Bangalore ITAT orders fresh assessment of 8% profit estimation on ₹2.52 crore export turnover

Background of the dispute

For Assessment Year 2016-17, the assessee, Salman Mujeer, was identified through the CBDT’s Risk Management Strategy because of export transactions exceeding the prescribed threshold. The information available with the Department reflected export turnover of ₹2,52,44,434. Despite such high-value transactions, no return of income was filed.

On this basis, the reassessment machinery under the Income Tax Act 1961 was set in motion, ultimately leading to a best judgment assessment where the Assessing Officer (AO) estimated 8% profit on the export turnover and made an addition of ₹20,19,555.

The assessee’s appeal before the National Faceless Appeal Centre was dismissed ex parte. The matter then reached the ITAT Bangalore in the case of Salman Mujeer Vs ITO.

Along the way, there was also a 116-day delay in filing the appeal before the Tribunal, which the ITAT had to address before dealing with the merits.

Delay of 116 days in filing appeal and Tribunal’s approach

Reason for delay

The assessee filed an application seeking condonation of the 116-day delay, supported by an affidavit. The core explanation was:

  • While filing Form 35 before the learned CIT(A), the email ID of the consultant was mentioned.
  • All notices issued by the learned CIT(A) and the final appellate order were sent only to the consultant’s email.
  • The assessee claimed that he did not receive or become aware of these communications in real time.
  • Only when he later received a departmental intimation did he come to know that the appeal had been disposed of and an order existed.
  • According to the assessee, immediately upon gaining knowledge of the order, he initiated steps to file the appeal before ITAT, and there was no deliberate or mala fide delay.

The Tribunal referred to the landmark decision of the Hon’ble Supreme Court in Collector Land Acquisition, Ananth Nag vs. MST Katiji and others, reported in 1987 SCR (2) 387. Relying on the principles laid down therein, the ITAT reiterated:

  • Procedural rules are intended to advance justice and not to defeat it.
  • When “substantial justice” is pitted against purely “technical” considerations, substantial justice must be given precedence.
  • There was no discernible advantage to the assessee in filing the appeal belatedly.

Condonation of delay

After examining the contents of the condonation petition and the affidavit, the Tribunal held:

  • The explanation furnished constituted a “sufficient cause” for not filing the appeal within the prescribed limitation period.
  • The delay of 116 days was therefore condoned.
  • The appeal was admitted and taken up for decision on merits.

Initiation of reassessment: notices under Section 148A and Section 148

Trigger under CBDT Risk Management Strategy

The Department flagged the assessee on the basis of data gathered under the Risk Management Strategy formulated by the CBDT, which indicated that:

  • The assessee had executed export transactions exceeding Rs. 5 lakh in the relevant financial year.
  • Despite these sizable transactions, no return of income was filed for AY 2016-17.

Issue of Section 148A(b) notice

In this backdrop: