Facts of the Case

The assessee, Smt. Anita Devi, filed an appeal against the appellate order dated 28.11.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi for Assessment Year 2017-18. The assessment was completed under Section 147 read with Section 144B of the Income Tax Act, wherein the total income was assessed at ₹11,73,170 as against the returned income of ₹2,96,640.

The Assessing Officer made an addition of ₹8,76,530 by applying a presumptive net profit rate of 8% on alleged turnover, despite the assessee maintaining audited books of account under Section 44AB reflecting a net profit rate of 2.27%. The assessee’s appeal before the CIT(A) was dismissed, leading to the present appeal before the ITAT.

 Issues Involved

  1. Whether application of a presumptive net profit rate of 8% was justified without pointing out defects in audited books of account.
  2. Whether rejection of books of account without invoking Section 145(3) was valid.
  3. Whether assessment and appellate proceedings were vitiated due to lack of reasonable opportunity under the faceless assessment framework.

 Petitioner’s (Assessee’s) Arguments

The assessee contended that neither the Assessing Officer nor the CIT(A) provided reasonable opportunity of hearing. It was argued that the books of account were duly audited and no discrepancies were pointed out to justify rejection or application of a higher net profit rate. The assessee prayed for restoration of the matter for fresh adjudication after granting due opportunity.

 Respondent’s (Revenue’s) Arguments

The learned Departmental Representative did not object to the prayer for remand and left the matter to the discretion of the Tribunal.

 Court Order / Findings

The ITAT observed that reasonable opportunity had not been granted to the assessee either at the assessment stage or during appellate proceedings. Considering the submissions of both parties, the Tribunal set aside the impugned order of the CIT(A) and restored the matter relating to the addition of ₹8,76,530 to the file of the Assessing Officer.

The Assessing Officer was directed to pass a de novo assessment order on the specific issue in accordance with law after providing reasonable opportunity of being heard to the assessee. The appeal was partly allowed for statistical purposes.

 Important Clarification / Legal Principle

Application of presumptive taxation or higher net profit rates without pointing out defects in audited books of account and without granting reasonable opportunity violates principles of natural justice. Such assessments are liable to be set aside and remanded for fresh adjudication.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770871477_ANITADEVIRAUNIYARPANTNAGARVS.ASSESSMENTUNITINCOMETAXDEPARTMENTDELHI.pdf  

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