ITAT Upholds 8% Profit Estimation for AY 2015-16; Grants Partial Relief for AY 2020-21

ITAT Chennai dismissed the appeal for AY 2015-16, upholding 8% profit estimation, and partly allowed AY 2020-21 by taxing genuine contract receipts on a presumptive basis while denying unsubstantiated deductions for non-business income.

Thirumal Arun Mohan Dass has filed the present appeal in the ITAT Chennai, challenging two separate orders, both dated June 26, 2025, passed by the CIT(A)/NFAC Delhi. The orders are related to the Assessment Years (AY) 2015-16 and 2020-21.

For the Assessment Year (AY) 2015-16, the assessee did not file his Income Tax Return (ITR). The Assessing Officer (AO) noticed that for the considered AY, the assessee had deposited cash in his bank account and also received payments from various parties, against which TDS was deducted during the same period. This grabbed the attention of the tax authorities; hence, AO reopened the case and issued a notice against the assessee under Section 148 of the Act. In response to the notice, the assessee filed its ITR, declaring a total income of Rs. 2,153,864, where the assessee offered 6% of the total receipts as per Form 26AS as business income. The AO completed the assessment, estimating the total profit at 10% of gross receipts as per the TDS return.

The aggrieved assessee filed an appeal before CIT(A), wherein he argued that his profit should be 6%, based on historical audited financial statements. The CIT(A) restricted the addition made by the AO to 8% of profit, considering that in later years the assessee declared profit at 8% under presumptive taxation.

The assessee thereafter filed an appeal before the ITAT Chennai. The tribunal, after analysing the arguments of both sides, noted that in earlier years with proper books, the assessee declared profits around 6%, but in the following years without proper books, he consistently declared 8% under presumptive taxation. Since the assessee himself accepted 8% profit in later years and did not provide a strong basis to justify 6% for the year under appeal, the Tribunal upheld the CIT(A)’s decision. The appeal for AY 2015-16 was dismissed.

For the Assessment Year (AY) 2020-21, the assessee filed his income tax return (ITR), disclosing the total income of Rs. 24,25,500. During assessment, AO noticed that assessee declared its Rs. 12,10,509 (estimated at 8%) under head profits and gains from business or profession, LTGC of Rs. 4,50,754, Interest income of Rs. 1,33,722 and other receipts of Rs. 6,30,513. Some receipts exceeded Rs. 2 crore, so the assessee claimed deductions under Section 57 to bring the taxable profit to 8%. During the assessment of the return, the AO disallowed the deduction on the grounds that Section 57 is not allowed under presumptive taxation. When approached to the CIT(A), challenging the decision of the AO, the CIT(A) confirmed this disallowance.

The ITAT noted that receipts from Karnataka Road Development Corporation Limited were actually business income under contract payments and should be taxed on an 8% presumptive basis, not fully as other income. Receipts from LIC were not business income, and the deduction claimed was not substantiated. Therefore, the Tribunal allowed the claim for the Karnataka Road Development Corporation receipts but confirmed the disallowance for LIC receipts.

In conclusion to the above findings, the tribunal dismissed the assessee’s appeal for the Assessment Year (AY) 2015-16 and partly allowed the appeal for Assessment Year (AY) 2020-21, granting relief only for properly classified business receipts.