTMI 
2026 (9) TMI 866
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....ferred to as 'NFAC'], dated 23.04.2026, which in turn arises out of an order passed by assessing officer u/s. 143(3) of the Act, dated 16.05.2021. 02. Brief facts of the case are that the assessee is engaged in the business of manufacturing and trading of edible oils. The assessee filed its return of income for the assessment year 2018-19 declaring a loss of Rs. 7,08,02,914/-. The case was selected for Limited Scrutiny under CASS for verification of the following issues; i. Default in deduction/deposit of TDS; and ii. Allowability of business loss on account of such default. During the course of assessment proceedings, notices under sections 143(2) and 142(1) of the Income-tax Act, 1961, were issued. In response ther....
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....ch is not a valid basis for estimating profits. It was further submitted that the assessee is engaged in the business of extraction and trading of edible oils, where profitability is highly dependent upon volatile market conditions. During the relevant year, production and sales declined substantially whereas the fixed overheads remained almost unchanged, resulting in a significant fall in the Gross Profit ratio. It was also submitted that the assessee had itself disallowed expenditure relating to TDS defaults in the return of income, which itself demonstrates that the assessee had suffered genuine business losses. The Ld. AR further contended that the addition under section 40(a)(ia) as well as the estimation of Gross Profit travelled beyo....
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....assessment order. It is well settled that before resorting to estimation of profits, the Assessing Officer must first reject the books of account by recording cogent reasons and identifying material defects therein. In the absence of such rejection, estimation of Gross Profit merely because the Gross Profit ratio has declined compared to earlier years is legally unsustainable. We also find that the assessee has satisfactorily explained the reasons for the decline in the Gross Profit ratio by placing reliance upon adverse market conditions, reduced production and sales, and the continued burden of fixed overheads. The subsequent events placed on record, namely, the taking over of the business assets by the secured creditor under the SARFAESI....