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2024 (8) TMI 822 - AT - Income TaxReopening of assessment - sudden dip in the profits as compared to the earlier year - AO observed that the net profit range is between 8.44% to 11.65% and computed average net profit percentage of three years which works out to @9.39% - AR argued CIT(A) has erred in sustaining the addition made by the AO overlooking the submissions made by the assessee in lieu of the notice issued on 06.04.2024 to file the reply on or before 12.04.2024. HELD THAT - AR has demonstrated the information and details filed before the CIT(A) on 12.04.2024, which is not disputed and was not considered by the CIT(A). AR submitted that the assessee in the F.Y. 2015-16 was engaged in the business of wholesale food items and therefore the profit margin based on the Turnover/volume will be lower and the AO comparing with the net profit rate of earlier years, where the assessee was engaged in the retail trade and the profit margin differs. AR submitted that the assessee has a good case on merits and shall substantiate with material evidences that the assessee s wholesale business profit margin is between 2% to 3%. Therefore, we considering the facts, circumstances and the principles of natural justice, shall provide with one more opportunity of hearing to the assessee to substantiate the case with evidences and information - Matter remitted to the file of the AO to adjudicate afresh - Appeal filed by the assessee is allowed for statistical purposes.
Issues:
1. Confirmation of order under section 147 r.w.s 144 and section 250 of the Act by CIT(A) NFAC. 2. Addition of Rs. 37,19,741/- by estimation of net profit. 3. Disallowance of Rs. 2,00,000/- under section 24(b) of the Act. Analysis: Issue 1: Confirmation of order under section 147 r.w.s 144 and section 250 of the Act by CIT(A) NFAC The appeal was filed against the order of the National Faceless Appeal Centre (NFAC), Delhi / CIT(A) passed under section 147 r.w.s 144 and section 250 of the Act. The appellant contended that the CIT(A) erred in confirming the order passed by the AO without considering the submissions made by the appellant. The appellant argued that the AO estimated the profit without valid reasons and failed to acknowledge that the financials were audited with no adverse observations. The Tribunal set aside the CIT(A)'s order, providing the appellant with another opportunity to present evidence and information, emphasizing the principles of natural justice. Issue 2: Addition of Rs. 37,19,741/- by estimation of net profit The AO added Rs. 37,19,741/- by estimating the net profit at 9.39% of turnover, based on the average of the last three years' net profit ratio. The appellant contested this addition, highlighting that the nature of the business changed over the years, making the comparison of net profit ratios inaccurate. The Tribunal acknowledged the appellant's arguments and remitted the disputed issues back to the AO for fresh adjudication, directing the AO to allow the appellant a fair opportunity to present evidence and cooperate in the process. Issue 3: Disallowance of Rs. 2,00,000/- under section 24(b) of the Act The CIT(A) disallowed Rs. 2,00,000/- under section 24(b) of the Act, stating that the appellant did not file any return to support the claim. However, the appellant argued that the claim was made in the filed returns under different sections. The Tribunal found merit in the appellant's contentions and directed the deletion of the disallowance, emphasizing the need for proper consideration of all filed returns and claims. In conclusion, the Tribunal allowed the appeal for statistical purposes, setting aside the CIT(A)'s order and providing the appellant with an opportunity to substantiate their case with evidence and information before the Assessing Officer.
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