Estimation of 8% Solely Based on Assumptions Not Admissible under Law; ITAT Restores Appeal Before CIT(A) 

The Income Tax Appellate Tribunal (ITAT), Delhi, has granted relief to Kailash Chand Agarwal by deleting the impugned addition of Rs 43.56 lakh and remanding his case to the CIT(A) for fresh consideration.

The present case concerns an addition amounting to Rs 43.56 lakh made by the tax authorities on the assessee’s income declared for the assessment year 2020-21. The assessee claims the addition was merely made based on estimations.

The assessee, Kailash Chand Agarwal, claims that he is a commission agent of general merchant goods. His return for the AY 2020-21 was processed under Section 143(1) of the Income Tax Act. Later, tax authorities had noted that the assessee during the year in consideration had made certain cash deposits of about Rs 4.64 crore in his bank account maintained with the State Bank of India (SBI). In explanation of the same, the assessee claimed that he is a wholesale trader involved in trading goods and runs a store named ‘Mittal General Store’. From wholesale trading of goods, he is able to earn a commission of about 1.50% to 2%.

In the return of income for the assessment year in question, the assessee had shown a commission of about 1.59% and about 1.60% last year. The assessee claims that the tax authorities completed the reassessment, estimating the total commission earned as 8% completely on presumptions, without any basis, which is explicitly unfair as per the law. The aggrieved assessee approached the CIT(A); however, the impugned addition was confirmed.

When the ITAT Delhi examined the entire case, it noted that when the case was taken before the lower appellate authority, i.e., CIT(A), it was not properly examined, and proceedings were passed ex parte, meaning the assessee was not granted a fair opportunity to represent his case. Considering these findings, the tribunal restored the assessee’s appeal before the CIT(A). The lower authorities have been directed to reconsider the case afresh, granting the assessee a reasonable opportunity to make possible submissions and thereafter issue a fair and reasoned order.

The assessee has been instructed to provide the concerned authority [CIT(A)] his current/operational email address within 30 days of receiving the present order. The assessee must respond to the CIT(A)’s notice without any negligence. Consequently, the assessee’s appeal was allowed for statistical purposes.