Al Rehman Frozen Foods vs ACIT_1, Moradabad New

PER M. BALAGANESH, A. M.:

The appeal in ITA No.2682/Del/2026 for AY 2023-24, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as 'Id. CIT(A)', in short] dated 13.01.2026 against the order of assessment passed u/s 143(3) r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') dated 13.03.2025 by the Assessing Officer, Assessment Unit, Income Tax Department (hereinafter referred to as 'Id. AO').

None appeared on behalf of the assessee. Hence we proceed to dispose of this appeal on hearing the Learned DR and based on materials available on record.

The assessee has raised the following grounds of appeal before us:-

We have heard the Learned DR and perused the materials available on record. The Assessee is a partnership firm engaged in the business of slaughters processing and freezing of buffaloes meat etc at Village Chimyawali, Moradabad Road, Tehsil and District Sambhal. and had filed its return of income for the assessment year 2023-24 on 1-11-2023 declaring total income of Rs 82,82,450. The case of the Assessee was selected for scrutiny on the ground that there were high liabilities when compared to low receipts of the Assessee and low net profit shown by Assessee. In the course of scrutiny assessment proceedings, the Assessee provided copy of bank account statements, computation of income, partnership deed, copy of ledgers before the learned AO, comparison chart of net profit, schedule of fixed assets, payment vouchers of building maintenance, compressor oil expenses, fire wood expenses, electricity expenses, ledger account of packing material expenses, green feed (Chara) , ammonia gas expenses, production expenses, salt expenses, staff welfare, purchases receipts of raw hides, ledger of some expenses and partners schedule. The Assessee also pleaded, the Assessee also submitted that the father of three partners as been long missing and the partners were very busy in search of their father and accordingly were seeking adjournment from time to time during the course of assessment proceedings. The Learned AO noted that Assessee had declared turnover of Rs 220,93,76,185 and had offered profit of Rs 82,82,444 which works out to 0.37% of total turnover. The learned AO also noted that Assessee had paid remuneration to its partners in the sum of Rs 1,26,48,666. He noted that the Assessee has not submitted the justification and details of remuneration with respect to partnership deed. Similarly there are other expenditures claimed by the Assessee which for which no supporting documentary evidences were furnished by the Assessee. Hence those expenditure remained unverified. For all these collective reasons, the learned AO decided to estimate the net profit at the rate of 4% of turnover and completed the assessment. The learned AO noted that the ledger account submitted by the Assessee were illegible and no details for huge sundry creditors of Rs 35,07,21,767 were submitted by the Assessee. The Learned AO also noted that eventhough the details of fixed assets were stated to be furnished by the Assessee but nothing was filed in that regard even in respect of additions to fixed assets during the year. Since there was no proper response from the side of the Assessee and considering the dodging attitude of the Assessee by not providing proper details, he proceeded to complete the assessment by estimating net profit at the rate of 4% of the turnover and after reducing the profit already disclosed in the profit and loss account, he made a net addition of Rs 8,00,92,603 and completed the assessment.

We find on perusal of the order of the learned AO, the learned AO was duly justified in resorting to estimation of net profit as a percentage of turnover in the facts and circumstances of the instant case, as there was continuous failure from the side of the Assessee in furnishing the requisite details. However, considering the nature of business carried on by the Assessee and also considering the past trend, we hold that estimation of net profit at 4% would be on the higher side. Hence, we resort to estimate the net profit before partner's remuneration at the rate of 2.5% of turnover would meet the ends of justice. The net profit of the Assessee is determined as under:-

Net profit before Partners Remuneration @ 2.5% of Turnover Less: Partners Remuneration - Rs 5,52,34,405 - Rs 1,26,48,666 Less: Income declared in the return Rs 4,25,85,739 Rs 82,82,444 Income to be determined finally Rs 3,43,03,295

We would like to make it very clear that the determination of income in the abovementioned manner would be applicable only for the year under consideration and the same shall not act as a binding precedent for other assessment years. Accordingly, the grounds raised by the Assessee are partly allowed.

In the result, the appeal of the Assessee is partly allowed.