Income Tax Appellate Tribunal - Kolkata
Sanoara Begam Gazi,Howrah vs I.T.O., Ward - 47(1), Kolkata on 7 May, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL "SMC" BENCH, KOLKATA
BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER
ITA No.500/Kol/2026
(निर्धारण वर्ा /Assessment Year: 2020-21)
Sanoara Begam Gazi Vs ITO, Ward-47(1), Kolkata
Gazipra, Bankra Doomjur,
Howrah-711403.
PAN No. : BNXPG0101M
(अपीलधर्थी /Appellant) .. (प्रत्यर्थी / Respondent)
निर्धाररती की ओर से /Assessee by : Shri Palas Chattopadhya, FCA
रधजस्व की ओर से /Revenue by : Shri Kallol Mistry, Sr. DR
सुनवाई की तारीख / Date of Hearing : 07/05/2026
घोषणा की तारीख/Date of Pronouncement : 07/05/2026
आदे श / O R D E R
Per George Mathan, JM:
This is an appeal filed by the assessee against the order of the NFAC, DELHI [hereinafter referred to as the 'CIT(A)'] in appeal no.NFAC/2019-20/10501238 dated 04.09.2025.
2. Shri Palas Chattopadhya, AR, represented on behalf of the assessee and Shri Kallol Mistry, Sr. DR represented on behalf of the revenue.
3. The assessee has filed a written submission as follows:
"This appeal is filed by Appellant against the order passed by the Ld. CIT (Appeals) NFAC in relation to the Assessment Order passed by the Ld. AO, NFAC u/s 147 r.w.s 144 dated 14/02/2025 of the Income Tax Act 1961. In this regard, we submit:
Brief of the Appellant case:-
1. The Appellant SANOARA BEGAM GAZI is an Individual Assessee carrying on the business of Supply mainly Building Construction Materials and Contract Jobs under the name and style GAZI N SONS at Vill-Munshidanga Gazi Para, PO- Bankra, PS- Domjur, Howrah-711403.2
ITANo.500/Kol/2026
2. The Appellant used to file her return of Income opted under the ITR Form-4 applying provisions of Section 44AD of the Act and accordingly filed her return of Income for the Assessment year 2020-21 opted the ITR Form-4 applying provisions of Section 44AD of the Act. (page-22-31).The details particulars of return filling preceding, succeeding and the Assessment year under Appeal are as follows:-
Assessment ITR- Acknowledgement Gross Net % of GSTR-
Year Form No Turnover Profit Profit Turnover
2021-22 ITR-4 395371390210322 49,97,849 4,18,813 8.38 49,97,849
2020-21 ITR-4 311557570270321 61,05,964 4,96,870 8.14 61,05,964
2019-20 ITR-4 127245970310819 54,14,160 4,88,605 9.02 54,14,160
2018-19 ITR-4 107245670120818 22,95,636 1,95,129 8.50 20,82,949
AO Order U/S 148A(b) of the Acts AND Notice Issued u/s 148 of the Acts:-
3. The Income tax officer ITO Ward 47(1)/Kolkata issued notice u/s 148A(b) of the Acts on 13/03/2024 to the Appellant on the basis of information received in the Portal under the category High Risk Transactions that that despite total sales made by R.S. Enterprises having GSTIN: 19AAUFR2987B1ZM during the F.Ys. 2018-19 & 2019-20 amounting to Rs. 18.90 Crores he had filed his ITR showing very meagre income during this F.Ys. Further investigation led to conclusion that M/s R.S. Enterprises is only a paper entity which is not doing any real business activity and is only engaged in providing accommodation entries had executed Fictitious Transactions of Bogus Purchase of ₹ 11,33,772. The ITO Ward 47(1), Kolkata passed Order u/s 148A of the Acts on 29/03/2024 and also issued notice u/s 148 of the Acts on 29/03/2024 and served to the Appellant through the email id which was operated by an Employee of the Assessee but the Employee did not inform the Appellant about the notice received.
(page-12-14) & (15-21)-148 AO OBSERVATION
4. The Ld. FAO issued notice u/s 142(1) of the Acts on various dates and also issued show cause notice to the Appellant through the email id which was operated by an Employee of the Assessee but the Employee did not inform the Appellant about the notice received. Thus the Appellant could not furnish reply against the notice issued to the Appellant.
5. The Ld. FAO passed an impugned Assessment order u/s 147 w.r.t. 144 of the Acts on 14.02.2025 and assessed Taxable Income for an amount of ₹ 36,76,659 considering the Income declared in ITR Form-4 applying section 44AD of the Acts disclosing Gross Turnover for an amount of ₹ 61,05,964 and made the following addition in his impugned Assessment Order.
• Addition on account of unexplained expenditure u/s 69C r.w.s.
115BBE of the IT Act of ₹ 11,33,772. (page-43-44 Form 36) • Addition on account of Income from business and profession u/s 28 of IT Act for an amount of ₹ 17,80,198. (page-44 Form 36) 3 ITANo.500/Kol/2026 • Addition on account of income from other sources u/s 56 of IT Act being work contract receipts of ₹ 2,65,799(page-44 Form 36)
6. As regards addition of ₹ 11,33,772, the Ld. FAO stated in his impugned Order dated 14.02.2025 that as per information available, during the investigation proceedings conducted by the Office of the Pr.DIT(Inv.), Kolkata based on the information from DGGI, Kolkata Zonal Unit, related with cases of issuance of bogus sales invoices booked by CGST, Kolkata. In the case of R.S. Enterprises for the Financial Year 2018-19 & 2019- 20, it was observed that despite total sales made by R.S. Enterprises having GSTIN:
19AAUFR2987B1ZM during the F.Ys. 2018-19 & 2019-20 amounting to Rs. 18.90 Crores he had filed his ITR showing very meagre income during this F.Ys. Further investigation led to conclusion that M/s R.S. Enterprises is only a paper entity which is not doing any real business activity and is only engaged in providing accommodation entries. Further, investigation by the investigation wing led to the finding that during the financial year under reference, assessee is among one of the beneficiaries who had made bogus purchases from M/s R.S. Enterprises to the tune of Rs. 11,33,772. The assessee has been involved in the above-mentioned high value transactions in AY 2020- 21 and transaction made in this regard is not recorded in any regular books maintained by the assessee and therefore escaped assessment for AY 2020-21 and hence the same stands unexplained expenditure and added u/s 69C r.w.s. 115BBE of the Income tax Act back to the total income of the assessee for the for the year under consideration.
(Page-33 Form 36)
7. As regards the addition u/s 28 as business Income the Ld. FAO alleged that the assessee has not complied with any of the notices and established the nature of the activities carried out by him with relevant evidences. However, It is clear from the GSTR data that the assessee did carry out some business activities. As per GSTR data, the entire sales remained unexplained and offered for taxation. Accordingly GST transactions - Sales of ₹ 59,33,996 which worked out to ₹ 17,80,198 [59,33,996 @30%] is treated as income of assessee from business and profession for the year under consideration.
8. In respect of addition towards ₹ 2,65,799 u/s 56 of the acts, the Ld. FAO alleged that the assessee is in receipt of payment of ₹ 2,65,799 in the category of "payment to contractors u/s 194C". In absence of relevant documentary evidences and submission by assessee, the amount so credited remains unexplained and hence the same is to be added u/s 56 of IT Act being income from other sources to the total income of the assessee for the F.Y. 2019-20 relevant to A.Y. 2020-21.
OBSERVATION by CIT(A)/NFAC
9. The Appellant filed an Appeal before CIT(A), NFAC on 10/06/2025 against the order passed by the Ld. FAO dated 14/02/2025 The Ld. CIT(A), NFAC dismissed the Appeal filed by the Appellant u/s 250 of the Acts on 04/09/2025. The Ld. CIT(A), NFAC stated in his order that the Assessing Officer made the impugned additions, based on materials available on record, after according proper and adequate opportunity to the appellant and after marshalling all the facts. The appellant neither produced any evidence in support of his claim nor complied with the various notices issued from time to time during the entire appellate proceedings. Hence, it is held that the assessment order passed by the Assessing Officer based on his findings and proper adjudication, is 4 ITANo.500/Kol/2026 quite in order and the same is hereby confirmed. Accordingly, Grounds of appeal of the appellant are dismissed.
10. The Appellant filed an Appeal before your bench against the Order padded by the Ld. CIT(A), NFAC in relation to the impugned Assessment Order passed by the Ld. FAO u/s 147 w.r.t. 144 of the Acts.
a. That on the facts and in the circumstances of the case the Ld. CIT(A),NFAC is wrong, unjust and has erred in law in confirming the orders passed by Ld Assessing Officer/NFAC erred in arbitrarily computing the total income of the Appellant at ₹. 36,76,659 u/s 147 r.w.s 144 of the I T Act 1961 vide the impugned Assessment Order dated 14th February 25 as against the total Income of ₹ 4,96,890 declared in the return of Income for the Assessment year 2020-21 in his own motion without considering the nature of business and the return filled u/s 139(4) of the Act and for that in view of the facts and circumstances the order passed by the AO u/s 147 r.w.s. 144 is wholly bad, illegal b. That the authorities below failed to appreciate that passing of the order under Section 148A(d) of the Act and subsequent 148 notice issued by the Jurisdictional Assessing Officer (JAO) rather than the Faceless Assessing Officer (FAO) after 29.03.2022 was in complete defiance to the prescription of law/ procedure in relation thereto and hence ought to have appreciated that in the absence of valid foundation for issuance of notice under section 148 of the Act, the consequential re-assessment should be considered as nullity in law.
c. That the authorities below failed to appreciate that the notice issued u/s 148 related to the grounds of bogus purchases from M/s R.S. Enterprises to the tune of ₹ 11,33,772 and thus the addition made in the impugned Assessment order other than the issue of notice u/s 148 of the acts beyond the jurisdiction and hence the addition made other than the issue contained in the notice u/s 148 liable to be deleted.
d. For that in view of the facts and circumstances the addition made on the basis of Information received from DIT(Inv.)/Kol grounds of bogus purchases from M/s R.S. Enterprises to the tune of ₹ 11,33,772 and without considering the facts that the appellant had genuinely purchased the goods and the addition made by the Ld AO is wholly bad, illegal and void ab initio and in view of the facts and circumstances such addition is liable to be deleted.
e. For that in view of the facts and circumstances the addition made by the Ld. AO as Business Income calculated on the GST Turnover without considering the facts that the Income from Business declared on considering the Gross Turnover as disclosed vide ITR filed and thus the Ld. AO wrongly computed the Business Income again. For that in view of the facts and circumstances and the action of the AO is wholly bad and illegal and in view of the facts and circumstances it may kindly be held accordingly and may kindly delete the addition made for an amount of ₹ 17,80,198.
f. For that in view of the facts and circumstances the addition made by the Ld. AO as Other Source Income considering the TDS u/s 194C of the Acts without considering the fact that the amount on which TDS U/S 194C deducted already included in Turnover as disclosed in the ITR filed and thus the Ld. AO wrongly 5 ITANo.500/Kol/2026 computed the Income from other Source again. For that in view of the facts and circumstances and the action of the AO is wholly bad and illegal and in view of the facts and circumstances it may kindly be held accordingly and may kindly delete the addition made for an amount of ₹ 2,65,799.
g. The Ld CIT(A)-NFAC erred in coming to the conclusion in his order u/s.250 dated 04/09/2025 that the Appellant did not comply with any notice when the Appellant was not aware of the fact that the hearing notice had been served to the email id which did not belong to her and also was not mentioned in Form 35 is considered improper service and a violation of the principles of natural justice.
h. That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds Brief Submission in favour of Grounds of Appeal:-
Ground 1: The Ld. FAO wrongly and arbitrarily computed total income of the Appellant at ₹. 36,76,659 u/s 147 r.w.s 144 of the I T Act 1961 against the total Income of ₹ 4,96,890 declared in the return of Income filed in ITR-4 opted provision of section 44AD of the Acts for the Assessment year 2020-21.
11. The Appellant filed her return of Income for the Assessment year 2020-21 in ITR Form-
4 by offering income under presumptive taxation as per the provisions of Section 44AD of the Act and Calculated Business Profit for an amount of ₹ 4,96,870 i.e. declared Business Profit @ > 8% on the Turnover declared for an amount of ₹ 61,05,964. Section 44AD of the Act, gives an option to the assessee to offer income on presumptive basis.
These are special provisions. The assessee has opted for the same and offered to tax income at the rate of 8% of his turnover. The issue is whether, the Assessing Officer can examine statement of accounts in such cases, make additions towards undisclosed purchases, undisclosed Business Profit u/s 28 on declared turnover in ITR and again computed the Income from other Source again etc. on part of the declared Turnover. The turnover declared by the assessee is accepted by the Ld. FAO and no comments made by the Ld. FAO in his impugned Assessment Order. Thus such additions go against the spirit of the Act. Section 44AD of the Act was introduced to help the small traders who have difficulties in maintaining books of account and other records. Tax is levied on presumptive basis.
12. Section 44AD of the Act reads as under :
"44AD (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession"
13. Putting the above analysis, in converse, it can be easily inferred that the same is also true for the expenditure of the assessee. If 8% of gross receipts are 'deemed' income of the assessee, the remaining 92% are also 'deemed' expenditure of the assessee. Meaning thereby that actual expenditure may not be 92% of gross receipts, only for the purposes of taxation, it is considered to be so. To take it further, it can be said that 6 ITANo.500/Kol/2026 the expenditure may be less than 92% or it may also be more than 92% of gross receipts. Therefore the Addition made by the Ld. FAO in his impugned Assessment order on the basis of declared turnover supported by GST Return and thus no further addition should be made than the Income declared considering the section 44AD of the Acts.
14. The Appellant placed reliance on the following decision:-
i. ITAT, Kolkata A Bench in the case of Dipyaman Dutta v Income Tax Officer, Ward -7(1), Kolkata vide ITA No. 2817/Kol/2025 (Page 58-61 of paper Book) ii. Hon'ble Punjab & Haryana High Court in the case of CIT vs. Surinder Pal Anand [2010] 192 Taxman 264 (Punjab & Haryana)- (Page 55-57 of paper Book) iii. ITAT, Kolkata SMC Bench in the case of Mohan Kumar Agarwal v Income Tax Officer, Ward -46(1), Kolkata vide ITA No. 1750/Kol/2018 (Page 62-68 of paper Book) iv. ITAT, Bangalore SMC Bench in the case of Lakshmanram Bheemaji Purohit v Income Tax Officer, Ward 5(2)(1), Bangalore. vide ITA No.196/Bang/2025 (Page 69-72 of paper Book) Ground- 2:- Validity of Notice u/s 148 of the Acts
15. In the case of Appellant the notice issued u/s 148A and order passed u/s 148A(d) of the acts on as per information available, during the investigation proceedings conducted by the Office of the Pr. DIT(Inv.), Kolkata based on the information from DGGI, Kolkata Zonal Unit, related with cases of issuance of bogus sales invoices booked by GST invoices to facilitate irregular input tax credit to other business entities and while doing this he also availed and utilized ITC by others. In the case of R.S. Enterprises for the Financial Year 2018-19 & 2019-20, it has been observed that despite total sales made by R.S. Enterprises having GSTIN: 19AAUFR2987B1ZM during the F.Ys. 2018-19 & 2019-20 is amounting to Rs. 18.90 Crores and from the return profile of R.S. Enterprises it is known that he had filed his ITR showing very meagre income during the F.Ys. 2018- 19 N 2019-20. Further investigation led to conclusion that M/s R.S. Enterprises is only a paper entity which is not doing any real business activity and only engaged in providing accommodation entries Further, investigation by the investigation wing led to the finding that during the financial year under reference, assessee is among one of the beneficiaries who has made bogus purchases from M/s R.S. Enterprises to the tune of ₹ 11,33,772. The assessee has been involved in the above-mentioned high value transactions in AY 2020-21 and transaction made in this regard is not recorded in any regular books maintained by assessee and has therefore escaped assessment for AY 2020-21 and hence the same stands unexplained expenditure and added u/s 69C r.w.s. 115BBE of the Income tax Act back to the total income of the assessee for the year under consideration.
16. The order issued U/S 148A of the Acts and the reasons recorded for issuing of notice u/s 148 was also the same language. Therefore the Ld. ITO Ward 47(1)/ KOLKATA issued notice without verification of the transaction of the Assessee but solely based on the information shared by from DGGI, Kolkata Zonal Unit and the former received the said information from the GST Department.
17. The Ld. ITO should have 'reason to believe' that income chargeable to tax has escaped assessment. The words "reason to believe" suggest that the belief must be that of an 7 ITANo.500/Kol/2026 honest and reasonable person based upon reasonable grounds and that the assessing officer may act on direct or circumstantial evidence but not on mere suspicion or rumour.
Following constitutes reason to believe for invoking sec. 147:
- Evidence in possession of AO that the assessee has understated his income
- Evidence in possession of AO that the assessee has claimed excessive loss/ deductions, allowances, reliefs.
Before making assessment u/s 147, the AO must have "reasons to believe" that income, chargeable to tax has escaped assessment. The important words u/s 147 is 'has reason to believe' and these words are stronger than the words 'is satisfied'. Ganga Saran & Sons P. Ltd V. ITO (1981) 130 ITR 1(SC) In determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. Raymond Woolen Mills Ltd v. ITO (1999) 236 ITR 34 (SC) 12. Before making assessment u/s 147, the AO must have "reasons to believe" that income, chargeable to tax has escaped assessment. The important words u/s 147 is 'has reason to believe' and these words are stronger than the words 'is satisfied'. Ganga Saran & Sons P. Ltd V. ITO (1981) 130 ITR 1(SC).
In CIT vs. Kelvinator of India Ltd., 320 ITR 561 it was held by the Hon'ble Apex court that AO has power to re-open, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment; reasons must have a live link with formation of belief. Also see Direct Information Pvt. Ltd. Vs. ITO [2011] 203 Taxman 70 (Bomb.), Trans wind Infrastructure P. Ltd. Vs ITO [2014] 362 ITR 67 (Guj.) Notice u/s 148A and section 148 issued by JAO but Assessment framed by FAO
18. Section 151A of the Act itself contemplates formulation of Scheme for assessment, reassessment or recompilation under section 147 as well as for issuance of notice under section 148 of the Act. Therefore, the Scheme framed by the CBDT, which covers both the aforesaid aspect of the provisions of Section 151A of the Act cannot be said to be applicable only for one aspect, i.e., proceedings post the issue of notice under section 148 of the Act being assessment, reassessment or recompilation under section 147 of the Act and inapplicable to the issuance of notice under section 148 of the Act. The Scheme is clearly applicable for issuance of notice under section 148 of the Act and accordingly, it is only the FAO which can issue the notice under section 148 of the Act and not the JAO.
19. The Hon'ble Bombay High Court in the case of Hexaware Technologies Ltd. v. Asstt. CIT [2024] 162 taxmann.com 225/464 ITR 430 expressed their view as follows:-
"Section 151A of the Act itself contemplates formulation of Scheme for assessment, reassessment or recompilation under section 147 as well as for issuance of notice under section 148 of the Act. Therefore, the Scheme framed by the CBDT, which covers both the aforesaid aspect of the provisions of Section 151A of the Act cannot be said to be applicable 8 ITANo.500/Kol/2026 only for one aspect, i.e., proceedings post the issue of notice under section 148 of the Act being assessment, reassessment or recompilation under section 147 of the Act and inapplicable to the issuance of notice under section 148 of the Act. The Scheme is clearly applicable for issuance of notice under section 148 of the Act and accordingly, it is only the FAO which can issue the notice under section 148 of the Act and not the JAO. The argument advanced by respondent would render clause 3(b) of the Scheme otiose and to be ignored or contravened, as according to respondent, even though the Scheme specifically provides for issuance of notice under section 148 of the Act in a faceless manner, no notice is required to be issued under section 148 of the Act in a faceless manner. In such a situation, not only clause 3(b) but also the first two lines below clause 3(b) would be otiose, as it deals with the aspect of issuance of notice under section 148 of the Act. Respondents, being an authority subordinate to the CBDT, cannot argue that the Scheme framed by the CBDT, and which has been laid before both House of Parliament is partly otiose and inapplicable. The argument advanced by respondent expressly makes clause 3(b) otiose and impliedly makes the whole Scheme otiose. If clause 3(b) of the Scheme is not applicable, then only clause 3(a) of the Scheme remains. What is covered in clause 3(a) of the Scheme is already provided in section 144B(1) of the Act, which Section provides for faceless assessment, and covers assessment, reassessment or recompilation under section 147 of the Act. Therefore, if Revenue's arguments are to be accepted, there is no purpose of framing a Scheme only for clause 3(a) which is in any event already covered under faceless assessment regime in section 144B of the Act. The argument of respondent, therefore, renders the whole Scheme redundant. An argument which renders the whole Scheme otiose cannot be accepted as correct interpretation of the Scheme. The phrase "to the extent provided in section 144B of the Act" in the Scheme is with reference to only making assessment or reassessment or total income or loss of assessee. Therefore, for the purposes of making assessment or reassessment, the provisions of section 144B of the Act would be applicable as no such manner for reassessment is separately provided in the Scheme. For issuing notice, the term "to the extent provided in Section 144B of the Act" is not relevant. The Scheme provides that the notice under section 148 of the Act, shall be issued through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in Section 148 of the Act and in a faceless manner. Therefore, "to the extent provided in Section 144B of the Act" does not go with issuance of notice and is applicable only with reference to assessment or reassessment. The phrase "to the extent provided in Section 144B of the Act" would mean that the restriction provided in Section 144B of the Act, such as keeping the International Tax Jurisdiction or Central Circle Jurisdiction out of the ambit of Section 144B of the Act would also apply under the Scheme. Further the exceptions provided in sub-section (7) and (8) of Section 144B of the Act would also be applicable to the Scheme.
20. The recent judgement of ITAT Chennai, A Bench in the case of Mr. Loganathan Dhandapani vs The ACIT vide ITA No. 2240/chny/2024 where it was held in para 12 of the said order
12. In the light of the aforesaid discussion, we find that in the case in hand, the JAO had issued notice u/s.148A(b) of the Act dated 14.03.2022 followed by order u/s.148A(d) of the Act dated 31.03.2022 and followed by notice u/s.148 dated 31.03.2022 which impugned notices have been issued despite faceless scheme was notified by Central Government on 29.03.2022 pursuant to section 151A of the Act, making it mandatory for the issuance of notice u/s.148A(b), 148A(d) as well as 148 of the Act by the Faceless Mechanism, the impugned notices especially issued u/s.148 dated 31.03.2022 is found to be invalid and bad in law, since it has been issued contrary to law and is against the 'Rule of Law'; which impugned action of the JAO vitiates the reopening of assessment for AY 2018-19 by issuance of impugned notice dated 31.03.2022 u/s.148 of the Act and is therefore held to be illegal and bad in law and 9 ITANo.500/Kol/2026 therefore, assessment order dated 16.03.2023 is held to be null in eyes of law; and the assessee succeeds, on the legal issue which is held in favour of the assessee and therefore, we are inclined not to go into the merits of the addition made by the NFAC.
Addition of Purchase of Rs. 11,33,772 u/s 69C of the Acts.
21. The business of the Appellant was carrying on the business of Supply mainly Building Construction Materials and Contract Jobs under the name and style GAZI N SONS. The Appellant purchased Material form R S Enterprise identified by GSTRN - 19AAUFR2987B1ZM during the F.Y. 2019-20 for an amount of ₹ 11,33,772 for which he paid GST for an amount of ₹ 68,695. The Alleged party has issued 30 (Thirty) GST Invoices during the financial year 2019-20, the details purchased is enclosed as page no. 41-43 to of the paper book and payment made to the party by banking channel appearing in page no. 44 to 46 of the paper book
22. The said alleged party uploaded the Invoice issued to the Appellant in GSTR-1 under B 2 B, the said information is available in the GST portal uploaded appeared in GSTR-2B in the portal of the Appellant. The details appeared in GSTR-2B extracted from GST portal in page no. 36-38 of the paper Book. Further the alleged party also uploaded the GSTR-3B in the GST Portal during the financial year 2019-20 the said extract for GST Portal for the FY 2019-20 is appeared in page no.32-35 of the paper book.
23. The alleged party had filed its return of Income during the Assessment year 2019-20 and disclosed its turnover during the financial year for an amount of ₹. Rs. 5.15 Crore which was more than the amount of purchase from the alleged party during the said Assessment Year (refer page no. 37 of Form 36 ) of the Assessment Order).
24. The Appellant has genuinely purchased goods from the above alleged party and the goods utilized for Works Contracts service and Supply of goods and the Appellant filed GSTRN against the sale made by her and also paid GST on such turnover. The copy of GSTRN is enclosed for your kind verifications and records appeared in page no. 39 to 40 of the Paper book.
25. The Appellant filed return of Income considering the turnover as per GSTRN for an amount of ₹ 61,05,964 and while filing the return of Income the Appellant opted for the provision of section 44AD of the Acts i.e. presumptive basis of profit declared based on turnover. According to section 44AD minimum profit to be declared @ 8% and thus 92% of the turnover will be treated as Expenditure and the purchase from RS Enterprise for an amount of ₹ 11,33,772. The said amount appeared in GSTRN-2, Bank payment and also supported by invoice issued by the alleged party.
26. In the GST portal of the alleged party viz. R S Enterprise identified by GSTN-
19AAUFR2987B1ZM reveals that the GST department cancelled the GSTN suo-moto (Effective from 01/12/2021) and hence therefore no effect would be arisen prior to the date of cancellation of GSTN. Further the alleged party filed his GSTRN-1 and GSTRN- 3B and thus the alleged party has complied with the GST return and assumed paid Tax during the financial year 2019-20.
Therefore the purchase of ₹ 11,33,772 from R S Enterprise are not bogus purchases as alleged by the Ld. AO in his impugned Assessment order.
10 ITANo.500/Kol/2026Ground-5 Addition of business Income u/s 28 of IT Act for an amount of ₹ 17,80,198
27. The Appellant filed return of Income in ITR-4 opted for the provision of section 44AD of the Acts while filing the return of Income and thus the Appellant declared Profit more than 8% of the turnover. In the Instant case the Appellant declared gross Turnover in ITR-4 in column E-1b for an amount of ₹ 61,05,594 (page -26 ) and the Profit declared in column E2b for an amount of ₹ 4,96,870 (page- 26) In column no E-10 (page- 28 ) in respect of information regarding turnover/Gross Receipts reported for GST also appeared as ₹ 61,05,964. Further in GSTR-1 and GSTR-3B filed by the appellant declaring turnover during the financial year 2019-20 also the said amounts (page-40). Therefore no dispute was arisen in respect of GST turnover and the turnover declared in ITR -4 for calculation of business profit as specified in section 44AD of the Acts.
28. The details of sales declared in ITR and GSTRN are as follows:-
Name of the Party Taxable Turnover GST Total
CRESCENT FOUNDRY CO PVT 8,00,490 94,614 8,95,104
LTD
RBA FERRO INDUSTRIES Pvt Ltd 53,05,104 6,01,221 59,06,695
Total 61,05,964 6,95,835 68,01,800
29. The Ld. FAO without considering the facts that the Appellant filed return in ITR-4 opted the provision of section 44AD on the turnover for an amount ₹ 61,05,594 calculated business Profit u/s 28 of the Acts considering the GST Turnover for an amount of ₹ 59,33,996 (₹ 61,05,594- ₹ 2,65,799) @ 30% on GST Turnover taken hypothetically for an amount of ₹ 17,80,198.Therefore once the Appellant declared profit @ 8% and above on the turnover reflected in GSTRN and ITR again the Ld. FAO further added Business Profit on the same turnover @ 30% on GST considering Turnover along with the Profit declared by the Appellant for an amount of ₹ 4,96,870. Thus the Tax has been charged twice on the one turnover.
Ground:- 6:- Addition on account of income from other sources u/s 56 of IT Act being work contract receipts of ₹ 2,65,799
30. The Ld. FAO made addition of ₹ 2,65,799 u/s 56 of the acts, on the alleged ground that the assessee is in receipt of payment of ₹ 2,65,799 in the category of "payment to contractors u/s 194C". In absence of relevant documentary evidences and submission by assessee, the amount so credited remains unexplained and hence the same is to be added u/s 56 of IT Act being income from other sources to the total income of the assessee for the assessee for the F.Y. 2019-20 relevant to A.Y. 2020-21.
31. The Appellant refers in para no 28 here in above that the Appellant supplied martials and works contract service to CRESCENT FOUNDRY CO PVT Ltd for an amount of ₹ 8,00,490 and RBA FERRO INDUSTRIES Pvt Ltd for an amount of ₹ 53,05,104. The CRESCENT FOUNDRY CO PVT Ltd deducted Tax on ₹ 2,65,799 out of supplied materials and works contract service for an amount of ₹ 8,00,490 to the said party. Therefore 11 ITANo.500/Kol/2026 the amount on which Tax deducted u/s 194C of the Acts on ₹ 2,65,799 included in the turnover declared in GSTR and ITR-4 and the Appellant declared business Profit on the total turnover declared. Thus the Tax has been charged twice on the one turnover.
Ground:- 4:- Addition other than issue covered notice u/s 148 of the Acts
32. Undisputedly the assessment framed by the Ld. FAO is not sustainable in view of the fact that no addition can be made to the income of the assessee which comes to the notice of the Assessing Officer during the assessment proceedings in terms of Explanation 3 to section 147 of the Act, the Ld. FAO considered as Other Source Income which was not subject matter of the reasons recorded u/s 148(2) of the Act and no addition can be made in respect of any other item of income if the AO does not make any additions for those items which are recorded in the reasons recorded u/s 148(2) of the Act. Therefore the AO has no jurisdiction to make any other addition in terms of Explanation 3 to section 147 of the Act. Consequently the addition of Business Income u/s 28 of the Acts for an amount of ₹ 17,80,198 and Income from Other Source considering TDS deducted u/s 194C for an amount of ₹ 2,65,799 without jurisdiction .
The case of the Appellant case covered by several decisions as discussed below:
• ITAT Kolkata SMC Bench ITA No. 842/Kol/2023 in the case of Nitu Singh vs. ITO 37(2)/Kol • Ranbaxy Laboratory Ltd Vs CIT (2011) 336 ITRT 136(Delhi) • CIT Vs Software Consultants (2012) 241 ITR 240 (Delhi) • CIT Vs M/S Jet Airways (I) Ltd (2011) 331 ITR 236 (Bom) Under the circumstances and according to the above submissions and documents produced before you, the Appellant pray to delete the disallowance and/or addition made in the impugned Assessment order passed by the Ld. AO, NFAC and the same upheld by the Ld. CIT(A)/NFAC and/or pass such an order as your honour think fit and proper."
4. It was submitted that the Assessing Officer has made three additions in the assessment. It was the submission that the assessee is engaged in the business of purchase and sale of construction material such as sand, bricks, stones etc. It was the submission that the assessee filed her return of income for the impugned assessment year and has offered income under the provisions of section 44AD of the Act. The Assessing Officer had on the basis of non-compliance held that the transaction with M/s R.S. Enterprises to the tune of 12 ITANo.500/Kol/2026 Rs.11,33,772/- was bogus and had made the addition as unexplained expenditure. It was further submitted that the Assessing Officer has also made an addition of Rs.17,80,198/- representing 30% of the sales on the ground that the assessee had not cooperated in the assessment proceedings. The Assessing Officer has also made an addition of Rs.2,55,799/- representing payment of contractors on which allegedly TDS had been deducted. The ld. AR drew my attention to the GST details of M/s R.S. Enterprises which reads as follows:13 ITANo.500/Kol/2026 14 ITANo.500/Kol/2026
5. It was the submission that M/s R.S. Enterprises was also dealing 15 ITANo.500/Kol/2026 in construction material. The ld. AR further drew my attention to the ledger account of M/s R.S. Enterprises which reads as follows:
6. The ld. AR also drew my attention to the bank account of the assessee with State Bank of India, Banka, Amta Road, Account No.3419081995. It was the submission that the payments to M/s R.S. 16 ITANo.500/Kol/2026 Enterprises have been made through banking channels. It was the submission that the addition is not called for. It was the further submission that other two additions which have been made are without any basis and liable to be deleted.
7. In reply, the ld. Sr. DR submitted that the assessee has not produced any evidence before the Assessing Officer as has been specifically required by the Assessing Officer and thus the Assessing Officer made the additions. It was prayed that the order of the ld. CIT(A) be upheld.
8. I have considered the rival submissions. Coming to the primary issue raised by the assessee that the assessee has filed her return u/s 44AD and consequently, the Assessing Officer could not go any of the transaction specifically, the same does not stand to reason in so far as the Assessing Officer had categorically made a statement that a transaction with a specific entity is a bogus transaction. The assessee has not cooperated in the assessment proceedings. Now coming to specific transaction mentioned, the assessee claims to be in the business of purchase and sale of construction material but on perusal of the GST evidences as produced by the assessee in the case of M/s R.S. Enterprises does not show that the said M/s R.S. Enterprises is dealing in any construction material. In fact, it shows that they are dealing in scrap. A perusal of the ledger account produced shows that the transaction was done in 2019-20 from 01.04.2019 to 31.03.2020 17 ITANo.500/Kol/2026 in which GTS has been mentioned to have been paid. Admittedly, none of the bills have been produced. The last transaction with M/s RS Enterprises was in 20th February 2020. When this is verified with the bank account produced, it is noticed that the first payment has been made for the first time on 11.11.2020, that means that the assessee has maintained credit with M/s R.S. Enterprises of more than one year.18
ITANo.500/Kol/2026 8.1 This obviously requires examination. There is also closing balance which shows Rs.446525/-. No evidence of payment of the 19 ITANo.500/Kol/2026 balance is also available. The claim of input credit and output credit has also not been proved. Admittedly, these are all fresh evidences. The assessee has not produced any of the evidences before the Assessing Officer nor the Assessing Officer has able to examine these evidences.
This being so and considering the last prayer of the ld. AR of the assessee that the issues may be restored to the file of the Assessing Officer for re-examination, the issues are being restored to the file of the Assessing Officer for re-adjudication after granting the assessee adequate opportunity of being heard.
9. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 07/05/2026.
Sd/-
(GEORGE MATHAN) न्यधनयक सदस्य / JUDICIAL MEMBER Dated 07/05/2026 RS आदे श की प्रनतललपप अग्रेपर्त/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant-
2. प्रत्यर्थी / The Respondent-
3. आयकर आयुक्त(अपील) / The CIT(A),
4. आयकर आयुक्त / CIT
5. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कोलकाता / DR, ITAT, Kolkata
6. गार्ड फाईल / Guard file.20 ITANo.500/Kol/2026
सत्यापपत प्रतत //True Copy// आदे शधिुसधर/ BY ORDER, (Assistant Registrar) Income Tax Appellate Tribunal, Kolkata