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Facts
The assessee's case was reopened under section 148 of the Income Tax Act, 1961, due to an outward remittance of Rs. 5,88,96,000/- from his NRO account not being reflected in his ITR. The AO accepted gifts from family members but was not satisfied with the explanation for Rs. 1,63,33,500/- received from M/s S. R. Credit Pvt. Ltd.
Held
The Tribunal found merit in the assessee's argument that the sum received from M/s S. R. Credit Pvt. Ltd. was a refund of the assessee's deposit. The AO had not doubted the identity or genuineness of the transaction, but only the creditworthiness of M/s S. R. Credit Pvt. Ltd.
Key Issues
Whether the addition of Rs. 1,63,33,500/- made by the AO on account of non-verifiable source of remittance is justified, and whether the reopening of the case was legal.
Sections Cited
147, 148, 144C, 148A, 68, 271AAC, 234A, 234B, 234C, 234D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘D’: NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI AVDHESH KUMAR MISHRA
ORDER
PER AVDHESH KUMAR MISHRA, AM
1. The appeal filed by the assessee is directed against the order, dated 22.03.2024, passed under section 147 r.w.s. 144C (13) of the Income Tax Act, 1961 by the Dy. Commissioner of Income Tax, Circle-International Tax, Circle -2(1)(2), New Delhi.
2. The assessee has raised following grounds in this appeal:
1. That the Hon'ble Dispute Resolution Panel has erred in law in not issuing specific directions to the AO with respect to the addition made in the draft assessment order and instead in delegating its authority to the AO to reappraise and reconsider all the evidence and to re-decide the issue in disregard of the express provisions of sub-section 8 of section 144C of the Income Tax Act, 1961.
Ravi Kumar 2. That the Hon'ble Dispute Resolution Panel has erred in law in holding that it had no power to decide the issue of validity/maintainability of the issue of notice u/s 148. 3. That the notice issued u/s 148 is bed in law as the order passed u/s 148A(d) has failed to consider at all the legal objections raised vide para 53A of reply dt. 07.06.2022 submitted in compliance to the notice issued u/s 148A(b) dt. 27.05.2022 and also on account of twisted presentation of facts.
That on the facts and in the circumstances of the case the order passed by the learned AO is bad in law as the same is a non-speaking order passed summarily rejecting and not considering, deliberating and dealing with all the contentions/rebuttals made, evidences placed on record and the case laws cited in its true spirit as directed by the Hon'ble Dispute Resolution Panel and therefore liable to be quashed as such.
That on the facts and in the circumstances of the case the learned AO has erred in law in applying the provisions of section 68 with respect to addition of Rs.1,63,33,500.00 made.
6. That, without prejudice to the ground of appeal no. 5 above, on the facts and in the circumstances of the case the learned AO has erred in law in making an addition Rs.1,63,33,500.00
7. The appellant craves leave to add, alter, amend, substitute and/or modify foregoing grounds of appeal.”
2.1 The above grounds broadly fall into two categories; (i) the legality of reopening the case and (ii) merit of addition of Rs.1,63,33,500/-.
3. The relevant facts giving rise to this appeal are that the assessee’s case was reopened under section 148 of the income Tax Act, 1961 (‘Act’) based on the reasoning that the outward remittance of Rs.5,88,96,000/- made during the relevant year by the assessee from his NRO Account No. Ravi Kumar 91084 maintained with J & K Bank was not found reflected in his Income Tax Return (‘ITR’). During the course of proceedings before the Assessing Officer (‘AO’) and the Dispute Resolution Panel (‘DRP’), the assessee provided the details of gifts aggregating to Rs.4,63,00,000/- received from the family members; mother, father & brothers and the sum of Rs.1,63,33,500/- received from M/s S. R. Credit Pvt. Ltd. to source the foreign remittances. The AO accepted the explanations regarding gifts but he was not satisfied with the explanations regarding Rs.1,63,33,500/- received from M/s S. R. Credit Pvt. Ltd. Therefore, he proposed the addition of Rs.1,63,33,500/- in the draft order. The assessee filed objections on the legality of reopening the case and also on merit of addition of Rs.1,63,33,500/- before the DRP. The assessee filed various additional evidence, before the DRP, to explain the genuineness of the sum of Rs.1,63,33,500/- received from M/s S. R. Credit Pvt. Ltd. The DRP dismissed the objections on the legality of reopening the case, but issued certain directions to the AO on the issue of taxability of Rs.1,63,33,500/- as under: “The draft order, written and oral contention of the assessee, remand report and rejoinder to remand report have been perused. It is a factual issue. Assessing Officer is directed to take rejoinder to account and pass final speaking order, without making further inquiries with the assessee, and making additions only if rejoinder read with other replies is not found satisfactory. Grounds of objection no. 2 (including sub-grounds) are disposed off accordingly.
Directions of DRP under section 144C of the Income Tax Act Ravi Kumar (i) The Assessing Officer is directed to complete the assessment as per the above directions of the Dispute Resolution Panel. (ii) The Assessing Officer shall place a copy of these directions as annexure to the final order, to be read as a part of the order. (iii) While passing the final order, the Assessing Officer shall incorporate the reasons given by the Dispute Resolution Panel in respect of various objections, at appropriate places.” 3.1 In pursuance of the DRP directions, the AO’s final order, on the issue of taxability of Rs.1,63,33,500/-, reads as under: “10. The directions given by the Ld. DRP-2, New Delhi have been perused, wherein, the Ld. DRP has directed the undersigned to take rejoinder to remand report into account while passing the final order. The directions of the Ld. DRP have been considered, however, the claim of the assessee in rejoinder to the remand report is merely a repetition and elaboration of what he had submitted as additional evidences during DRP proceedings. Succinctly, during the course of DRP proceedings, the assessee has submitted the following additional evidence:
1. Copy of Tax Audit Repot of M/s S R Credits Private Limited of FY 2016- 17 2. Copies of Bank statements of M/s S R Credits Private Limited for FYs 2015-16 and 2016-17 3. Copy of ledger of assessee in the books of M/s S R Credits Private Limited for FY 2015-16 4. Copies of Bank Statement of the assessee with J&K Bank Ltd. for FY 2015-16.
The above referred documents were perused and remand report was sent by this office vide letter F. No. DCIT/Cir.2(1)(2)Intl. Tax./Remand Report/2023-24/579 dated 08.12.2023. The relevant extract of the AO's comments are as under:
Addition of Rs. 1,63,33, 500/- u/s 68 of the dncome-tax Act, 1961/-:
The assessee has submitted Form 3 CD of M/s S R Credits Private Limited Tor the previous year from 01.04.2016 to 31:03.2017 in which the name of the assessee appears in particulars of each repayment of loan or deposit made and repayment of loan during the previous year. As 4 Ravi Kumar per the statement submitted by the assessee the assessee has taken or accepted loan or repayment of loan or deposit of Rs.1,91,33,500/- and made repayment of loan or deposit or any specified advance of Rs.2,26,33,500/- during the previous year. These amounts could not be verified in absence of breakup of such receipts/payments.
The assessee, during the assessment proceedings, submitted Balance sheet and profit and loss statement of the M/s S R Credit Private Ltd which is enough to ascertain the following: a. The assessee's name is neither listed under short term loan & advances nor under long term loans and advances b. The company (M/s S R Credits Private Ltd.) filed a profit of only Rs. 75,06, 802/- for the year ending in 2016. And, c. the company had cash and cash equivalent of only Rs.46,59,222/- on 31.03.2016 and Rs. 34,80,256/- on 31.03.2017.
Looking at the above, the credit worthiness of the company to give such a huge amount (Rs.1,63,33,500/) to the assessee is not justifiable.
The assessee has also submitted Ledger account of M/s S R Credits Pvt. Ltd the name of Shri Ravi Kumar (assessee) (Page no 31) for the period from 01.04.2015 to 31.03.2016 as additional evidence. The assessee has also submitted copy of bank account statement of M/s S R Credits Pvt. Ltd. of his account with J & K Bank bearing account No. 0319040100091084. The assessee has furnished copy of his own bank statement for the stated period. The assessee however failed to furnish copy of company's HDFC bank account statement. On perusal of the ledger and the bank statements, it is seen that the entries mentioned in the ledger are neither reflected in company’s bank account (except for entry of Rs.9,00,000/- on 18 04.2015. It is further submitted that none of the other entries, both debit and credit, in the name of the assessee in the company’s ledger are verifiable from the above documents.
From the above, it is clearly evident that the assessee has not brought on record anything new in rejoinder. Therefore, in view of the 5
After considering entire gamut of facts and circumstances of the case and in accordance with the directions Ld. DRP, total income of the assessee has been assessed at Rs.1,77,92,830/-. Issue necessary forms. Give credit for pre-paid taxes after verification. Charge interest u/s 234A, 2348, 234C and 234D of the Act, as applicable. Penalty proceedings u/s 271AAC is initiated separately for concealment of particulars of income.”
4. The Ld. Authorized Representative (‘AR’) argued vehemently not only on the jurisdictional issue/legality of reopening the case but also on the merit of addition of Rs.1,63,33,500/-. The Ld. DR drew our attention to the Statement of Affairs of the assessee as on 31.03.2014 and 31.03.2015 [page 262 and 263 of the Paper Book (PB)], wherein the name of M/s S R Credits Private Ltd. found mentioned on the asset side of the Balance Sheets under the head ‘Deposit with Firm & Companies’. The Ld. DR further drew our attention to the Bank Accounts of both; assessee (0319040100091084) and M/s S R Credits Private Ltd. (0319030100000008) of the relevant year (01.04.2016 to 31.03.2017) maintained with the J & K Bank [page 269 to 287 of the PB], wherein the contra transactions did get reflected. Further, the Ld. AR, placing emphasis on S. No. 31a and 31c of the Audit Report in Form 3CD of the relevant year (FY 2016-17) of M/s S R Credits Private Ltd., submitted that the name of the assessee found mentioned at S. No. 31a and 31c of the Audit Report in Form 3CD of M/s S R Credits Private Ltd. [page 132 to 133 of the PB], which clearly showed the peak deposit of Rs.1,91,33,500/- and the sum of Rs.2,26,33,500/- repaid in the relevant 6 Ravi Kumar year (FY 2016-17). The Ld. AR, in view of the above, contended that M/s S R Credits Private Ltd. had refunded part of the assessee’s deposit with it in the relevant year (FY 2016-17) and all these details, documents, confirmation of the deposit, bank accounts details and ITR of M/s S R Credits Private Ltd. the relevant year even during proceedings under section 148A(d) of the Act. But the AO did not appreciate various evidences & submissions and passed order under section 148A(d) of the Act. Thus, the reopening of the case was questionable, contended the Ld. AR. He further submitted that the Ld. DRP also did not appreciate various evidences & submissions and left the matter to the discretion of the AO. The Ld. AR placing emphasis on provisions of section 144C(8) of the Act, which reads as under: “The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order.” submitted that the directions of the Ld. DRP were contrary to the provisions of section 144C(8) of the Act and thus, the same should be treated as null and void as it had delegated its power to the AO.
4.1 On legal issue, the Ld. AR argued the case at length by submitting the factual details. It was submitted that the case of M/s S R Credits Private Ltd. was assessed in the Central Circle, New Delhi. The details mentioned in the AO’s order under section 148A(d) of the Act demonstrated the credit worthiness of M/s S R Credits Private Ltd. Ravi Kumar 5. On the other hand, the Ld. CIT-DR contended that the directions of the Ld. DRP were in accordance with the provisions of section 144C(5) of the Act, which reads as under: “The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment.”
The Ld. CIT-DR, placing emphasis on the provisions of section 144C(5) of the Act, contended that the Ld. DRP can issue any direction as it thinks fit for the guidance of the AO to enable him to complete the assessment. She argued that the Ld. DRP had not delegated its power to the AO. It had simply directed the AO to pass the assessment order after verification of the factual details of refund of the deposit by M/s S R Credits Private Ltd.
We have heard both parties at length and have perused the material available on the record. Since the legal issue has been challenged based on the facts of the case. We therefore, think it proper to deal with the facts of the case first and thereafter, the legal issue if required so. The factual issue revolves around the sum of Rs.1,63,33,500/- received from M/s S. R. Credit Pvt. Ltd. to source the foreign remittances. The Ld. CIT-DR has not brought any material on the record that the Statement of Affairs of the assessee as on 31.03.2014 and 31.03.2015, wherein the name of M/s S R Credits Private Ltd. found mentioned on the asset side of the Balance Sheets under the head ‘Deposit with Firm & Companies’ and the Audit Report in Form 3CD of FY 2016-17 of M/s S R Credits Private Ltd., wherein the name of the 8 Ravi Kumar assessee found mentioned at S. No. 31a and 31c of the said Audit Report in Form 3CD of M/s S R Credits Private Ltd. are not with the AO and the Ld. DRP at the time of passing the final assessment order and issuing directions under section 144C(5) of the Act.
We find merit in the argument/contention/submission of the Ld. AR that the sum of Rs.1,63,33,500/- received from M/s S. R. Credit Pvt. Ltd. is nothing but the refund of the assessee’s deposit with M/s S. R. Credit Pvt. Ltd., which gets buttressed by the fact that the said deposit of the assessee gets reflected in the Balance Sheet for the FY ending on 31.03.2016 & 31.03.2017 and the Audit Report in Form 3CD of FY 2016-17 of M/s S R Credits Private Ltd. The AO has not doubted the identity M/s S. R. Credit Pvt. Ltd. and the genuineness of the transaction. The dispute raised by the AO is the credit worthiness of M/s S. R. Credit Pvt. Ltd. The details mentioned on page 3-7 of the Ld. DRP’s directions under section 144C(5) of the Act clearly mention that the assessee has explained the sum of Rs.1,63,33,500/- received by the assessee from M/s S. R. Credit Pvt. Ltd. and the reasoning given by the AO is nothing but non-appreciation of the evidence brought before him during the course of proceedings under section 144C(5) of the Act. We do not find any merit in the reasoning of the AO rejecting the evidence and submission of the assessee filed during the course of proceedings under section 144C(5) of the Act as the AO has not brought any material on the record to controvert the facts emerged from the said evidence and submission of the assessee. Thus, we delete the addition Ravi Kumar of Rs.1,63,33,500/-. The assessee gets consequential relief. Since the issue has already been decided on merit of the addition, we therefore do not decide the legal issue being academic in nature.
In the result, the appeal of the assessee is allowed as above.
Order pronounced in open Court on 18th August, 2025.