" 1 आयकर अपीलीय अधिकरण, बेंगलुरू पीठ ें, बेंगलुरू INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE BENCH: SMC BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT ITA 2109/Bang/2026 (निर्धारण वर्ा/Assessment Year: 2020-21) PATIO NO 19, BRIGHT FARM, VARTHUR MAIN ROAD, WHITEFIELD, THUBARAHALLI, BENGALURU, BENGALURU-560066, KARNATAKA Vs. INCOME TAX OFFICER, WARD 4(2)(1), BMTC BUILDING, KORAMANGALA, BENGALURU BENGALURU-560095, KARNATAKA अपीलधर्थी Appellant प्रत्यर्थी Respondent Permanent Account Number of Assessee: AAKFP6249C अपीलधर्थी द्वारा/Appellant represented by: Shri. Suresh Muthukrishnan, CA प्रत्यर्थी द्वारा/Respondent represented by: Sri. Ganesh R Ghale, Standing Counsel for the Dept सुनवाई की तारीख / Date of conclusion of hearing: 27-Aug-2026 घोषणा की तारीख / Date of pronouncement: 28-Sep-2026 आदेश / ORDER PER SHRI PRASHANT MAHARISHI, VICE PRESIDENT 1. This appeal is filed by the Assessee against appellate order passed by the National faceless appeal Centre NFAC Delhi (the learned CIT – A) for assessment year 2020 – 21 on 17 March 2026 wherein the appeal filed by the assessee against the assessment of order passed under section 147 of the income tax act, 1961 (the act) dated 26th of March 2025 passed by the National faceless assessment unit, Delhi (the learned assessing officer was dismissed and therefore the assessee is in appeal before us. Printed from counselvise.com ITA 2109/BANG/2026 PATIO 2 2. The Assessee has raised the following grounds of appeal: 1. The order of the learned Assessing Officer and confirmed by the Learned Commissioner of Income-tax (Appeals), in so far as it is against the Appellant, is opposed to law, equity, natural justice, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned Authorities below erred in law and on facts in estimating the income of the appellant without rejecting the books of account as required under section 145(3) of the Act and without pointing out any specific defects or discrepancies therein, despite the appellant having maintained regular books of account duly supported by audited financial statements and a tax audit report. 3. The learned authorities below erred in law and on facts in invoking and applying section 44AD of the Act to estimate the appellant’s income at 8%, despite the appellant’s turnover exceeding INR 2 crores during the relevant previous year, thereby rendering the provisions of section 44AD inapplicable for Assessment Year 2020-21. 4. Without prejudice to the above, the learned Authorities below erred in law and on facts in not restricting the profit rate to 6%, in terms of the proviso to section 44AD(1) of the Act, under the facts and circumstances of the Appellant’s case. 5. The learned authorities below erred in law and on facts in levying interest u/s 234A and 234B, which being consequential in nature, is not leviable under the facts and circumstances of the Appellant’s case. 6. The appellant craves leave to add, alter, amend, or withdraw any of the above grounds at the time of hearing, as may be necessary. 7. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed, and Justice rendered. Printed from counselvise.com ITA 2109/BANG/2026 PATIO 3 3. Briefly, the assessee is a partnership firm engaged in providing interior services to corporate clients and supplying office furniture. It did not file its return of income for the relevant assessment year. Based on information concerning tax deducted at source and GST turnover, the learned Assessing Officer found that the assessee had undertaken transactions without filing a corresponding return. Accordingly, under the risk- management strategy, a notice under section 148 of the Income-tax Act, 1961, was issued on 28th March 2024. In response, the assessee filed its return on 29 June 2024, declaring total income of ₹ 1,575,530, and furnished the details sought. However, the learned Assessing Officer noted that the reasons for selecting the return for scrutiny remained unexplained and that the limitation deadline was approaching. No further opportunity was therefore granted, and an assessment order under section 144 of the Act determined total income at ₹ 3,034,651, recording an addition of ₹ 40,59,121 on account of presumptive profit under section 44AD. The learned Assessing Officer further observed that, despite reporting turnover of ₹ 37,933,177 and substantial business operations, the assessee had not furnished the tax audit report required under section 44AB when profit below 8% is declared and turnover falls within the prescribed audit threshold. The assessee reported gross profit of ₹ 4,564,673 and net profit of ₹ 1,575,533 after expenses. As documentary evidence supporting the computation of total income was not furnished, the learned Assessing Officer estimated profit at 8% of turnover under section 44AD, amounting to ₹ 3,034,654. Since the assessee had disclosed profit of ₹ 1,575,533, the difference of ₹ 1,459,121 was added to its total income. 4. Aggrieved by the assessment order, the assessee appealed to the learned CIT(A), contending that its books of account had been audited and that the learned Assessing Officer’s estimation of profit at 8% was therefore without merit. The learned CIT(A) upheld the assessment, observing that the assessee had not afforded the learned Assessing Officer an opportunity to examine the books of account. Consequently, the claim that the audited books and the reported results should be accepted was held to be without merit. The learned CIT(A) also noted that the assessee had not originally filed a return and did so only after receiving the notice under section 148. Finding no infirmity in the assessment order, the learned CIT(A) also rejected the assessee’s plea to adopt a 6% profit rate, holding that no basis had been shown for doing so. Printed from counselvise.com ITA 2109/BANG/2026 PATIO 4 5. Aggrieved by the appellate order, the assessee is before us. We have heard the rival submissions. The assessee filed an 86-page paper book containing copies of the notices issued by the learned Assessing Officer and the assessee’s responses. It was submitted that, in response to the letter dated 5 March 2025, the assessee furnished all the required details. Despite this, the learned Assessing Officer rejected the books of account and estimated profit at 8% of turnover. The assessee contended that, because its books were audited and had been furnished to the learned Assessing Officer, they could not be disregarded without justification and income could not be determined arbitrarily at 8% of turnover. It was therefore argued that both the learned CIT(A) and the learned Assessing Officer erred in adopting the 8% profit rate. The assessee further submitted that it is regularly assessed to income tax and that estimating its profit at 8% was incorrect. 6. The learned Departmental Representative strongly submitted that the assessee was a non- filer and that, upon receiving information, the learned Assessing Officer found that no return had been filed despite the substantial turnover. A notice under section 148 of the Income-tax Act was therefore issued. As the assessee did not furnish the required information or cooperate with the proceedings, the learned Assessing Officer determined profit at 8% of turnover. The learned Departmental Representative argued that audited books cannot be relied upon when they are not produced before the learned Assessing Officer, who was consequently required to estimate the assessee’s total income. It was further submitted that the learned Assessing Officer correctly applied section 44AD of the Act and estimated profit at 8% of total turnover, and that the learned CIT(A) rightly upheld this approach. 7. We have carefully considered the rival submissions and examined the orders of the lower authorities. The assessee is a partnership firm engaged in providing interior services to corporate clients and supplying office furniture. Although it did not originally file a return of income, it responded to the notice under section 148 by filing a return supported by the tax audit report required under section 44AB of the Income-tax Act. Against total turnover of ₹ 37,933,176, the assessee declared taxable income of ₹ 1,575,533. Admittedly, the learned Assessing Officer had no opportunity to examine the assessee’s books of account, Printed from counselvise.com ITA 2109/BANG/2026 PATIO 5 though those books were audited. In the absence of any identified defect in the books, estimating profit at 8% of total turnover cannot be sustained. The books may be rejected only if they disclose latent, patent, or glaring defects; had such defects been established, estimation at 8% might have been justified. Here, however, neither did the learned Assessing Officer examine the books nor did the assessee produce them during the assessment proceedings, despite filing audited annual accounts. In the interests of justice, we therefore restore the entire issue to the file of the learned Assessing Officer. The assessee shall substantiate its books of account with evidence, and the learned Assessing Officer may examine them, conduct the necessary inquiry, and assess total income in accordance with law. If the books correctly reflect the assessee’s income, the reported results shall be accepted. Grounds Nos. 2 and 3 are accordingly allowed for statistical purposes. 8. The assessee’s alternative proposal to estimate income at 6% of annual turnover is also unacceptable, as doing so would amount to determining total income without examining the audited books of account. Ground No. 4 is therefore dismissed. 9. Ground No. 5 concerns the levy of interest under sections 234A and 234B. As the levy is consequential, the ground is dismissed. Ground No. 6 is general, requires no adjudication, and is also dismissed. 10. In the result, the assessee’s appeal is allowed for statistical purposes. Order pronounced in the open court on 28th September, 2026. Sd/- PRASHANT MAHARISHI VICE PRESIDENT Bangalore Dated: 28.09.2026 *TNTS* Printed from counselvise.com ITA 2109/BANG/2026 PATIO 6 Copy to: 1 PATIO NO 19, BRIGHT FARM, VARTHUR MAIN ROAD, WHITEFIELD, THUBARAHALLI, BENGALURU, BENGALURU-560066, KARNATAKA 2 INCOME TAX OFFICER, WARD 4(2)(1), BMTC BUILDING, KORAMANGALA, BENGALURU BENGALURU-560095, KARNATAKA 3 THE PCIT / CIT, 4 THE CIT(APPEALS) 5 THE D.R., ITAT, BANGALORE BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T., BANGALORE Printed from counselvise.com "