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Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR
PER PRABHASH SHANKAR [A.Μ.] :- The present appeal arising from the appellate order dated 17.01.2025 is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)"] pertaining to assessment order passed u/s.147 r.w.s.144B of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 14.03.2024 for the Assessment Year [A.Y.] 2019-20. 2. The grounds of appeal are as under:
Whether on the facts and circumstances of the case of the appellant and in law, the Ld. Commissioner of Income Tax Appeals erred in not considering the impugned notice dated 02.03.2024 under section 147 read with section 144B of the Income tax Act by the Assessing Officer (AO) as bad in law, illegal and invalid and that the same is required to be quashed and set aside, without appreciating the facts and Documentation, the Order were initiated on the borrowed satisfaction, without the Assessing Officer forming their own independent opinion, Change of opinion and also without following and complying with other mandatory provisions of the Act.
Whether on the facts and circumstances of the case of the appellant and in law, the Ld. Commissioner of Income Tax Appeals A.O. has erred in confirming the addition of Rs.31,00,663/- made by the CIT against the adhoc account disallowance of Expenses based on the assumption and Surmises.The assessee would like to submit that the detailed documents were submitted before Commissioner Appeals were not perused and accordingly the addition was made. The assessee had submitted all the relevant documents for the above ground. The Ld. CIT Appeals did not call for any additional documents for clarification and passed the order. The assessee humbly request your honour to kindly drop the addition made by the Ld. CIT Appeals.
Whether on the facts and circumstances of the case of the appellant and in law, the Ld. Commissioner of Income Tax Appeals. has erred in confirming the addition of Rs.35,98,598/- made by the AO, u/s 68 of the Act against capital balance treated as unexplained income on the assumption and Surmises.The Assessee would like to submit that the relevant documents for the above ground were submitted before the Commissioner Appeals and the same was added in the Total Income. The Ld. C.I.T did not call for any other additional documents and order was passed. The assessee submit to your honour to kindly drop the addition made by the Ld CIT Appeal.
Whether on the facts and circumstances of the case of the appellant and in law, the Ld Commissioner of Income Tax Appeals A.O. has erred in confirming the addition of Rs.25,11,118/- made by C.I.T, against the Unexplained Credit in the bank account by the appellants, without appreciating the fact that the appellant having proved genuineness of the transaction, documentation, established identity of the concerned party (Debtor) and Realization of Debtors, and all the relevant documents related for addition of Amount. The said confirmation and documents serve as a crucial evidence supporting veracity of our assertion and there is absolutely no justification for making impugned addition under the provision of Section 68 of the Act.
In Ground no.1, the assessee has challenged the validity of reopening u/s 147/148 of the Act by claiming that the impugned notice dated 02.03.2024 under section 147 read with section 144B of the Act was bad in law, illegal and invalid without appreciating the facts and documentation, initiated on the borrowed satisfaction, and based on change of opinion and also without following and complying with other mandatory provisions of the Act. It may be stated here that neither before the AO nor the ld.CIT(A) the assessee contested the reopening and the grounds are being raised before the Bench for the first time.
1 In this regard, the ld.AR has made oral and written submissions inter alia claiming that as per the Explanation to section 147 of the Act the A.O. is empowered to assess the income which has escaped assessment and such issue comes to the notice of the A.O. subsequently in the course of the assessment proceedings and in the event, he does not make addition in respect of the escaped income for any reason, he is not empowered to make addition in respect of any other income noticed in the course of assessment proceedings. Reliance has been placed the case of Hon'ble Bombay High Court in the case of CIT v. Jet Airways (I) Ltd .331 ITR 236.
2 It is also contended that the notice u/s.148 of the Act as well as order u/s.148A(d) of the Act were issued by the ITO, Ward 1(1), Thane and not by the Faceless authorities under the National Faceless Assessment Center. Thereafter, the proceedings were conducted and the order was passed by the assessment unit, National Faceless Assessment Centre u/s.147 r.w.s.144B of the Act on 02.03.2024. It is submitted that as per the provisions of s.151A of the Act, the juri iction in case of the assessee to carry out the reassessment proceedings was vested with only the Faceless authorities. Reliance is placed on the case of Hexaware Technologies Ltd. v. ACIT 464 ITR 430. 4. In ground no.2 the assessee has agitated the confirmation of the addition of Rs.31,00,663/- made by the AO on account of ad hoc account disallowance of expenses. Brief facts of the case are that the assessee did not file its return for the year under consideration whereas as per Insight Portal the assessee earned rent income of Rs.1,89,640/- Commission income Rs.33,08,933/- and Interest income of Rs.26,385/-. Therefore, the notice u/s 148 was issued on 23.03.2023 alongwith order u/s 148A(d) of the Act. In compliance, the assessee e-filed ITR declaring income of Rs.6,84,730/-declaring various particulars of Capital, Sundry Debtors and Creditors, Receipts and expenses.
1 The assessee was requested by the AO to produce books of account alongwith necessary evidence in support of particulars declared in the return which were partly complied. He disclosed commission income and rent in the profit & loss and after claiming expenses of Rs.69,34,971/-, net income of Rs.6,63,644/- was declared. The assessee provided bills for expenses of Rs.8,87,098/- only. It also paid Rs.98,280/- as brokerage in cash which was disallowable u/s 40A(3) of the Act. In the absence of bills and vouchers and without proper verification, the declared net profit was not accepted u/s 145 of the Act and net business income @ 50% of Rs.75,28,614/- i.e. Rs.37,64,307/- was estimated. Since the assessee declared business income of Rs.6,63,644/-, a sum of Rs.31,00,663/- [37,64,307 minus 6,63,644]was added to the total income under the head 'Business & profession'. In the subsequent appeal the ld.CIT(A) upheld the addition observing that observed that since the assessee did not produce the books and primary vouchers relating to the expenditure incurred, and also failed to prove the nexus between the commission income earned and the expenditure incurred.
In respect of ground no.3, the AO noted that in the return, the assessee declared Capital of Rs.42,04,811/-. Further, as per the details submitted he reported opening capital of Rs.37,18,607/-. It was noticed that the assessee did not file returns for AY 2018- 19, 2017-18, 2016-17 or any previous year. Also, the assessment year under consideration, was the first year in which business activities carried out by the assessee. No evidence in support of opening capital was brought on records. In the submission, the assessee stated that this was not first year of business, doing business in the same field since 5 year yet in small scale also the bank account had an opening balance of Rs.1,20,009/-. The AO treated the balance capital balance as unexplained income to the extent of Rs.35,98,598/- which was added to the total income u/s 68 of the Act. The ld.CIT(A) observed that since the assessee had not filed the returns of income and the financials for the last 3 years i.e. AY 2016-17 to 2018-19, the facts could not be verified. In the instant case, he neither filed the sources of the capital introduced nor submitted the audited balance sheet of the earlier years to establish that it was having brought forward balance from earlier years upheld the addition
In ground no.4 the assessee has contested the addition of Rs confirming the addition of Rs.25,11,118/- of Unexplained Credit in the bank account. According to the assessment order, perusal of the bank statements showed that during the year under consideration, in this account there were total credit of Rs.1,00,52,950/-. In the return, the assessee disclosed receipts of Rs.75,28,614/-. Thus, there was a difference of Rs.25,24,336/- in the credit entries in the bank account and receipts disclosed in the return. The submission of the assessee that Rs.34,18,113/- received as debtors realisation and not part of taxable income for the year under consideration, was not found acceptable as he did not file confirmations from respective debtors and original sales bills which could establish that the sum was received for sales or service provided. Accordingly, the difference of Rs.25,11,118/- in the credit entries in the bank account and receipts disclosed was treated income of the assessee and added to the total income u/s 68 of the Act.In the subsequent appeal, the ld CIT(A) partly upheld the addition.
Before us, the ld.AR has vehemently agitated the above additions claiming that the assessee submitted voluminous details of expenses, capital and bank deposits which were not appreciated and considered by the lower authorities in right perspective. In support of the contention, the ld.AR submitted two sets of paper books containing 325 pages in total giving details of various submissions made and details filed before the above proceedings from time to time. PB-1 containing 1 to 270 pages comprises of various details including financial statements for previous years, employees details, salary register, payment vouchers etc., details of various expenses claimed against the receipts. Rent details including rent agreement, invoices thereof, professional fees, brokers expenses, Bank summary and bank reconciliation statements as also ledger account of J.K.Helen Curtis Ltd, their confirmations, payment advise also bank statements were also submitted. It is claimed that all these details were filed before lower authorities.
1 In PB-2 containing pages 271 to 325, the assessee has submitted various submissions made before the ld.CIT(A) on different dates from 12.12.2023 to 16.12.2024 on as many seven occasions.
On perusal of the assessment order, it appears that most of the details submitted as above do not find any mention therein. Similarly, the ld.CIT(A) also has not discussed at length the submissions and contents therein. This gives an impression that both the authorities have failed to apply their respective minds in objective manner and have jumped to adverse conclusion much to the detriment of the assessee. It appears that the assessee derived its main income from the well known concern namely M/s JK Helene Curtis as per details submitted. Therefore, taking an adverse view of the entire matter does not appear to be fair. Moreover, the AO has made additions in respect of the opening Capital balance brought forward without making any effort to examine and analysing the Financials of the previous years submitted before him and has brushed aside all such evidences in an hurried and casual manner. Likewise, the conclusion drawn with regard to the bank deposit also appears to be half baked and without taking into account the submissions made by the assessee. Perusal of the records reveals that the assessee has been very sincerely and diligently in making compliances including the show-cause letter issued and has tried its best to satisfy the requirements of the AO. It also appears that even during the appellate proceedings, the assessee made several compliance from time to time explaining the issues involved and the grounds raised by it. However, the ld.CIT(A) relied more on the findings and observations of the AO rather than making any sincere attempts to either examine the issue himself or by the AO calling for remand report.
In view of the above discussion, we are of the considered opinion that in the interest of justice and fairplay, entire issue including the legal grounds which have been raised for the first time before us, need revisit by the AO for proper and objective appreciation of the various details submitted. In view of the above discussion, we deem it fit to set aside the appellate order and remand it to the AO for framing it de novo after allowing adequate opportunity of hearing to the assessee.
In the result, the appeal is allowed for statistical purposes. Order pronounced in the open court on 30/10/2025. SANDEEP GOSAIN (न्यायिक सदस्य /JUDICIAL MEMBER) Place: मुंबई/Mumbai दिनांक / Date 30.10.2025 Lubhna Shaikh / Steno PRABHASH SHANKAR (लेखाकार सदस्य/ACCOUNTANT MEMBER) आदेश की प्रतिलिपि अग्रेषित/