Income Tax Appellate Tribunal - Chennai
Perambur Sri Srinivasa Sweets And ... vs Acit, Ncc-10(1), Chennai on 10 April, 2026
आयकर अपील य अ धकरण, 'सी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
'C' BENCH, CHENNAI
ी एबी ट वक , या यक सद य एवं ी एस. आर. रघुनाथा, लेखा सद य के सम$
BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER AND
SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.: 2889/Chny/2025
नधा%रण वष% / Assessment Year: 2015-16
Perambur Sri Srinivasa Sweets Assistant Commissioner of
and Snacks, vs. Income Tax,
16/1, P.H. Road, Non-Corporate Circle -10(1),
Perambur S.O., Chennai.
Perambur, Chennai- 600 011.
[PAN: AAHFP-7042-A]
(अपीलाथ'/Appellant) (()यथ'/Respondent)
अपीलाथ' क* ओर से/Appellant by : Mr. J. Saravanan, Advocate
()यथ' क* ओर से/Respondent by : Ms. R. Anita, Addl. CIT
सुनवाई क* तार ख/Date of Hearing : 24.02.2026
घोषणा क* तार ख/Date of Pronouncement : 10.04.2026
आदे श / O R D E R
PER S.R.RAGHUNATHA, AM:
The present appeal is filed by the assessee against the order dated 26.08.2025 passed by the learned Commissioner of Income Tax (Appeals), Chennai - 18, (hereinafter referred to as "ld.CIT(A)"), dismissing the appeal filed by the assessee against the assessment order dated 26.12.2018 passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), by the Assistant Commissioner of Income Tax, Non Corporate Circle - 10(1), Chennai (in short "AO") pertaining to Assessment Year (A.Y.) 2015-16.
:-2-: ITA. No:2889/Chny/2025
2. The grounds raised by the assessee are as under:
"1. For that the order of the Ld. Commissioner of Income-Tax (Appeals), Chennai-18, Chennai, under section 250 of the Income-Tax Act, 1961 (Act) dated 26.08.2025 is erroneous, bad in law, and was passed ignoring the facts and merits of the case.
2.1. For that the Ld. CIT(A) erred in confirming the addition of Rs.4,29,00,000/- made as business income.
2.2. For that the Ld. CIT(A) failed to appreciate that the notice u/s 148 of the Income-Tax Act, 1961, does not bear the digital signature or manual signature of the Assessing Officer [ACIT, Non-Corporate Circle-10(1), Chennai].
2.3. For that the Ld. CIT(A) ought to have noted that the reassessment was completed without issuance of notice u/s 143(2) of the Act, despite return of income filed by the assessee on 24.12.2018, in response to notice u/s 148 of the Act.
2.4. For that the Ld. CIT(A) failed to appreciate that there is no mandate for the assessee to inform the AO of the filing of return of income on 24.12.2018, after filing the said return online.
2.5. For that the Ld. CIT(A) ought to have noted that the CBDT Instruction No.5/2017 dated 07.07.2017 authorized cases for compulsory scrutiny during the FY 2017-18, in cases of survey u/s 133A of the Act.
2.6. For that the Ld. CIT(A) failed to appreciate that the reassessment order was made solely on the basis of statement recorded from the accounts-in-charge and the assessee firm's partner, as may be seen from page nos.4 and 5 of the reassessment order.
2.7. For that the Ld. CIT(A) failed to note that no co-relation between incriminating material pertaining to the AY 2015-16 (which was found during survey) and the income assessed was established by the AO.
2.8. For that the Ld. CIT(A) ought to have seen that provisional statement for the FY 2014-15 (AY 2015-16) cannot be made as the foundation for estimating the business income of the assessee.
2.9. For that the Ld. CIT(A) failed to note that estimation of profit of an assessee cannot be made without rejecting books of account.
2.10. For that the Ld. CIT(A), on the one hand, observed that the AO has not found fault with the audited figures in books, but has not gone by the audited figures in the books of account.
3. Without prejudice to the above, for that the Ld. CIT(A) failed to note that the net profit on purported suppressed sales has been determined at 76.72% which is nowhere near the net profit declared by the assessee in any of the AYs or by any other assessee in the same industry."
:-3-: ITA. No:2889/Chny/2025
3. The brief facts of the case emanating from the records are that the assessee is a partnership firm engaged in the business of manufacturing and sale of sweets and snacks. A survey u/s.133A of the Act was conducted on 03.09.2015 at its business premises. The assessee filed its return of income on 30.10.2015 declaring total income of Rs.1,23,68,730/-. The assessment was ultimately completed on 26.12.2018 determining total income at Rs.5,52,68,730/-, inter alia, by making an addition of Rs.4,29,00,000/- on the footing that, in the course of survey, suppression of sales and additional income were admitted and only a sum of Rs.75,00,000/- had been offered in the return instead of Rs.5.04 crores.
4. The said addition having been sustained by the ld. CIT(A), the assessee is in further appeal before us. Though several grounds have been raised, the principal grievance is against the confirmation of the addition of Rs.4,29,00,000/- as business income.
5. Before us, the ld. AR filed detailed written submissions and took us through the paper book. It was submitted that, during the survey conducted u/s.133A on 03.09.2015, discrepancies were noticed only with reference to sales entries for limited dates, namely 25.08.2015 and 28.08.2015, and on that basis statements were recorded from the accountant as well as one of the partners. According to the ld. AR, the assessee, in order to buy peace and avoid prolonged controversy, voluntarily offered a sum of Rs.75,00,000/- in the return of income filed on 30.10.2015. However, the AO thereafter proceeded to estimate an additional income at Rs.5.04 crores and, after reducing the sum of Rs.75,00,000/- already offered, made the impugned addition of Rs.4,29,00,000/-.
6. The ld. AR first assailed the assessment on legal grounds by submitting that the notice issued u/s.148 of the Act was not signed and that, after the assessee filed the return of income electronically on 24.12.2018 in response thereto declaring the same income as in the original return, no notice u/s.143(2) :-4-: ITA. No:2889/Chny/2025 of the Act was issued before completion of the reassessment on 26.12.2018. Relying on the decisions in ACIT v. Hotel Blue Moon, PCIT v. Shri Jai Shiv Shankar Traders Pvt. Ltd., PCIT v. Silver Line, Major Suresh Yadav v. ITO and other authorities cited in the written submissions, it was contended that the reassessment itself is bad in law.
7. On merits, the ld.AR submitted that the entire addition rests only on statements recorded during survey and on extrapolation from discrepancies noticed for two days, without rejection of books of account for the relevant year and without any corroborative evidence. It was emphasized that no unaccounted assets, investments or expenditure were found by the Department. The ld.AR further submitted that a statement recorded u/s.133A of the Act has no independent evidentiary value and cannot, by itself, form the sole basis of addition, placing reliance on the judgment of the Hon'ble Madras High Court in CIT v. S. Khader Khan Son [2008] 300 ITR 157 (Madras), as affirmed by the Hon'ble Supreme Court, [2013] 352 ITR 480(SC) as well as the CBDT Instruction discouraging confessional statements in survey/search proceedings.
8. The ld. AR further pointed out that the quantification made by the AO is inherently arbitrary. As per the assessment order itself, the AO proceeded on the basis that there was suppression of sales of about Rs.6.56 crores and yet estimated the additional income at Rs.5.04 crores, which would imply an impossible profit rate of about 77%. It was further submitted that if one goes by the reconstructed turnover of Rs.22,99,06,136/- referred to in the assessment records and compares it with the assessed income of Rs.5,52,68,730/-, the effective net profit rate works out to about 24.04%, which is wholly abnormal for this line of business.
9. Inviting our attention to the financial figures for five years placed in the paper book, the ld.AR submitted that the net profit before tax percentages for financial years 2012-13 to 2016-17 are 3.30%, 3.02%, 2.86%, 7.74% and 3.95% :-5-: ITA. No:2889/Chny/2025 respectively, the average whereof works out to 4.174%. According to the ld. AR, even if the turnover figure of Rs.22,99,06,136/- is adopted, the profit relatable thereto at the average rate of 4.17% would come only to about Rs.95,96,282/-, whereas the assessee has already returned income of Rs.1,23,68,730/-. On this basis, it was submitted that no further addition survives even on the Revenue's own figures.
10. Per contra, the ld.DR supported the orders of the lower authorities and submitted that the partner had admitted suppression of sales during survey and, therefore, the addition made by the AO and confirmed by the ld.CIT(A) deserves to be sustained. In respect of the legal ground raised by the assessee, the ld.DR submitted the assessment records and brought to our attention that the signed copy of the notice u/s.148 was duly served and acknowledged by the assessee. Hence, the ld.DR prayed for dismissing the legal ground raised by the assessee.
11. We have heard the rival submissions, perused the orders of the authorities below and carefully gone through the materials available on record, including the written submissions and financial particulars placed before us. The legal grounds challenging the validity of the reassessment were pressed before us; however, inasmuch as the ld.DR produced the signed copy of the notice issued u/s.148 of the Act and demonstrated that the same had been served on and acknowledged by the assessee, we are not inclined to accept the challenge to the reassessment on that count. Accordingly, the legal ground raised by the assessee stands rejected.
12. We now proceed to examine the substantive issue arising on merits, namely, whether the addition of Rs.4,29,00,000/- sustained by the ld.CIT(A) can be said to represent a fair, reasonable and legally sustainable estimate of income relatable to the alleged suppression of sales. Upon a careful consideration of the facts, we find considerable force in the grievance projected :-6-: ITA. No:2889/Chny/2025 by the assessee. The foundation of the impugned addition is the survey conducted u/s.133A of the Act on 03.09.2015, during which certain discrepancies were noticed with reference to sales entries pertaining only to limited dates, namely 25.08.2015 and 28.08.2015. Based on such discrepancies, statements were recorded from the accountant as well as one of the partners of the assessee-firm. Thereafter, the AO proceeded to extrapolate the said discrepancies to the entire year and worked out a substantial figure of alleged suppressed turnover and consequential income. In our considered view, such extrapolation, in the absence of reliable corroborative material, cannot by itself furnish a sound basis for making an addition of the magnitude impugned before us.
13. A notable and significant feature of the present case is that no unaccounted assets, investments, unexplained expenditure, excess stock, undisclosed cash or any other incriminating material were found during the course of survey. This factual aspect assumes material importance. If the case of the Revenue is that the assessee had earned substantial income outside the books, one would ordinarily expect some supporting evidence in the form of corresponding application of such income, whether by way of assets, investments, expenditure, receivables, stock variation or like material. However, the record is conspicuously silent on any such corroboration. The absence of any corresponding incriminating material substantially weakens the Revenue's case and renders the impugned addition largely inferential.
14. Further, we find merit in the contention of the assessee that the addition has been made substantially on the basis of the sworn statements recorded during survey proceedings. It is trite law that a statement recorded during survey u/s.133A of the Act, though relevant, does not by itself possess conclusive evidentiary value so as to justify an addition in the absence of independent supporting material. More so, where such statement is not backed by documentary evidence showing the actual accrual or deployment of :-7-: ITA. No:2889/Chny/2025 undisclosed income, the addition cannot be sustained merely on the strength of such statement. In the present case, except for the statements and the extrapolated workings, no independent material has been brought on record by the Revenue to establish that the assessee in fact earned undisclosed income to the extent assessed.
15. We also find that the quantification adopted by the AO is wholly disproportionate and does not withstand judicial scrutiny. As noticed from the assessment order itself, the AO worked out suppression of sales at about Rs.6.56 crores, but estimated additional income therefrom at Rs.5.04 crores, which translates into a profit rate of nearly 77%. Such a margin is, on the face of it, commercially implausible in the line of business carried on by the assessee, namely manufacture and sale of sweets and snacks. Even when viewed from another angle, if the assessed income of Rs.5,52,68,730/- is compared with the reconstructed turnover of Rs.22,99,06,136/-, the resultant net profit rate works out to around 24.04%, which again is far removed from the assessee's past history and the normal business realities of this trade. These figures clearly demonstrate the arbitrariness inherent in the estimation made by the AO.
16. It is a settled principle that while some degree of estimation may be permissible in taxation proceedings, such estimation must bear a reasonable nexus to the material on record and must not be founded on surmises, conjectures or unrealistic assumptions. In the present case, the approach of the AO in converting alleged suppressed turnover into almost equivalent income is clearly excessive and unsupported by any comparable case, industry norm, historical trend or other cogent material.
17. In our view, the best and most reliable guide in the facts of the present case is the assessee's own financial history. The financial results for five years placed before us show that the net profit before tax percentages for financial years 2012-13 to 2016-17 were 3.30%, 3.02%, 2.86%, 7.74% and 3.95% :-8-: ITA. No:2889/Chny/2025 respectively. The average thereof works out to 4.17%. The Revenue has not brought on record any better or more dependable comparable material for estimating the profit rate. Therefore, in the absence of any contrary evidence, we are of the considered opinion that the assessee's own historical profit trend furnishes a fair and reasonable basis for estimating the profit element, assuming without conceding that any suppression of turnover had in fact taken place.
18. The total turnover declared by the assessee for the impugned assessment year is Rs.16,42,18,659/-. The alleged suppressed turnover has been taken at 40% thereof, which works out to Rs.6,56,87,477/-. If the average net profit rate of 4.17%, as derived from the five years' financial results, is applied to the said suppressed turnover, the resultant net profit would come only to Rs.27,39,168/-.
19. Further, we note that the ld.CIT(A) has considered the statement recorded from the partner D.Srinivasan at the time of survey, wherein the suppressed turnover has been stated to be Rs.10.94 crores, based on the declared turnover to be only 60% i.e. Rs.16.42 crores and arriving the total turnover of the assessee was Rs.27.36 Crores. Even assuming these facts are also to be considered for estimation of income of the assessee on the alleged suppressed turnover, the income works out to Rs.45,65,278/- ( i.e., Rs.10.94 crores X 4.17%).
20. It is an admitted and undisputed fact that the assessee had, on its own, offered an additional income of Rs.75,00,000/- in the return of income filed and had also discharged the due taxes thereon. The said additional income offered by the assessee works out to about 6.85% (Rs.75.00 lakhs / Rs.10.94 Crores (alleged suppressed sales) x 100) of the alleged suppressed turnover and is thus substantially higher than the profit of Rs.27,39,168/- or Rs.45,65,278/- that would result even on application of the average profit rate to the alleged suppressed turnover. In other words, even on the Revenue's own premise regarding suppression of turnover, the voluntary disclosure already made by :-9-: ITA. No:2889/Chny/2025 the assessee more than takes care of the possible profit element embedded therein.
21. In such circumstances, we are unable to sustain the further addition of Rs.4,29,00,000/-. Once the assessee has already offered an amount far in excess of the reasonable profit that could be attributed to the alleged suppressed turnover, any further addition would be wholly unwarranted and would amount to taxing an imaginary income unsupported by evidence. The impugned addition, therefore, cannot be upheld either on facts or in law.
22. Accordingly, considering the totality of the facts and circumstances of the case, particularly the absence of any corroborative incriminating material such as unaccounted assets or investments, the fact that the addition is founded primarily on sworn statements recorded during survey, the arbitrariness in quantification by the AO, and the adequacy of the voluntary disclosure already made by the assessee, we set aside the order of the ld.CIT(A) on this issue and direct the AO to delete the addition of Rs.4,29,00,000/-.
23. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 10th April, 2026 at Chennai.
Sd/- Sd/-
(मनु कुमार ग/र) (एस. आर. रघुनाथा)
(MANU KUMAR GIRI) (S. R. RAGHUNATHA)
या यक सद य/Judicial Member लेखासद य/Accountant Member
चे ई/Chennai,
िदनां क/Dated, the 10th April, 2026
JPV
आदे श की ितिलिप अ ेिषत/Copy to:
1. अपीलाथ /Appellant
2. थ /Respondent
3.आयकर आयु /CIT- Chennai/Coimbatore/Madurai/Salem
4. िवभागीय ितिनिध/DR
5. गाड फाईल/GF PRASANNA Digitally signed by PRASANNA VANI JETTY VANI JETTY Date: 2026.04.15 14:16:51 +05'30'